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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2021

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to            

Commission file number 001-36146

 

CommScope Holding Company, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

27-4332098

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

1100 CommScope Place, SE

Hickory, North Carolina

(Address of principal executive offices)

28602

(Zip Code)

(828) 324-2200

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.01 per share

 

COMM

 

The NASDAQ Stock Market

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 for 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      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of April 26, 2021 there were 204,078,661 shares of Common Stock outstanding.

 

 

 

 


 

 

CommScope Holding Company, Inc.

Form 10-Q

March 31, 2021

Table of Contents

 

Part I—Financial Information (Unaudited):

 

 

 

 

 

Item 1. Condensed Consolidated Financial Statements:

 

 

 

 

 

Condensed Consolidated Statements of Operations

 

2

 

 

 

Condensed Consolidated Statements of Comprehensive Loss

 

3

 

 

 

Condensed Consolidated Balance Sheets

 

4

 

 

 

Condensed Consolidated Statements of Cash Flows

 

5

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity

 

6

 

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

7

 

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

23

 

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

37

 

 

 

Item 4. Controls and Procedures

 

37

 

 

 

Part II—Other Information:

 

 

 

 

 

Item 1. Legal Proceedings

 

38

 

 

 

Item 1A. Risk Factors

 

38

 

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

38

 

 

 

Item 3. Defaults Upon Senior Securities

 

39

 

 

 

Item 4. Mine Safety Disclosures

 

39

 

 

 

Item 5. Other Information

 

39

 

 

 

Item 6. Exhibits

 

40

 

 

 

Signatures

 

41

 

 

 

1

 


 

 

PART 1 -- FINANCIAL INFORMATION (UNAUDITED)

ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

CommScope Holding Company, Inc.

Condensed Consolidated Statements of Operations

(Unaudited – In millions, except per share amounts)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

Net sales

 

$

2,072.0

 

 

$

2,033.2

 

Cost of sales

 

 

1,399.8

 

 

 

1,392.0

 

Gross profit

 

 

672.2

 

 

 

641.2

 

Operating expenses:

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

292.7

 

 

 

311.1

 

Research and development

 

 

171.5

 

 

 

180.4

 

Amortization of purchased intangible assets

 

 

154.7

 

 

 

157.8

 

Restructuring costs, net

 

 

44.4

 

 

 

23.7

 

Total operating expenses

 

 

663.3

 

 

 

673.0

 

Operating income (loss)

 

 

8.9

 

 

 

(31.8

)

Other income (expense), net

 

 

1.0

 

 

 

(12.5

)

Interest expense

 

 

(137.5

)

 

 

(149.1

)

Interest income

 

 

0.5

 

 

 

2.1

 

Loss before income taxes

 

 

(127.1

)

 

 

(191.3

)

Income tax benefit

 

 

29.5

 

 

 

31.4

 

Net loss

 

 

(97.6

)

 

 

(159.9

)

Series A convertible preferred stock dividend

 

 

(14.3

)

 

 

(13.8

)

Net loss attributable to common stockholders

 

$

(111.9

)

 

$

(173.7

)

 

 

 

 

 

 

 

 

 

Loss per share:

 

 

 

 

 

 

 

 

Basic

 

$

(0.55

)

 

$

(0.89

)

Diluted

 

$

(0.55

)

 

$

(0.89

)

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

201.7

 

 

 

194.9

 

Diluted

 

 

201.7

 

 

 

194.9

 

 

 

 

 

 

 

 

 

 

See notes to unaudited condensed consolidated financial statements.

 

2

 


 

 

CommScope Holding Company, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited – In millions)

 

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

Comprehensive loss:

 

 

 

 

 

 

 

 

Net loss

 

$

(97.6

)

 

$

(159.9

)

Other comprehensive loss, net of tax:

 

 

 

 

 

 

 

 

Foreign currency translation loss

 

 

(51.3

)

 

 

(99.6

)

Pension and other postretirement benefit activity

 

 

0.3

 

 

 

(0.5

)

Gain (loss) on hedging instruments

 

 

12.6

 

 

 

(7.6

)

Total other comprehensive loss, net of tax

 

 

(38.4

)

 

 

(107.7

)

Total comprehensive loss

 

$

(136.0

)

 

$

(267.6

)

 

 

 

 

 

 

 

 

 

See notes to unaudited condensed consolidated financial statements.

 

3

 


 

 

CommScope Holding Company, Inc.

Condensed Consolidated Balance Sheets

(In millions, except share amounts)

 

 

 

Unaudited

March 31, 2021

 

 

December 31, 2020

 

Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

325.9

 

 

$

521.9

 

Accounts receivable, less allowance for doubtful accounts of

   $32.1 and $40.3, respectively

 

 

1,639.2

 

 

 

1,487.4

 

Inventories, net

 

 

1,093.5

 

 

 

1,088.9

 

Prepaid expenses and other current assets

 

 

265.9

 

 

 

256.3

 

Total current assets

 

 

3,324.5

 

 

 

3,354.5

 

Property, plant and equipment, net of accumulated depreciation

   of $730.1 and $705.7, respectively

 

 

668.4

 

 

 

684.5

 

Goodwill

 

 

5,262.3

 

 

 

5,286.5

 

Other intangible assets, net

 

 

3,489.7

 

 

 

3,650.4

 

Other noncurrent assets

 

 

616.3

 

 

 

600.9

 

Total assets

 

$

13,361.2

 

 

$

13,576.8

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,059.4

 

 

$

1,010.8

 

Accrued and other liabilities

 

 

835.5

 

 

 

910.6

 

Current portion of long-term debt

 

 

32.0

 

 

 

32.0

 

Total current liabilities

 

 

1,926.9

 

 

 

1,953.4

 

Long-term debt

 

 

9,486.7

 

 

 

9,488.6

 

Deferred income taxes

 

 

189.6

 

 

 

206.2

 

Other noncurrent liabilities

 

 

508.4

 

 

 

531.8

 

Total liabilities

 

 

12,111.6

 

 

 

12,180.0

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Series A convertible preferred stock, $0.01 par value

 

 

1,041.8

 

 

 

1,041.8

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value: Authorized shares: 200,000,000;

 

 

 

 

 

 

 

 

Issued and outstanding shares: 1,041,819 Series A convertible

preferred stock

 

 

 

 

 

 

Common stock, $0.01 par value: Authorized shares:

   1,300,000,000; issued and outstanding shares:

   203,996,914 and 200,095,232, respectively

 

 

2.1

 

 

 

2.1

 

Additional paid-in capital

 

 

2,526.0

 

 

 

2,512.9

 

Retained earnings (accumulated deficit)

 

 

(1,850.3

)

 

 

(1,752.7

)

Accumulated other comprehensive loss

 

 

(194.3

)

 

 

(155.9

)

Treasury stock, at cost: 10,818,615 shares and

   9,223,081 shares, respectively

 

 

(275.7

)

 

 

(251.4

)

Total stockholders' equity

 

 

207.8

 

 

 

355.0

 

Total liabilities and stockholders' equity

 

$

13,361.2

 

 

$

13,576.8

 

 

 

 

 

 

 

 

 

 

See notes to unaudited condensed consolidated financial statements.

4

 


 

CommScope Holding Company, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited - In millions)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

Operating Activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(97.6

)

 

$

(159.9

)

Adjustments to reconcile net loss to

    net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

199.2

 

 

 

205.4

 

Equity-based compensation

 

 

23.5

 

 

 

23.5

 

Deferred income taxes

 

 

(53.4

)

 

 

(38.3

)

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(164.2

)

 

 

69.0

 

Inventories

 

 

(10.7

)

 

 

50.6

 

Prepaid expenses and other assets

 

 

4.1

 

 

 

15.2

 

Accounts payable and other liabilities

 

 

(23.9

)

 

 

(217.2

)

Other

 

 

(1.0

)

 

 

9.0

 

Net cash used in operating activities

 

 

(124.0

)

 

 

(42.7

)

Investing Activities:

 

 

 

 

 

 

 

 

Additions to property, plant and equipment

 

 

(26.4

)

 

 

(23.9

)

Proceeds from sale of property, plant and equipment

 

 

1.0

 

 

 

0.1

 

Net cash used in investing activities

 

 

(25.4

)

 

 

(23.8

)

Financing Activities:

 

 

 

 

 

 

 

 

Long-term debt repaid

 

 

(8.0

)

 

 

(108.0

)

Dividends paid on Series A convertible preferred stock

 

 

(14.3

)

 

 

 

Proceeds from the issuance of common shares under equity-based

   compensation plans

 

 

3.9

 

 

 

0.9

 

Tax withholding payments for vested equity-based compensation

  awards

 

 

(24.3

)

 

 

(5.9

)

Net cash used in financing activities

 

 

(42.7

)

 

 

(113.0

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(3.9

)

 

 

(24.4

)

Change in cash and cash equivalents

 

 

(196.0

)

 

 

(203.9

)

Cash and cash equivalent at beginning of period

 

 

521.9

 

 

 

598.2

 

Cash and cash equivalents at end of period

 

$

325.9

 

 

$

394.3

 

 

 

 

 

 

 

 

 

 

See notes to unaudited condensed consolidated financial statements.

 

5

 


 

 

CommScope Holding Company, Inc.

Condensed Consolidated Statements of Stockholders' Equity

(Unaudited - In millions, except share amounts)

 

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

Number of common shares outstanding:

 

 

 

 

 

 

 

 

Balance at beginning of period

 

 

200,095,232

 

 

 

194,563,530

 

Issuance of shares under equity-based compensation plans

 

 

5,497,216

 

 

 

1,814,298

 

Shares surrendered under equity-based compensation plans

 

 

(1,595,534

)

 

 

(569,915

)

Balance at end of period

 

 

203,996,914

 

 

 

195,807,913

 

Common stock:

 

 

 

 

 

 

 

 

Balance at beginning and end of period

 

$

2.1

 

 

$

2.0

 

Additional paid-in capital:

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

2,512.9

 

 

$

2,445.1

 

Issuance of shares under equity-based compensation plans

 

 

3.9

 

 

 

0.9

 

Equity-based compensation

 

 

23.5

 

 

 

23.5

 

Dividend on Series A convertible preferred stock

 

 

(14.3

)

 

 

(13.8

)

Balance at end of period

 

$

2,526.0

 

 

$

2,455.7

 

Retained earnings (accumulated deficit):

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

(1,752.7

)

 

$

(1,179.3

)

Net loss

 

 

(97.6

)

 

 

(159.9

)

Balance at end of period

 

$

(1,850.3

)

 

$

(1,339.2

)

Accumulated other comprehensive loss:

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

(155.9

)

 

$

(197.0

)

Other comprehensive loss, net of tax

 

 

(38.4

)

 

 

(107.7

)

Balance at end of period

 

$

(194.3

)

 

$

(304.7

)

Treasury stock, at cost:

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

(251.4

)

 

$

(234.5

)

Net shares surrendered under equity-based compensation plans

 

 

(24.3

)

 

 

(5.9

)

Balance at end of period

 

$

(275.7

)

 

$

(240.4

)

Total stockholders' equity

 

$

207.8

 

 

$

573.4

 

 

 

 

 

 

 

 

 

 

See notes to unaudited condensed consolidated financial statements.

 

 

6

 


CommScope Holding Company, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In millions, unless otherwise noted)

 

 

 

1. BACKGROUND AND BASIS OF PRESENTATION

Background

CommScope Holding Company, Inc., along with its direct and indirect subsidiaries (CommScope or the Company), is a global provider of infrastructure solutions for communication and entertainment networks. The Company’s solutions for wired and wireless networks enable service providers including cable, telephone and digital broadcast satellite operators and media programmers to deliver media, voice, Internet Protocol (IP) data services and Wi-Fi to their subscribers and allow enterprises to experience constant, wireless and wired connectivity across complex and varied networking environments. The Company’s solutions are complemented by a broad array of services including technical support, systems design and integration. CommScope is a leader in digital video and IP television distribution systems, broadband access infrastructure platforms and equipment that delivers data and voice networks to homes. CommScope’s global leadership position is built upon innovative technology, broad solution offerings, high-quality and cost-effective customer solutions, and global manufacturing and distribution scale.

Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited and reflect all adjustments of a normal, recurring nature that are, in the opinion of management, necessary for a fair presentation of the interim period financial statements. The results of operations for these interim periods are not necessarily indicative of the results of operations to be expected for any future period or the full fiscal year. Certain prior year amounts have been reclassified to conform to the current year presentation.

The unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial information and are presented in accordance with the applicable requirements of Regulation S-X. Accordingly, these financial statements do not include all of the information and notes required by U.S. GAAP for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (the 2020 Annual Report). The significant accounting policies followed by the Company are set forth in Note 2 within the Company’s audited consolidated financial statements included in the 2020 Annual Report. There were no material changes in the Company’s significant accounting policies during the three months ended March 31, 2021.

Concentrations of Risk and Related Party Transactions

No direct customer accounted for 10% or more of the Company’s total net sales during the three months ended March 31, 2021 or 2020. As of March 31, 2021, no direct customer accounted for 10% or more of the Company’s accounts receivable.

The Company relies on sole suppliers or a limited group of suppliers for certain key components, subassemblies and modules and a limited group of contract manufacturers to manufacture a significant portion of its products. Any disruption or termination of these arrangements could have a material adverse impact on the Company’s results of operations.

As of March 31, 2021, funds affiliated with Carlyle Partners VII S1 Holdings, L.P. (Carlyle) owned 100% of the Series A convertible preferred stock (the Convertible Preferred Stock), which was sold to Carlyle to fund a portion of the acquisition of ARRIS International plc (ARRIS) in 2019. See Note 9 for further discussion of the Convertible Preferred Stock. Other than transactions related to the Convertible Preferred Stock, there were no material related party transactions for the three months ended March 31, 2021.

7

 


CommScope Holding Company, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In millions, unless otherwise noted)

 

Product Warranties

The Company recognizes a liability for the estimated claims that may be paid under its customer warranty agreements to remedy potential deficiencies of quality or performance of the Company’s products. These product warranties extend over various periods, depending upon the product subject to the warranty and the terms of the individual agreements. The Company records a provision for estimated future warranty claims as cost of sales based upon the historical relationship of warranty claims to sales and specifically identified warranty issues. The Company bases its estimates on assumptions that are believed to be reasonable under the circumstances and revises its estimates, as appropriate, when events or changes in circumstances indicate that revisions may be necessary. Such revisions may be material.

The following table summarizes the activity in the product warranty accrual, included in accrued and other liabilities and other noncurrent liabilities:

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

Product warranty accrual, beginning of period

 

$

59.5

 

 

$

61.0

 

Provision for warranty claims

 

 

10.6

 

 

 

4.1

 

Warranty claims paid

 

 

(7.8

)

 

 

(7.8

)

Foreign exchange

 

 

(0.2

)

 

 

 

Product warranty accrual, end of period

 

$

62.1

 

 

$

57.3

 

Commitments and Contingencies

The Company is party to certain intellectual property claims and periodically receives notices asserting that its products infringe on another party’s patents and other intellectual property rights. These claims and assertions, whether against the Company directly or against its customers, could require the Company to pay damages, royalties, stop offering the relevant products and/or cease other activities. The Company may also be called upon to indemnify certain customers for costs related to products sold to such customers. While the outcome of the claims and notices is uncertain and a reasonable estimate of the loss from unfavorable outcomes in certain of these matters cannot be determined, an adverse outcome could result in a material loss.

As of March 31, 2021, the Company had a liability of $31.7 million recorded in accrued and other liabilities on the Condensed Consolidated Balance Sheets related to certain intellectual property assertions that have been settled or are in process of settlement. Of that amount, $21.7 million was assumed in the acquisition of ARRIS. For the three months ended March 31, 2021, the Company recorded a charge to cost of sales in the Condensed Consolidated Statements of Operations of $1.5 million related to these intellectual property assertions. This amount is reflected in the results of the Home Networks and Venue and Campus Networks segments.

The Company is either a plaintiff or a defendant in certain other pending legal matters in the normal course of business. Management believes none of these other pending legal matters will have a material adverse effect on the Company’s business or financial condition upon final disposition.

In addition, the Company is subject to various federal, state, local and foreign laws and regulations governing the use, discharge, disposal and remediation of hazardous materials. Compliance with current laws and regulations has not had, and is not expected to have, a materially adverse effect on the Company’s financial condition or results of operations.

Asset Impairments

Goodwill is tested for impairment annually or at other times if events have occurred or circumstances exist that indicate the carrying value of the reporting unit may exceed its fair value. There were no indicators of goodwill impairment identified during the three months ended March 31, 2021 or 2020.

8

 


CommScope Holding Company, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In millions, unless otherwise noted)

 

Property, plant and equipment and intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable, based on the undiscounted cash flows expected to be derived from the use and ultimate disposition of the assets. Assets identified as impaired are adjusted to estimated fair value. Equity investments without readily determinable fair values are evaluated each reporting period for impairment based on a qualitative assessment and are then measured at fair value if an impairment is determined to exist. Other than certain assets impaired as a result of restructuring actions, there were no definite-lived intangible or other long-lived asset impairments identified during the three months ended March 31, 2021 or 2020. See Note 8 for discussion of impairment charges related to restructuring actions.

Income Taxes

For the three months ended March 31, 2021, the Company’s effective tax rate was 23.2% and the Company recognized a tax benefit of $29.5 million on a pretax loss of $127.1 million. The Company’s tax benefit was higher than the statutory rate of 21.0% and was impacted favorably by decreases in prior year uncertain tax positions and adjustments related to the finalization of prior year’s tax returns, offset partially by the unfavorable impacts of earnings in foreign jurisdictions that are taxed at rates higher than the United States (U.S.) statutory rate, foreign withholding taxes and U.S. anti-deferral provisions.

For the three months ended March 31, 2020, the Company’s effective income tax rate was 16.4%, and the Company recognized a tax benefit of $31.4 million on a pretax loss of $191.3 million. The Company’s tax benefit was less than the statutory rate primarily due to the impacts of U.S. anti-deferral provisions, changes in uncertain tax positions, withholding taxes and earnings in foreign jurisdictions that are taxed at rates higher than the U.S. This unfavorable impact was offset partially by the favorable impacts of certain federal tax credits.

Earnings (Loss) Per Share

Basic earnings (loss) per share (EPS) is computed by dividing net income (loss), less any dividends and deemed dividends related to the Convertible Preferred Stock, by the weighted average number of common shares outstanding during the period. The numerator in diluted EPS is based on the basic EPS numerator adjusted to add back any dividends and deemed dividends related to the Convertible Preferred Stock, subject to antidilution requirements. The denominator used in diluted EPS is based on the basic EPS computation plus the effect of potentially dilutive common shares related to the Convertible Preferred Stock and equity-based compensation plans, subject to antidilution requirements.

For the three months ended March 31, 2021 and 2020, 14.7 million and 16.1 million shares, respectively, of outstanding equity-based compensation awards were not included in the computation of diluted EPS because the effect was either antidilutive or the performance conditions were not met. Of those amounts, for the three months ended March 31, 2021 and 2020, 6.4 million and 4.3 million shares, respectively, would have been considered dilutive if the Company had not been in a net loss position.        

For the three months ended March 31, 2021 and 2020, 37.9 million and 36.4 million, respectively, of as-if converted shares related to the Convertible Preferred Stock were excluded from the diluted share count because they were antidilutive; however, they may have been considered dilutive if the Company had not been in a net loss position.

9

 


CommScope Holding Company, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In millions, unless otherwise noted)

 

The following table presents the basis for the EPS computations (in millions, except per share data):

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

Numerator:

 

 

 

 

 

 

 

 

Net loss

 

$

(97.6

)

 

$

(159.9

)

Dividends on Series A convertible preferred stock

 

 

(14.3

)

 

 

(13.8

)

Net loss attributable to common stockholders

 

$

(111.9

)

 

$

(173.7

)

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - basic

 

 

201.7

 

 

 

194.9

 

Dilutive effect of as-if converted Series A convertible preferred stock

 

 

 

 

 

 

Dilutive effect of equity-based awards

 

 

 

 

 

 

Weighted average common shares outstanding - diluted

 

 

201.7

 

 

 

194.9

 

 

 

 

 

 

 

 

 

 

Loss per share:

 

 

 

 

 

 

 

 

Basic

 

$

(0.55

)

 

$

(0.89

)

Diluted

 

$

(0.55

)

 

$

(0.89

)

 

Recent Accounting Pronouncements

Adopted During the Three Months Ended March 31, 2021

On January 1, 2021, the Company adopted Accounting Standards Update (ASU) No. 2020-01, Investments – Equity Securities (Topic 321), Investments – Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815). The new guidance is based on a consensus of the Emerging Issues Task Force and is expected to increase comparability in accounting for these transactions. The amendments in this guidance clarify the interaction of accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815. The impact of adopting this new guidance was not material to the consolidated financial statements.

On January 1, 2021, the Company adopted ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.  The new guidance simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifying and amending existing guidance. The impact of adopting this new guidance was not material to the consolidated financial statements.

10

 


CommScope Holding Company, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In millions, unless otherwise noted)

 

Issued but Not Adopted

In August 2020, the Financial Accounting Standards Board (FASB) issued ASU No. 2020-06, DebtDebt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The new guidance simplifies the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments and convertible preferred stock and amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions and requires the application of the if-converted method for calculating diluted earnings per share, along with expanded disclosures. ASU No. 2020-06 is effective for the Company as of January 1, 2022 and early adoption is permitted beginning January 1, 2021. The Company is currently evaluating the impact of the new guidance on the consolidated financial statements.

In March 2020 and January 2021, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting and ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope, respectively. Together, the ASUs provide temporary optional guidance to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying generally accepted accounting principles to transactions affected by reference rate reform if certain criteria are met. These transactions include contract modifications, hedging relationships, and sale or transfer of debt securities classified as held-to-maturity. The Company can elect to apply the amendments through December 31, 2022. The Company is currently evaluating the impact of this guidance on the consolidated financial statements.

2. GOODWILL

The following table presents the activity in goodwill by reportable segment.

 

 

 

December 31, 2020

 

 

Activity

 

 

March 31, 2021

 

 

 

Goodwill

 

 

Accumulated Impairment Losses

 

 

Total

 

 

Foreign Exchange and Other

 

 

Goodwill

 

 

Accumulated Impairment Losses

 

 

Total

 

Broadband

 

$

3,369.7

 

 

$

(193.6

)

 

$

3,176.1

 

 

$

(14.6

)

 

$

3,355.1

 

 

$

(193.6

)

 

$

3,161.5

 

OWN

 

 

669.1

 

 

 

(159.5

)

 

 

509.6

 

 

 

(2.3

)

 

 

666.8

 

 

 

(159.5

)

 

 

507.3

 

VCN

 

 

1,642.0

 

 

 

(41.2

)

 

 

1,600.8

 

 

 

(7.3

)

 

 

1,634.7

 

 

 

(41.2

)

 

 

1,593.5

 

Home

 

 

399.5

 

 

 

(399.5

)

 

 

 

 

 

 

 

 

399.5

 

 

 

(399.5

)

 

 

 

Total

 

$

6,080.3

 

 

$

(793.8

)

 

$

5,286.5

 

 

$

(24.2

)

 

$

6,056.1

 

 

$

(793.8

)

 

$

5,262.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3. REVENUE FROM CONTRACTS WITH CUSTOMERS

Disaggregated Net Sales

The majority of the Company’s net sales are product sales that are recognized at a point in time. The Company does have some customer arrangements where net sales are recognized over time, but this does not represent a significant portion of consolidated net sales. Contracts with net sales recognized over time are primarily concentrated in the Broadband Networks and Venue and Campus Networks segments. In the first quarter of 2021, the Company determined that the geographic disaggregation of net sales by segment is a more meaningful disaggregation of net sales than net sales disaggregated based on the timing of the transfer of goods, given the relatively low level of net sales recognized over time. Therefore, the presentation of net sales by geographic region in Note 7 has been expanded to include segments and the presentation of net sales based on the timing of the transfer of goods has been eliminated.

11

 


CommScope Holding Company, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In millions, unless otherwise noted)

 

 

Allowance for Doubtful Accounts

 

 

March 31,

 

 

 

2021

 

 

2020

 

Allowance for doubtful accounts, beginning of period

 

$

40.3

 

 

$

35.4

 

Provision (benefit)

 

 

(7.2