v3.25.2
Background and Basis of Presentation (Policies)
6 Months Ended
Jun. 30, 2025
Accounting Policies [Abstract]  
Basis of Presentation

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.

As of January 1, 2025, management shifted a product line from the Company’s Ruckus (formerly NICS) segment to the ANS segment to better align with how the businesses are managed. All prior period amounts in these condensed consolidated financial statements have been recast to reflect these operating segment changes.

The unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) in the U.S. 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, 2024 (the 2024 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 2024 Annual Report. There were no material changes in the Company’s significant accounting policies during the three or six months ended June 30, 2025.

Concentrations of Risk and Related Party Transactions

Concentrations of Risk and Related Party Transactions

Net sales to Comcast Corporation and affiliates (Comcast) accounted for approximately 14% and 12% of the Company’s total net sales during the three and six months ended June 30, 2025, respectively. Net sales to Charter Communications, Inc. (Charter) accounted for approximately 10% of the Company’s total net sales for the six months ended June 30, 2024. Other than Comcast and Charter, no direct customer accounted for 10% or more of the Company’s net sales during the three or six months ended June 30, 2025 or 2024. Accounts receivable from Comcast and Anixter International Inc. and its affiliates (Anixter) represented approximately 17% and 11%, respectively, of the Company’s accounts receivable as of June 30, 2025. Other than Comcast and Anixter, 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 June 30, 2025, funds affiliated with Carlyle Partners VII S1 Holdings, L.P. (Carlyle) owned 100% of the Company’s 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 11 for further discussion of the Convertible Preferred Stock. Other than transactions related to the Convertible Preferred Stock and the Company’s continuing involvement with Vantiva discussed in Note 3, there were no material related party transactions during the three or six months ended June 30, 2025.

Product Warranties

Product Warranties

The Company recognizes a liability for the estimated claims that may be paid under its customer assurance-type warranty agreements to remedy potential deficiencies of quality or performance of the Company’s products. These product warranties extend over various periods, depending on 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 on the Condensed Consolidated Balance Sheets:

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2025

 

 

2024

 

 

2025

 

 

2024

 

Product warranty accrual, beginning of period

 

$

21.3

 

 

$

21.3

 

 

$

20.0

 

 

$

20.6

 

Provision for warranty claims

 

 

3.3

 

 

 

3.2

 

 

 

8.2

 

 

 

8.7

 

Warranty claims paid

 

 

(3.9

)

 

 

(4.8

)

 

 

(7.5

)

 

 

(9.6

)

Product warranty accrual, end of period

 

$

20.7

 

 

$

19.7

 

 

$

20.7

 

 

$

19.7

 

 

Commitments and Contingencies

Non-cancellable Purchase Obligations

In July 2023, the Company entered into a long-term supply contract with a third-party to secure the supply of certain raw materials. Under the terms of the contract, the Company will make advance payments through 2026 totaling $120.0 million (undiscounted) and based on meeting certain minimum purchase requirements through 2031, such advance payments will be credited and applied to future orders on a quarterly basis beginning in 2027 through 2031. Advance payments of $80.0 million and $60.0 million are recorded as other noncurrent assets on the Condensed Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024, respectively. The Company has committed to growing purchases of raw materials under this agreement to a level of approximately $137 million per year by 2026 and continuing through 2032.

Legal Proceedings

The Company is party to certain intellectual property claims and also 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 or 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. The outcome of these claims and notices is uncertain, and a reasonable estimate of the loss from unfavorable outcomes in certain of these matters either cannot be determined or is estimated at the minimum amount of a range of estimates. The actual loss, through settlement or trial, could be material and may vary significantly from the Company’s estimates. From time to time, the Company may also be involved as a plaintiff in certain intellectual property claims. Gain contingencies, if any, are recognized when they are realized.

The Company is also 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.

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 material adverse effect on the Company’s financial condition or results of operations.

Asset Impairments

Asset Impairments

Goodwill

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. As of January 1, 2025, the Company assessed goodwill for impairment due to a change in the composition of reporting units as a result of the product line shift from the Ruckus (formerly NICS) segment to the ANS segment and determined that no goodwill impairment existed. There were no goodwill impairments identified during the three or six months ended June 30, 2025 or 2024.

As of the most recent impairment test on October 1, 2024, the implied fair value of the ANS reporting unit exceeded its respective carrying amount by 8%. Considering the low headroom going forward for the ANS reporting unit, there is a risk for future impairment in the event of further declines in general economic, market or business conditions or any significant unfavorable change in the forecasted cash flows, weighted average cost of capital or growth rates. If current and long-term projections for the ANS reporting unit are not realized or decrease materially, the Company may be required to recognize additional goodwill impairment charges, and these charges could be material to the results of operations.

Long-lived Assets

Long-lived assets, which include property, plant and equipment, intangible assets with finite lives and right of use assets 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 and as part of discontinued operations, there were no definite-lived intangible or other long-lived asset impairments identified during the three or six months ended June 30, 2025 or 2024.

Income Taxes

Income Taxes

For the three and six months ended June 30, 2025, the Company recognized income tax expense of $41.4 million on pretax income of $70.8 million and an income tax benefit of $292.7 million on pretax income of $26.4 million, respectively. The Company’s income taxes were greater than the statutory rate of 21.0% for the three and six months ended June 30, 2025, primarily due to the tax benefit related to federal tax credits, as well as $361.1 million of tax benefit associated with a tax planning strategy for the six months ended June 30, 2025. Offsetting these benefits for the three and six months ended June 30, 2025, were the unfavorable impacts of $29.6 million and $50.0 million, respectively, of an additional valuation allowance related to current year federal and state interest limitation carryforwards and U.S. anti-deferral provisions. For the three and six months ended June 30, 2025, the Company used a discrete calculation to compute the net tax benefit associated with external interest. Using the estimated annual tax rate for this component of income would have produced significant variability in the estimated annual effective tax rate, and use of the discrete method for this component results in the best estimate of the estimated annual effective tax rate.

For the three and six months ended June 30, 2024, the Company recognized an income tax benefit of $12.4 million on a pretax loss of $68.6 million and income tax expense of $14.8 million on a pretax loss of $284.4 million, respectively. The Company’s income taxes for the three and six months ended June 30, 2024, were unfavorably impacted by $67.8 million of additional valuation allowance related to current year federal and state interest limitation carryforwards, U.S. anti-deferral provisions and excess tax costs of $7.3 million related to equity compensation awards, partially offset by tax benefits related to federal tax credits. For the three and six months ended June 30, 2024, the Company used a discrete calculation to compute the net tax benefit associated with external interest. Using the estimated annual tax rate for this component of income would have produced significant variability in the estimated annual effective tax rate, and use of the discrete method for this component results in the best estimate of the estimated annual effective tax rate.

Earnings (Loss) Per Share

Earnings (Loss) Per Share

Basic earnings (loss) per share (EPS) from continuing operations is computed by dividing income (loss) from continuing operations, 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 from continuing operations is based on the basic EPS from continuing operations 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 from continuing operations 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.

Basic EPS from discontinued operations is computed by dividing income (loss) from discontinued operations, net of income taxes, by the weighted average number of common shares outstanding during the period. The numerator in diluted EPS from discontinued operations is the same as the basic EPS from discontinued operations numerator. The denominator used in diluted EPS from discontinued operations 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 and six months ended June 30, 2025, 9.0 million and 8.3 million shares, respectively, of outstanding equity-based compensation awards were not included in the computation of diluted EPS because the effect was antidilutive or the performance conditions were not met. For the three and six months ended June 30, 2024, 19.2 million and 18.6 million shares, respectively, of outstanding equity-based compensation awards were not included in the computation of diluted EPS because the effect was antidilutive or the performance conditions were not met. Of those amounts, for the three and six months ended June 30, 2024, 2.0 million and 1.7 million shares, respectively, would have been considered dilutive if the Company had not been in a loss from continuing operations position.

For the three months ended June 30, 2025, 45.2 million of as-if converted shares related to the Convertible Preferred Stock were excluded from the diluted share count because they were antidilutive. For the three and six months ended June 30, 2024, 42.8 million and 42.5 million, respectively, of as-if converted shares related to the Convertible Preferred Stock were excluded from the diluted share count because they were antidilutive.

 

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

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2025

 

 

2024

 

 

2025

 

 

2024

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

29.4

 

 

$

(56.2

)

 

$

319.1

 

 

$

(299.2

)

Income from discontinued operations, net of tax

 

 

2.4

 

 

 

100.6

 

 

 

496.7

 

 

 

9.9

 

Net income (loss)

 

$

31.8

 

 

$

44.4

 

 

$

815.8

 

 

$

(289.3

)

Dividends on Series A convertible preferred stock

 

 

(17.1

)

 

 

(16.2

)

 

 

(34.0

)

 

 

(32.2

)

Net income (loss) attributable to common stockholders

 

$

14.7

 

 

$

28.2

 

 

$

781.8

 

 

$

(321.5

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding – basic

 

 

218.1

 

 

 

213.5

 

 

 

217.2

 

 

 

212.9

 

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

 

 

 

 

 

 

 

 

45.0

 

 

 

 

Dilutive effect of equity-based awards

 

 

9.2

 

 

 

 

 

 

10.1

 

 

 

 

Weighted average common shares outstanding – diluted

 

 

227.3

 

 

 

213.5

 

 

 

272.3

 

 

 

212.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) from continuing operations per share

 

$

0.06

 

 

$

(0.34

)

 

$

1.31

 

 

$

(1.56

)

Earnings from discontinued operations per share

 

 

0.01

 

 

 

0.47

 

 

 

2.29

 

 

 

0.05

 

Earnings (loss) per share

 

$

0.07

 

 

$

0.13

 

 

$

3.60

 

 

$

(1.51

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) from continuing operations per share

 

$

0.05

 

 

$

(0.34

)

 

$

1.17

 

 

$

(1.56

)

Earnings from discontinued operations per share

 

 

0.01

 

 

 

0.47

 

 

 

1.83

 

 

 

0.05

 

Earnings (loss) per share

 

$

0.06

 

 

$

0.13

 

 

$

3.00

 

 

$

(1.51

)

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Issued but Not Adopted

In May 2025, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2025-04, Compensation—Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606). The new guidance is intended to provide less diversity in practice and improve the decision usefulness and operability of the guidance for share-based consideration payable to a customer in conjunction with selling goods or services. The guidance provides clarification regarding the distinguishment between service conditions and performance conditions, as well as closer alignment with how forfeitures of share-based consideration with service conditions and forfeitures of share-based consideration with performance conditions affect the measurement of the transaction price. The guidance is effective for the Company on a retrospective or modified retrospective basis, beginning January 1, 2027 for the interim and annual periods. Early adoption is permitted. The Company had no share-based customer agreements as of June 30, 2025 and therefore, does not expect this guidance to have a material impact on the condensed consolidated financial statements.

In November 2024, the FASB issued ASU No. 2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments. The new guidance improves the relevance and consistency in application of the induced conversion guidance in Subtopic 410-20. The amendments in this update clarify the requirements for determining whether settlements of convertible debt instruments should be accounted for as an induced conversion. The guidance also addresses the settlement of convertible debt instruments that are not currently convertible and provides additional clarification to assist stakeholders in applying the guidance. The guidance is effective for the Company on a prospective or retrospective basis, beginning January 1, 2026 for the interim and annual periods. Early adoption is permitted. The Company is currently evaluating the impact of the new guidance on the condensed consolidated financial statements.

In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40). The new guidance improves disclosures for expenses of public entities and addresses requests from investors for more detailed information about the types of expenses in commonly presented expense captions. Coupled with recent standards that enhanced the disaggregation of revenue and income tax information, the disaggregated expense information required by these amendments will enable investors to better understand the major components of an entity’s income statement. The guidance is effective for the Company on a prospective or retrospective basis, as of January 1, 2027 for the annual period. Early adoption is permitted. As this ASU relates to disclosures only, there will be no impact to CommScope’s results of operations and financial condition.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The new guidance is expected to improve income tax disclosures by requiring additional information related to the rate reconciliation and income taxes paid, including 1) consistent categories and greater disaggregation of information in the rate reconciliation and 2) disaggregation of income taxes paid by jurisdiction. The guidance is effective for the Company on a prospective or retroactive basis, beginning January 1, 2025 for the annual period. Early adoption is permitted. As this ASU relates to disclosures only, there will be no impact to CommScope’s results of operations and financial condition.