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.

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 October ~~23, 2020~~22, 2021 there were ~~198,644,631~~204,498,997 shares of Common Stock outstanding.

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.

On April 4, 2019, the Company completed the acquisition of ARRIS International plc (ARRIS) (the Acquisition) in an all-cash transaction with a total purchase price of approximately $7.7 billion, including debt assumed. See Note 2 for additional discussion of the Acquisition.

As of January 1, 2020, the Company reorganized its internal management and reporting structure as part of the integration of the Acquisition. The reorganization changed the information regularly reviewed by the Company’s chief operating decision maker for purposes of allocating resources and assessing performance. As a result, the Company now reports financial performance for the 2020 year based on four operating segments: Broadband Networks (Broadband), Home Networks (Home), Outdoor Wireless Networks (OWN) and Venue and Campus Networks (VCN). These four segments represent non-aggregated reportable operating segments. Prior to this change, the Company operated and reported five operating segments: Connectivity Solutions, Mobility Solutions, Customer Premises Equipment, Network and Cloud and Ruckus Networks. All prior period amounts in these condensed consolidated financial statements have been recast to reflect these operating segment changes.

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.

In the second quarter of 2021, management shifted certain product lines from the Company’s Broadband Networks (Broadband) segment to its Home Networks (Home) segment to better align with how the business is being managed in light of the planned spin-off of the Home Networks business. 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 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, ~~2019~~2020 (the ~~2019~~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 ~~2019~~2020 Annual Report. ~~Other than the enhancements described below to the allowance for doubtful accounts policy as a result of the adoption of Accounting Standards Update (ASU) No. 2016-13,~~ ~~Measurement of Credit Losses on Financial Instruments, there~~There were no material changes in the Company’s significant accounting policies during the three or nine months ended September 30, ~~2020.~~2021.

~~CommScope Holding Company, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~(In millions, unless otherwise noted)~~

~~Accounts Receivable and Allowance for Doubtful Accounts~~

Trade accounts receivable and contract assets for unbilled receivables are stated at the amount owed by the customer, net of allowances for estimated doubtful accounts, discounts, returns and rebates. The Company measures the allowance for doubtful accounts using an expected credit loss model, which uses a lifetime expected loss allowance for all trade accounts receivable and contract assets. To measure the expected credit losses, trade accounts receivable and contract assets are grouped based on shared credit risk characteristics and the days past due. Contract assets relate to unbilled work in progress and have substantially the same risk characteristics as trade accounts receivable for the same types of contracts. Therefore, the Company has concluded that the expected loss rates for trade accounts receivables are a reasonable approximation of the loss rates for the contract assets.

In calculating an allowance for doubtful accounts, the Company uses its historical experience, external indicators and forward-looking information to calculate expected credit losses using an aging method. The Company assesses impairment of trade accounts receivable on a collective basis as they possess shared credit risk characteristics which have been grouped based on the days past due.

The expected loss rates are based on the payment profiles of sales over the preceding thirty-six months and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle their trade accounts receivable.

Concentrations of Risk and Related Party Transactions

NaN direct customer accounted for 10% or more of the Company’s total net sales during the three or nine months ended September 30, 2021. Net sales to Comcast Corporation and affiliates (Comcast) accounted for ~~11%~~11% of the Company’s total net sales during the three and nine months ended September 30, 2020. ~~NaN~~Other than Comcast, 0 other direct customer accounted for 10% or more of the Company’s total net sales. Net sales to Comcast accounted for 15% and 10% of the Company’s total net sales during the three and nine months ended September 30, 2019, respectively. Other than Comcast, 0 other direct customer accounted for 10%10% or more of the Company’s total net sales during the three ~~and~~or nine months ended September 30, ~~2019. NaN~~2020. As of September 30, 2021, 0 direct customer accounted for ~~10%~~10% or more of the Company’s accounts ~~receivable as of September 30, 2020.~~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 September 30, ~~2020,~~2021, funds affiliated with Carlyle Partners VII S1 Holdings, L.P. (Carlyle) owned ~~100%~~100% of the Series A ~~Convertible Preferred Stock~~convertible preferred stock (the Convertible Preferred Stock), which was sold to Carlyle to fund a portion of the ~~Acquisition.~~acquisition of ARRIS International plc (ARRIS) in 2019. See Note 119 for further discussion of the Convertible Preferred Stock. Other than transactions related to the Convertible Preferred Stock, there were 0 material related party transactions for the three or nine months ended September 30, ~~2020.~~2021.

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.~~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.

~~CommScope Holding Company, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~(In millions, unless otherwise noted)~~

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


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Product warranty accrual, beginning of period	$	69.5		$	55.9		$	59.5		$	61.0
Provision for warranty claims		9.7			10.3			33.0			20.1
Warranty claims paid		(9.2	)		(8.4	)		(22.4	)		(22.8	)
Foreign exchange		(0.2	)		0.2			(0.3	)		(0.3	)
Product warranty accrual, end of period	$	69.8		$	58.0		$	69.8		$	58.0

Three Months Ended

Nine Months Ended

September 30,

September 30,

2020

2019

2020

2019

Product warranty accrual, beginning of period

$
55.9

$
66.6

$
61.0

$
15.6

Obligation assumed under ARRIS acquisition

—

—

—

57.4

Provision for warranty claims

10.3

6.5

20.1

12.5

Warranty claims paid

(8.4
)

(9.3
)

(22.8
)

(21.7
)
Foreign exchange

0.2

—

(0.3
)

—

Product warranty accrual, end of period

$
58.0

$
63.8

$
58.0

$
63.8

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~~The outcome of ~~the~~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 ~~an adverse outcome~~or is estimated at the minimum amount of a range of estimates. The actual loss could ~~result in a~~be material ~~loss.~~and may vary significantly from our estimates.

As of September 30, ~~2020,~~2021, the Company had a liability of ~~$59.4~~$21.7 million recorded in accrued and other liabilities and noncurrent 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, $48.5 million was assumed in the Acquisition. The Company paid $66.2 million during the nine months ended September 30, 2020 to settle intellectual property assertions and expects to pay an additional $39.8 million in the fourth quarter of 2020. For the three and nine months ended September 30, ~~2020,~~2021, the Company recorded ~~a charge (credit)~~charges to cost of sales in the Condensed Consolidated Statements of Operations of ~~$(9.9)~~$5.0 million and ~~$2.8~~$46.5 million, respectively, related to these intellectual property assertions. These ~~amounts~~charges are ~~primarily~~ reflected in the results of the Broadband, Home and ~~VCN~~Venue and Campus Networks segments. The Company paid $51.0 million and $55.0 million during the three and nine months ended September 30, 2021, respectively, to settle intellectual property assertions.

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.

CommScope Holding Company, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In millions, unless otherwise noted)

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 no0 indicators of goodwill impairment identified during the three months ended September 30, ~~2020. See Notes 3 and 8 for discussion of goodwill impairment charges during~~2021. During the nine months ended September 30, ~~2020.~~2021, the Company assessed goodwill for impairment due to a change in the composition of certain reporting units. The Company performed impairment testing immediately before and after the change and determined that 0 goodwill impairment existed. See Note 2 for further discussion. There were 0 indicators of goodwill impairment identified during the three ormonths ended September 30, 2020, but during the nine months ended September 30, ~~2019.~~2020, the Company recorded a $206.7 million goodwill impairment charge as a result of lower projected operating results for the Home Networks reporting unit in the Home segment.

Property, plant and equipment, intangible assets and ~~intangible~~right of use 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 0 definite-lived intangible or other long-lived asset impairments identified during the three or nine months ended September 30, ~~2020~~2021 or ~~2019. See Note 10 for discussion~~2020.

Income Taxes

For the three months ended September 30, 2021, the Company’s effective tax rate was 22.1% and the Company recognized a tax benefit of ~~impairment charges~~$35.2 million on a pretax loss of $159.4 million. The Company’s tax benefit was higher than the statutory rate of 21% due to favorable changes in uncertain tax positions. For the nine months ended September 30, 2021, the Company’s effective tax rate was 14.8% and the Company recognized a tax benefit of $65.3 million on a pretax loss of $440.9 million. The Company’s tax benefit was lower than the statutory rate primarily due to the impact of $37.4 million in tax expense related to ~~restructuring actions.~~a foreign tax rate change.

~~CommScope Holding Company, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~(In millions, unless otherwise noted)~~

~~Income Taxes~~

For the three months ended September 30, 2020, the Company’s effective tax rate was ~~(8.7)~~(8.7)% and the Company recognized income tax expense of ~~$9.3~~$9.3 million on a pretax loss of ~~$107.0~~$107.0 million. The income tax expense on the Company’s pretax loss was driven by ~~$19.2~~$19.2 million of tax expense related to a foreign tax rate change. For the nine months ended September 30, 2020, the Company’s effective tax rate was ~~5.9%~~5.9% and the Company recognized a tax benefit of ~~$37.2~~$37.2 million on a pretax loss of ~~$634.5~~$634.5 million. The Company’s tax benefit ~~was less than the statutory rate of 21.0%~~ in the nine months ended September 30, 2020 was impacted unfavorably primarily due to a goodwill impairment charge of ~~$206.7~~$206.7 million, for which minimal tax benefits were recorded, ~~$22.7~~$22.7 million of tax expense related to state valuation allowances and ~~$19.2~~$19.2 million in income tax expense related to a foreign tax rate change. For both the three and nine months ended September 30, 2020, the Company’s tax rate was also impacted favorably by federal tax credits and unfavorably by U.S. anti-deferral provisions and foreign withholding taxes. Excess tax costs of ~~$1.2~~$1.2 million and ~~$9.0~~$9.0 million related to equity compensation awards also impacted the income taxes unfavorably for the three and nine months ended September 30, 2020, respectively.

For the three and nine months ended September 30, 2019, the Company’s effective income tax rate was 24.8% and 15.1%, respectively, and the Company recognized a tax benefit of $51.7 million on a pretax loss of $208.2 million and a tax benefit of $87.6 million on a pretax loss of $580.4 million, respectively. For the three and nine months ended September 30, 2019, our tax benefit was impacted favorably by the impact of federal tax credits, benefits recognized from adjustments related to prior years’ tax returns and the expiration of statutes of limitations on various uncertain tax positions and impacted unfavorably by the impact of U.S. anti-deferral provisions and foreign withholding taxes. Excess tax costs related to equity-based compensation awards had an unfavorable impact on our tax benefit of $1.1 million and $1.5 million for the three and nine months ended September 30, 2019, respectively.

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.

CommScope Holding Company, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In millions, unless otherwise noted)

For the three and nine months ended September 30, 2021, 11.9 million and 12.3 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. Of those amounts, for the three and nine months ended September 30, 2021, 5.0 million and 5.2 million shares, respectively, would have been considered dilutive if the Company had not been in a net loss position. For the three and nine months ended September 30, 2020, 18.9 million and 17.4 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 and nine months ended September 30, 2020, 4.7 million and 4.5 million shares, respectively, would have been considered dilutive if the Company had not been in a net loss position.

For both the three and nine months ended September 30, ~~2019, 17.4~~2021, 37.9 million of as-if converted shares ~~and 10.8 million shares, respectively,~~related to the Convertible Preferred Stock were ~~not included in~~excluded from the ~~computation of~~ diluted ~~EPS~~share count because ~~the effect was either antidilutive or the performance conditions~~they were not met. Of those amounts, for the three and nine months ended September 30, 2019, 1.4 million shares and 2.3 million shares, respectively, would have been considered dilutive if the Company had not been in a net loss position.

antidilutive. For the three and nine months ended September 30, 2020, ~~and 2019,~~ 37.4 million and 36.9 ~~million, respectively, and 36.4 million and 23.8~~ million, respectively, of as-if converted shares related to the Convertible Preferred Stock were excluded from the diluted share count because they were ~~anti-dilutive; however, they would~~antidilutive. These shares may have been considered dilutive if the Company had not been in a net loss position.

~~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						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Numerator:
Net loss	$	(124.2	)	$	(116.3	)	$	(375.6	)	$	(597.3	)
Dividends on Series A convertible preferred stock		(14.3	)		(14.1	)		(43.0	)		(41.8	)
Net loss attributable to common stockholders	$	(138.5	)	$	(130.4	)	$	(418.6	)	$	(639.1	)

Denominator:
Weighted average common shares outstanding - basic		204.2			196.9			203.3			195.9
Dilutive effect of as-if converted Series A convertible preferred stock		—			—			—			—
Dilutive effect of equity-based awards		—			—			—			—
Weighted average common shares outstanding - diluted		204.2			196.9			203.3			195.9

Loss per share:
Basic	$	(0.68	)	$	(0.66	)	$	(2.06	)	$	(3.26	)
Diluted	$	(0.68	)	$	(0.66	)	$	(2.06	)	$	(3.26	)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2020

2019

2020

2019

Numerator:

Net loss

$
(116.3
)

$
(156.5
)

$
(597.3
)

$
(492.8
)
Dividends on Series A convertible preferred stock

(14.1
)

(13.8
)

(41.8
)

(26.9
)
Deemed dividends on Series A convertible preferred
stock

—

—

—

(3.0
)
Net loss attributable to common stockholders

$
(130.4
)

$
(170.3
)

$
(639.1
)

$
(522.7
)

Denominator:

Weighted average common shares outstanding - basic

196.9

194.1

195.9

193.5

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

—

—

—

—

Dilutive effect of equity-based awards

—

—

—

—

Weighted average common shares outstanding - diluted

196.9

194.1

195.9

193.5

Loss per share:

Basic

$
(0.66
)

$
(0.88
)

$
(3.26
)

$
(2.70
)
Diluted

$
(0.66
)

$
(0.88
)

$
(3.26
)

$
(2.70
)

On January 1, ~~2020,~~2021, the Company adopted ~~ASU~~Accounting Standards Update (ASU) No. ~~2016-13,~~ ~~Measurement of Credit Losses on Financial Instruments~~2020-01, Investments – Equity Securities (Topic 321), Investments – Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815).~~and subsequent amendments to the initial guidance: ASU No. 2018-19, ASU No. 2019-04, ASU No. 2019-05 and ASU No. 2020-02 (collectively, Topic 326)~~. The new guidance ~~replaces~~ is based on a consensus of the ~~incurred loss methodology with~~Emerging Issues Task Force and is expected to improve comparability in accounting for these transactions. The amendments in this guidance clarify the ~~current expected credit loss (CECL) methodology. The measurement~~interaction of ~~expected credit losses~~accounting for equity securities under Topic 321 and investments accounted for under the ~~CECL methodology is applicable to financial assets measured at amortized cost, including trade accounts receivable. It also applies to off-balance sheet credit exposures not~~equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for ~~as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor in accordance with Topic 842.~~

The Company adopted Topic 326 using the modified retrospective method for all financial assets measured at amortized cost, which are primarily trade accounts receivable and contract assets for the Company. Results for reporting periods beginning after January 1, 2020 are presented under Topic ~~326 while prior period amounts continue to be reported in accordance with previously applicable U.S. GAAP.~~815. The impact of adopting ~~Topic 326 as of January 1, 2020~~this new guidance was not material to the consolidated financial statements.

11On 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.

In August 2020, the Financial Accounting Standards Board (FASB) issued ASU No. 2020-06, Debt—Debt 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, ~~which provides~~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 ~~as of March 12, 2020~~ through December 31, 2022. The Company is currently evaluating the impact of this guidance on the consolidated financial ~~statements.~~statements.

2. GOODWILL

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


	December 31, 2020							Activity			September 30, 2021
	Goodwill		Accumulated Impairment Losses			Total		Foreign Exchange and Other			Goodwill		Accumulated Impairment Losses			Total
Broadband	$	3,369.7	$	(193.6	)	$	3,176.1	$	(33.3	)	$	3,336.4	$	(193.6	)	$	3,142.8
OWN		669.1		(159.5	)		509.6		(3.2	)		665.9		(159.5	)		506.4
VCN		1,642.0		(41.2	)		1,600.8		(10.0	)		1,632.0		(41.2	)		1,590.8
Home		399.5		(399.5	)		—		13.7			413.2		(399.5	)		13.7
Total	$	6,080.3	$	(793.8	)	$	5,286.5	$	(32.8	)	$	6,047.5	$	(793.8	)	$	5,253.7

In ~~January 2020,~~ the ~~FASB issued 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~~second quarter of 2021, management shifted certain product lines from the Company’s Broadband segment to its Home segment to better align the Home segment with how the business is ~~based on a consensus~~being managed in light of the ~~Emerging Issues Task Force~~planned spin-off of the Home Networks business. This changed the composition of the Company’s reporting units which resulted in the reallocation of $13.7 million of goodwill from the Network and ~~is expected~~Cloud reporting unit to ~~increase comparability~~the Home Networks reporting unit.

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 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. ASU No. 2020-01 is effective for the Company as of January 1, 2021 and early adoption is permitted.time. The Company ~~is evaluating~~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 ~~impact of the new guidance on the consolidated financial statements.~~

~~In December 2019 the FASB issued 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~~Broadband Networks and ~~clarifying~~Venue and amending existing guidance. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact of the new guidance on the consolidated financial statements and disclosures.

~~2. ACQUISITIONS~~

On April 4, 2019, the Company acquired all of the issued ordinary shares of ARRIS in an all cash transaction with a total consideration of approximately $7.7 billion, including debt assumed. ARRIS is a global leader in entertainment, communications and networking technology. The combined company is expected to drive profitable growth in new markets, shape the future of wired and wireless communications, and position the Company to benefit from key industry trends, including network convergence, fiber and mobility everywhere, 5G, Internet of Things and rapidly changing network and technology architectures.

~~During~~Campus Networks segments. In the first quarter of ~~2020,~~2021, the Company ~~completed its acquisition accounting and made~~determined that the ~~following adjustments to~~geographic disaggregation of net sales by segment is a more meaningful disaggregation of net sales than net sales disaggregated based on the ~~provisional amounts that were previously recorded:~~

•

An increase of $13.1 million in accrued liabilities and an increase of $3.2 million in deferred tax assets due to an adjustment of certain pre-acquisition contingencies with a corresponding $9.9 million increase to goodwill.

•

~~An increase in deferred tax assets of $20.8 million related to the release of valuation allowances for certain state income tax credits with a corresponding decrease to goodwill.~~

•

A decrease in deferred tax liabilities of approximately $4.7 million, an increase in income tax payable of $6.7 million and a decrease in unrecognized tax benefits of approximately $0.9 million with a corresponding $1.1 million increase to goodwill.

~~The Company recorded these amounts as measurement period adjustments because the information was known as~~timing of the ~~acquisition date but~~transfer of goods, given the ~~analysis was finalized~~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 ~~first quarter~~presentation of ~~2020.~~net sales based on the timing of the transfer of goods has been eliminated.

1211

CommScope Holding Company, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In millions, unless otherwise noted)

~~3. GOODWILL~~

As a result of the change in segments as discussed in Note 1, goodwill was reallocated from the previous segments to the new segments. The following table presents goodwill after the reallocation by new reportable segment:

Broadband

Home

OWN

VCN

Total

Goodwill, gross at December 31, 2019

$
3,355.1

$
402.1

$
666.0

$
1,635.6

$
6,058.8

Adjustments to preliminary purchase price

(7.1
)

(1.3
)

—

(1.4
)

(9.8
)
Foreign exchange and other

2.3

(1.3
)

—

(2.1
)

(1.1
)
Goodwill, gross at September 30, 2020

3,350.3

399.5

666.0

1,632.1

6,047.9

Accumulated impairment charges at
December 31, 2019

(193.6
)

(192.8
)

(159.5
)

(41.2
)

(587.1
)
Impairment charges for the nine months ended
September 30, 2020

—

(206.7
)

—

—

(206.7
)
Accumulated impairment at September 30, 2020

(193.6
)

(399.5
)

(159.5
)

(41.2
)

(793.8
)
Goodwill, net at September 30, 2020

$
3,156.7

$
—

$
506.5

$
1,590.9

$
5,254.1

The Company’s change in segments as of January 1, 2020 resulted in a realignment of its existing reporting units. Although the reporting units were realigned under the new segments, the Company’s reporting units remained the same except for where two reporting units have been combined into a new reporting unit. In this case, goodwill was simply combined in the new reporting units. Since the composition of the reporting units and the assignment of goodwill to the reporting units were unaffected, an interim goodwill impairment test due to the change in segments was not performed in the first quarter of 2020.

During the second quarter of 2020, the Company determined that indicators of goodwill impairment existed for the Home Networks reporting unit due to lower projected operating results, primarily from the accelerated decline in video devices. This trend was projected to continue as consumers adopt the use of other streaming applications and was further impacted by the macro-economic effects caused by the new strain of coronavirus (COVID-19). The Company performed a quantitative goodwill impairment test during the second quarter of 2020 and recorded a $206.7 million goodwill impairment charge during the second quarter 2020 relating to the Home Networks reporting unit. It is reflected in the asset impairments line on the Condensed Consolidated Statements of Operations for the nine months ended September 30, 2020. This reflected a full impairment of the remaining goodwill in the Home segment, and as such, the Home segment has 0 remaining goodwill balance as of September 30, 2020.

Estimating the fair value of a reporting unit involves uncertainties because it requires management to develop numerous assumptions, including assumptions about the future growth and potential volatility in revenues and costs, capital expenditures, industry economic factors and future business strategy. Changes in projected revenue growth rates, projected operating income margins or estimated discount rates due to uncertain market conditions, loss of one or more key customers, changes in the Company’s strategy, changes in technology or other factors could negatively affect the fair value in one or more of the Company’s reporting units and result in a material impairment charge in the future.

~~CommScope Holding Company, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~(In millions, unless otherwise noted)~~

~~4. REVENUE FROM CONTRACTS WITH CUSTOMERS~~

~~Disaggregated Net Sales~~

~~The following table presents net sales by reportable segment, disaggregated based on contract type:~~

Three Months Ended September 30,

Broadband

Home

OWN

VCN

Total

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

Contract type:

Product contracts

$
744.5

$
623.0

$
561.7

$
817.8

$
265.7

$
328.4

$
444.8

$
494.5

$
2,016.7

$
2,263.7

Other contracts

76.4

71.8

1.9

8.6

6.1

6.0

67.0

30.1

151.4

116.5

Consolidated net
sales

$
820.9

$
694.8

$
563.6

$
826.4

$
271.8

$
334.4

$
511.8

$
524.6

$
2,168.1

$
2,380.2

Nine Months Ended September 30,

Broadband

Home

OWN

VCN

Total

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

Contract type:

Product contracts

$
1,885.0

$
1,520.5

$
1,777.3

$
1,702.3

$
931.8

$
1,165.8

$
1,281.9

$
1,383.8

$
5,876.0

$
5,772.4

Other contracts

221.3

170.2

11.8

13.1

17.2

17.6

177.8

73.1

428.1

274.0

Consolidated net
sales

$
2,106.3

$
1,690.7

$
1,789.1

$
1,715.4

$
949.0

$
1,183.4

$
1,459.7

$
1,456.9

$
6,304.1

$
6,046.4

The Other contracts line above primarily includes service contracts and project contracts with multiple performance obligations. Further information on net sales by reportable segment and geographic region is included in Note 9.

Allowance for Doubtful Accounts


	Three Months Ended					Nine Months Ended						Three Months Ended						Nine Months Ended
	September 30,					September 30,						September 30,						September 30,
	2020			2019		2020			2019			2021			2020			2021			2020
Allowance for doubtful accounts, beginning of period	$	43.4		$	25.6	$	35.4		$	17.4		$	30.8		$	43.4		$	40.3		$	35.4
Charged to costs and expenses		(1.5	)		6.8		6.9			13.8
Provision (benefit)													15.6			(1.1	)		7.3			8.8
Write-offs		(0.3	)		—		(2.9	)		(0.1	)		(0.2	)		(0.3	)		(0.7	)		(3.0	)
Recoveries		—			0.2		1.5			0.2
Foreign exchange and other		1.5			—		2.2			1.3			(0.6	)		1.1			(1.3	)		1.9
Allowance for doubtful accounts, end of period	$	43.1		$	32.6	$	43.1		$	32.6		$	45.6		$	43.1		$	45.6		$	43.1

Customer Contract Balances

The following table provides the balance sheet location and amounts of contract assets, or unbilled accounts receivable, and contract liabilities, or deferred revenue, from contracts with customers as of September 30, ~~2020~~2021 and December 31, ~~2019.~~2020.

Balance Sheet Location

September 30,
2020

December 31,
2019

Unbilled accounts
receivable

Accounts receivable, less allowance for doubtful accounts

$
34.3

$
28.6

Deferred revenue

Accrued and other liabilities and Other noncurrent liabilities

144.5

122.2



Contract Balance Type	Balance Sheet Location	September 30, 2021		December 31, 2020
Unbilled accounts receivable	Accounts receivable, less allowance for doubtful accounts	$	37.2	$	21.9

Deferred revenue - current	Accrued and other liabilities		108.2		90.0
Deferred revenue - noncurrent	Other noncurrent liabilities		59.3		53.2
Total contract liabilities		$	167.5	$	143.2

There were no material changes to contract asset balances for the three or nine months ended September 30, ~~2020~~2021 as a result of changes in estimates or impairments. ~~As of~~The change in the contract liability balance from December 31, 2020 to September 30, ~~2020,~~2021 was primarily due to upfront support billings recognized over the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied and that have a duration of one year or less was $99.0 million, with the remaining $45.5 million having a duration greater than one year.

~~CommScope Holding Company, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~(In millions, unless otherwise noted)~~

~~Contract Liabilities~~

~~The following table presents the changes in deferred revenue for the nine months ended September 30, 2020 and 2019:~~

Nine Months Ended

September 30,

2020

2019

Balance at beginning of period

$
122.2

$
7.6

   Fair value of deferred revenue acquired in ARRIS acquisition

—

90.1

   Deferral of revenue

142.5

78.2

   Recognition of unearned revenue

(120.2
)

(61.1
)
Balance at end of period

$
144.5

$
114.8

~~5. LEASES~~

~~The Company has operating type leases for real estate, equipment and vehicles in the U.S. and internationally. As of September 30, 2020, the Company had~~ 0~~finance type leases. The Company’s leases have remaining lease terms of up to~~ ~~9 years, some of which may include options to extend the leases for up to 5 years or options to terminate the leases within 1 year. Operating lease expense was $26.7 million and $78.8 million for~~support term. During the three and nine months ended September 30, 2021, the Company recognized revenue related to contract liabilities recorded as of December 31, 2020 ~~respectively, inclusive~~ of ~~period cost for short-term, cancellable and variable leases, not included in lease liabilities, of $7.9~~$17.5 million and ~~$23.3~~$71.2 million, respectively.

4. SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION

Inventories



	September 30, 2021		December 31, 2020
Raw materials	$	361.4	$	280.2
Work in process		165.0		140.6
Finished goods		725.8		668.1
	$	1,252.2	$	1,088.9

Accrued and Other Liabilities



	September 30, 2021		December 31, 2020
Compensation and employee benefit liabilities	$	266.6	$	277.9
Deferred revenue		108.2		90.0
Accrued interest		58.0		120.2
Product warranty accrual		54.7		45.8
Operating lease liabilities		51.3		62.4
Restructuring reserve		47.2		22.0
Patent claims and litigation settlements		13.6		25.7
Other		285.0		266.6
	$	884.6	$	910.6

for the three and nine months ended September 30, 2020, respectively. Operating lease expense was $23.0 million and $61.3 million for the three and nine months ended September 30, 2019, respectively, inclusive of period cost for short-term, cancellable and variable leases, not included in lease liabilities, of $9.2 million and $18.6 million for the three and nine months ended September 30, 2019, respectively.

The Company occasionally subleases all or a portion of certain unutilized real estate facilities. As of September 30, 2020 and 2019, the Company’s sublease arrangements were classified as operating type leases and the income amounts were not material for the three or nine months ended September 30, 2020 and 2019. See Note 10 for discussion of the impairments of operating lease right of use assets during the three and nine months ended September 30, 2020.12

~~Supplemental cash flow information related to operating leases:~~

Nine Months Ended

September 30,

2020

2019

Operating cash paid to settle lease liabilities
$
55.8

$
49.2

Right of use asset additions in exchange for lease liabilities

17.1

21.3

~~Supplemental balance sheet information related to operating leases:~~

Balance Sheet Location

September 30,
2020

December 31,
2019

Right of use assets
Other noncurrent assets

$
175.1

$
204.9

Lease liabilities
Accrued and other liabilities

$
62.5

$
61.7

Lease liabilities
Other noncurrent liabilities

129.9

160.4

Total lease liabilities

$
192.4

$
222.1

CommScope Holding Company, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In millions, unless otherwise noted)

In the table above, the right of use assets balance as of December 31, 2019 has been revised to correct an immaterial error in presentation. This error did not affect the right of use assets balance included in the other noncurrent assets line in the Condensed Consolidated Balance Sheets as of December 31, 2019.

~~Weighted average remaining lease term (in years)~~

Operating Lease Information



	Balance Sheet Location	September 30, 2021		December 31, 2020
Right of use assets	Other noncurrent assets	$	139.5	$	159.3

Lease liabilities	Accrued and other liabilities	$	51.3	$	62.4
Lease liabilities	Other noncurrent liabilities		109.2		119.1
Total lease liabilities		$	160.5	$	181.5

~~3.9~~

~~Weighted average discount rate~~

~~6.9~~

~~Future minimum lease payments under non-cancellable leases as of September 30, 2020:~~

Operating Leases

Remainder of 2020
$
20.1

2021

69.9

2022

46.7

2023

36.1

2024

25.2

Thereafter

24.6

Total minimum lease payments
$
222.6

Less: imputed interest

(30.2
)
Total
$
192.4

~~6. SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION~~

~~Inventories~~

September 30,
2020

December 31,
2019

Raw materials

$
279.9

$
240.1

Work in process

148.7

121.6

Finished goods

675.9

614.2

$
1,104.5

$
975.9

~~Accrued and Other Liabilities~~

September 30,
2020

December 31,
2019

Compensation and employee benefit liabilities

$
268.4

$
187.3

Operating lease liabilities

62.5

61.7

Accrued interest

59.3

97.8

Deferred revenue

99.0

82.6

Accrued royalties

40.2

63.9

Product warranty accrual

45.0

42.8

Restructuring reserve

36.0

24.0

Income taxes payable

15.4

15.8

Value-added taxes payable

28.6

27.3

Contract manufacturing liability

39.4

25.4

Patent claims and litigation

47.1

70.1

Other

137.4

163.3

$
878.3

$
862.0

~~CommScope Holding Company, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~(In millions, unless otherwise noted)~~

Accumulated Other Comprehensive Loss

The following table presents changes in accumulated other comprehensive loss (AOCL), net of tax:


	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	September 30,						September 30,						September 30,						September 30,
	2020			2019			2020			2019			2021			2020			2021			2020
Foreign currency translation
Balance at beginning of period	$	(227.7	)	$	(140.4	)	$	(162.7	)	$	(140.5	)	$	(110.3	)	$	(227.7	)	$	(80.5	)	$	(162.7	)
Other comprehensive income (loss)		63.7			(76.6	)		(1.3	)		(78.2	)		(41.4	)		63.7			(71.7	)		(1.3	)
Amounts reclassified from AOCL		—			—			—			1.7			0.5			—			1.0			—
Balance at end of period	$	(164.0	)	$	(217.0	)	$	(164.0	)	$	(217.0	)	$	(151.2	)	$	(164.0	)	$	(151.2	)	$	(164.0	)

Defined benefit plan activity
Balance at beginning of period													$	(35.8	)	$	(25.9	)	$	(36.4	)	$	(25.4	)
Amounts reclassified from AOCL														0.3			(0.1	)		0.9			(0.6	)
Balance at end of period													$	(35.5	)	$	(26.0	)	$	(35.5	)	$	(26.0	)

Hedging instruments
Balance at beginning of period	$	(21.8	)	$	(13.3	)	$	(8.9	)	$	(1.4	)	$	(35.1	)	$	(21.8	)	$	(39.0	)	$	(8.9	)
Other comprehensive income (loss)		(9.0	)		7.9			(21.9	)		(4.0	)		4.3			(9.0	)		8.2			(21.9	)
Balance at end of period	$	(30.8	)	$	(5.4	)	$	(30.8	)	$	(5.4	)	$	(30.8	)	$	(30.8	)	$	(30.8	)	$	(30.8	)

Defined benefit plan activity
Balance at beginning of period	$	(25.9	)	$	(17.4	)	$	(25.4	)	$	(17.3	)
Amounts reclassified from AOCL		(0.1	)		(0.1	)		(0.6	)		(0.2	)
Balance at end of period	$	(26.0	)	$	(17.5	)	$	(26.0	)	$	(17.5	)
Net AOCL at end of period	$	(220.8	)	$	(239.9	)	$	(220.8	)	$	(239.9	)	$	(217.5	)	$	(220.8	)	$	(217.5	)	$	(220.8	)

Amounts reclassified from net AOCL related to foreign currency translation and defined benefit plans are recorded in other ~~income (expense),~~expense, net in the Condensed Consolidated Statements of Operations.

Cash Flow Information


	Nine Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2021		2020
Cash paid during the period for:
Income taxes, net of refunds	$	61.8	$	82.5	$	64.3	$	61.8
Interest		451.8		353.3		455.5		451.8

CommScope Holding Company, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In millions, unless otherwise noted)

5. FINANCING



	September 30, 2021			December 31, 2020
7.125% senior notes due July 2028	$	700.0		$	700.0
5.00% senior notes due March 2027		750.0			750.0
8.25% senior notes due March 2027		1,000.0			1,000.0
6.00% senior notes due June 2025		1,300.0			1,300.0
4.75% senior secured notes due September 2029		1,250.0			—
6.00% senior secured notes due March 2026		1,500.0			1,500.0
5.50% senior secured notes due March 2024		—			1,250.0
Senior secured term loan due April 2026		3,136.0			3,160.0
Senior secured revolving credit facility		—			—
Total principal amount of debt	$	9,636.0		$	9,660.0
Less: Original issue discount, net of amortization		(21.5	)		(24.8	)
Less: Debt issuance costs, net of amortization		(101.5	)		(114.6	)
Less: Current portion		(32.0	)		(32.0	)
Total long-term debt	$	9,481.0		$	9,488.6

~~7. FINANCING~~

September 30, 2020

December 31, 2019

7.125% senior notes due July 2028

$
700.0

$
—

5.00% senior notes due March 2027

750.0

750.0

8.25% senior notes due March 2027

1,000.0

1,000.0

6.00% senior notes due June 2025

1,400.0

1,500.0

5.50% senior notes due June 2024

—

650.0

5.00% senior notes due June 2021

—

150.0

6.00% senior secured notes due March 2026

1,500.0

1,500.0

5.50% senior secured notes due March 2024

1,250.0

1,250.0

Senior secured term loan due April 2026

3,168.0

3,192.0

Senior secured revolving credit facility

—

—

Total principal amount of debt

$
9,768.0

$
9,992.0

Less: Original issue discount, net of amortization

(25.9
)

(29.2
)
Less: Debt issuance costs, net of amortization

(120.8
)

(130.4
)
Less: Current portion

(32.0
)

(32.0
)
Total long-term debt

$
9,589.3

$
9,800.4

See Note 8 in the Notes to Consolidated Financial Statements in the ~~2019~~2020 Annual Report for additional information on the terms and conditions of the Company’s debt obligations except the new ~~7.125%~~4.75% senior secured notes due ~~2028~~2029 (the ~~2028~~2029 Secured Notes), which are described below.

In4.75% Senior Secured Notes due September 2029

On August ~~2020,~~23, 2021, the Company ~~redeemed $100.0~~issued $1,250.0 million aggregate principal amount of the 6.00% senior notes due 2025 (the 2025 Notes). The redemption of the 2025 Notes resulted in a charge of $3.0 million which is reflected in other income (expense), net during the three and nine months ended September 30, 2020. In connection with the redemption, $1.3 million of debt issuance costs was written off and included in interest expense during the three and nine months ended September 30, 2020.

~~7.125% Senior Notes due July 2028~~

~~On July 1, 2020, the Company issued $700.0 million aggregate principal amount of the 2028~~2029 Secured Notes. The Company will pay interest on the ~~2028~~2029 Secured Notes semi-annually in arrears on ~~July~~March 1 and ~~January~~September 1 of each year, commencing on ~~January~~March 1, ~~2021.~~2022. Unless repurchased or redeemed earlier, the ~~2028~~2029 Secured Notes will mature on ~~July~~September 1, ~~2028.~~2029. The ~~2028~~2029 Secured Notes were offered in a private placement exempt from registration under the Securities Act of 1933, as amended (the Securities Act), to qualified institutional buyers pursuant to Rule 144A under the Securities Act and to certain non-U.S. persons outside of the United States in reliance on Regulation S under the Securities Act. The Company used the net proceeds from the offering of the ~~2028~~2029 Secured Notes, together with cash on hand, to redeem and retire all of the outstanding ~~5.00%~~5.50% senior secured notes due ~~2021~~2024 (the ~~2021 Notes) and the outstanding 5.50% senior notes due~~ 2024 ~~(the 2024~~Secured Notes) and pay fees and expenses related to the transaction. The redemption of the 2024 Secured Notes resulted in a charge of ~~$11.9~~$34.4 million, ~~which is~~ reflected in other ~~income (expense),~~expense, net, ~~during the three and nine months ended September 30, 2020. In connection with the redemptions of the 2021 Notes~~ and the ~~2024 Notes, including the $100.0 million redemption~~write-off of ~~the 2021 Notes in February 2020, $4.7 million and $5.0~~$9.9 million of debt issuance costs, ~~were written off and included~~reflected in interest expense, during the three and nine months ended September 30, ~~2020, respectively.~~2021.

The ~~2028~~2029 Secured Notes are guaranteed on a senior ~~unsecured~~secured basis by CommScope Holding Company, Inc. and each of CommScope, Inc.’s existing and future wholly owned domestic restricted subsidiaries that is an obligor under the senior secured credit facilities or certain other ~~capital markets~~ debt, subject to certain exceptions. The ~~2028~~2029 Secured Notes and the related guarantees are secured on a first-priority basis by security interests in all of the assets that secure indebtedness under the 2026 Term Loan (as defined below) on a first-priority basis, and on a second-priority basis in all assets that secure the Revolving Credit Facility (as defined below) on a first-priority basis and the 2026 Term Loan on a second-priority basis. The 2029 Secured Notes and the related guarantees rank senior in right of payment to all of CommScope, Inc.’s and the guarantors’ subordinated indebtedness and equally in right of payment with all of CommScope, Inc.’s and the guarantors’ senior indebtedness (without giving effect to collateral arrangements)., including the senior secured credit facilities and the Company’s other senior notes. The ~~2028~~2029 Secured Notes and the related guarantees are effectively ~~junior~~subordinated to ~~all~~any of CommScope, Inc.’s ~~and~~or the guarantors’ ~~existing~~indebtedness that is secured by assets that do not constitute collateral for the 2029 Secured Notes and ~~future~~effectively subordinated to any of CommScope, Inc.’s or the guarantors’ indebtedness that is secured ~~indebtedness~~by a senior-priority lien, including under the senior secured asset-based revolving credit facility (the Revolving Credit Facility), in each case to the extent of the value of the assets securing such ~~secured~~ indebtedness. In addition, the ~~2028~~2029 Secured Notes and related guarantees are structurally subordinated to all existing and future liabilities (including trade payables) of CommScope, Inc.’s subsidiaries that do not guarantee the ~~2028~~2029 Secured Notes.

1814

CommScope Holding Company, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In millions, unless otherwise noted)

The ~~2028~~2029 Secured Notes may be redeemed prior to maturity under certain circumstances. Upon certain change of control events, the ~~2028~~2029 Secured Notes may be redeemed at the option of the holders at ~~101%~~101% of their principal amount, plus accrued and unpaid interest. The ~~2028~~2029 Secured Notes may be redeemed by CommScope, Inc. on or after ~~July~~September 1, ~~2023~~2024 at the redemption prices specified in the indenture governing the ~~2028~~2029 Secured Notes. Prior to ~~July~~September 1, ~~2023,~~2024, the ~~2028~~2029 Secured Notes may be redeemed by CommScope, Inc. at a redemption price equal to ~~100%~~100% of their principal amount, plus a make-whole premium (as specified in the indenture governing the ~~2028~~2029 Secured Notes), plus accrued and unpaid interest. Prior to ~~July~~September 1, ~~2023,~~2024, under certain circumstances, CommScope, Inc. may also redeem up to ~~40%~~40% of the aggregate principal amount of the ~~2028~~2029 Secured Notes at a redemption price of ~~107.125%~~104.750%, plus accrued and unpaid interest, using the proceeds of certain equity offerings. At any time prior to September 1, 2024, CommScope, Inc. may redeem during each calendar year up to 10% of the aggregate principal amount of the 2029 Secured Notes at a redemption price equal to 103% of the aggregate principal amount of the 2029 Secured Notes to be redeemed, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.

In connection with issuing the ~~2028~~2029 Secured Notes, the Company incurred costs of ~~$11.6~~$11.8 million during the three and nine months ended September 30, ~~2020~~2021, which were recorded as a reduction of the carrying amount of the debt and are being amortized over the term of the ~~2028~~2029 Secured Notes.

Senior Secured Credit Facilities

~~In April 2020,~~During the three and nine months ended September 30, 2021, the Company ~~borrowed $250.0 million~~did 0t borrow under the ~~senior secured asset-based revolving credit facility (the~~ Revolving Credit ~~Facility). The Company repaid the $250.0 million, plus accrued interest, in July 2020.~~Facility. As of September 30, ~~2020,~~2021, the Company had 0 outstanding borrowings under the Revolving Credit Facility and had availability of ~~$733.6~~$686.4 million, after giving effect to borrowing base limitations and outstanding letters of credit.

During the three and nine months ended September 30, ~~2020,~~2021, the Company made quarterly scheduled amortization payments ~~of $8.0~~totaling $8.0 million and ~~$24.0~~$24.0 million, respectively, on the senior secured term loan due in 2026 (the 2026 Term Loan). The current portion of long-term debt reflects ~~$32.0~~$32.0 million of repayments due under the 2026 Term Loan.

NaN portion of the 2026 Term Loan was reflected as a current portion of long-term debt as of September 30, ~~2020~~2021 related to the potentially required excess cash flow payment because the amount that may be payable in ~~2021,~~2022, if any, cannot currently be reliably estimated. There is no excess cash flow payment required in 2021 related to 2020.

Other Matters

The following table summarizes scheduled maturities of long-term debt as of September 30, ~~2020:~~2021:

Remainder of 2020

2021

2022

2023

2024

Thereafter

Scheduled maturities of long-term debt

$
8.0

$
32.0

$
32.0

$
32.0

$
1,282.0

$
8,382.0


	Remainder of 2021		2022		2023		2024		2025		Thereafter
Scheduled maturities of long-term debt	$	8.0	$	32.0	$	32.0	$	32.0	$	1,332.0	$	8,200.0

The Company’s non-guarantor subsidiaries held ~~$2,533~~$3,205 million, or ~~19%~~24%, of total assets and ~~$946~~$1,021 million, or 8%8%, of total liabilities as of September 30, ~~2020~~2021 and accounted for ~~$637~~$695 million, or ~~29%~~33%, and ~~$1,834~~$1,990 million, or ~~29%~~31%, of net sales for the three and nine months ended September 30, ~~2020,~~2021, respectively. As of December 31, ~~2019,~~2020, the non-guarantor subsidiaries held ~~$3,773~~$3,488 million, or ~~26%~~26%, of total assets and ~~$714~~$956 million, or 6%8%, of total liabilities. For the three and nine months ended September 30, ~~2019,~~2020, the non-guarantor subsidiaries accounted for ~~$399~~$637 million, or ~~17%,~~29% and ~~$1,770~~$1,834 million, or ~~29%~~29%, of net sales, respectively. All amounts presented exclude intercompany balances.

The weighted average effective interest rate on outstanding borrowings, including the impact of the interest rate swap, and the amortization of debt issuance costs and original issue discount, was ~~5.87%~~5.74% and ~~6.17% at~~5.86% as of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

CommScope Holding Company, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In millions, unless otherwise noted)

8.6. FAIR VALUE MEASUREMENTS

The Company’s financial instruments consist primarily of cash and cash equivalents, trade receivables, trade payables, debt instruments, interest rate derivatives and foreign currency contracts. For cash and cash equivalents, trade receivables and trade payables, the carrying amounts of these financial instruments as of September 30, ~~2020~~2021 and December 31, ~~2019~~2020 were considered representative of their fair values due to their short terms to maturity. The fair values of the Company’s debt instruments, interest rate derivatives and foreign currency contracts were based on indicative quotes.

Fair value measurements using quoted prices in active markets for identical assets and liabilities fall within Level 1 of the fair value hierarchy, measurements using significant other observable inputs fall within Level 2, and measurements using significant unobservable inputs fall within Level 3.

The carrying amounts, estimated fair values and valuation input levels of the Company’s debt instruments, interest rate derivatives and foreign currency contracts as of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, are as follows:


	September 30, 2020				December 31, 2019					September 30, 2021				December 31, 2020
	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Valuation Inputs	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Valuation Inputs
Assets:
Foreign currency contracts	$	5.5	$	5.5	$	10.7	$	10.7	Level 2	$	3.5	$	3.5	$	11.7	$	11.7	Level 2
Liabilities:
7.125% senior notes due 2028	$	700.0	$	722.8	$	—	$	—	Level 2	$	700.0	$	714.1	$	700.0	$	743.8	Level 2
5.00% senior notes due 2027		750.0		720.0		750.0		696.4	Level 2		750.0		710.7		750.0		741.5	Level 2
8.25% senior notes due 2027		1,000.0		1,040.0		1,000.0		1,052.5	Level 2		1,000.0		1,045.0		1,000.0		1,068.5	Level 2
6.00% senior notes due 2025		1,400.0		1,415.5		1,500.0		1,501.7	Level 2		1,300.0		1,319.5		1,300.0		1,329.3	Level 2
5.50% senior notes due 2024		—		—		650.0		656.0	Level 2
5.00% senior notes due 2021		—		—		150.0		149.9	Level 2
4.75% senior secured notes due 2029											1,250.0		1,246.9		—		—	Level 2
6.00% senior secured notes due 2026		1,500.0		1,560.0		1,500.0		1,595.6	Level 2		1,500.0		1,560.6		1,500.0		1,576.8	Level 2
5.50% senior secured notes due 2024		1,250.0		1,281.6		1,250.0		1,302.1	Level 2		—		—		1,250.0		1,285.9	Level 2
Senior secured term loan due 2026		3,168.0		3,092.8		3,192.0		3,219.9	Level 2		3,136.0		3,126.2		3,160.0		3,156.1	Level 2
Senior secured revolving credit facility		—		—		—		—	Level 2
Foreign currency contracts		9.4		9.4		5.9		5.9	Level 2		1.6		1.6		24.4		24.4	Level 2
Interest rate swap contracts		33.8		33.8		16.3		16.3	Level 2		18.2		18.2		29.9		29.9	Level 2

~~Non-Recurring Fair Value Measurements~~

During the three and nine months ended September 30, 2020, the Company recorded a pretax impairment charge of $2.6 million related to right of use operating lease assets associated with restructuring activities (see Note 10). The fair value of the right of use assets was determined using a discounted cash flow (DCF) model where the fair value was based upon the present value of the anticipated sublease cash flows utilizing information gathered from third party analysis. The inputs in the DCF model were Level 3 inputs.

During the second quarter of 2020, the Company recorded a pretax goodwill impairment charge of $206.7 million related to the Home Networks reporting unit in the Home segment (see Note 3). The fair value of the reporting unit was determined as of May 31, 2020 using a DCF model. Under the DCF method, the fair value of a reporting unit is based on the present value of estimated future cash flows. The inputs to the DCF model were Level 3 valuation inputs.

These fair value estimates are based on pertinent information available to management as of the valuation date. Although management is not aware of any factors that would significantly affect these fair value estimates, such amounts have not been comprehensively revalued for purposes of these financial statements since those dates, and current estimates of fair value may differ significantly from the amounts presented.

2016

CommScope Holding Company, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In millions, unless otherwise noted)

9.7. SEGMENTS AND GEOGRAPHIC INFORMATION

~~As of January 1, 2020, the~~The Company reorganized its internal management and reporting structure as part of the integration of the Acquisition. The reorganization changed the information regularly reviewed by the Company’s chief operating decision maker for purposes of allocating resources and assessing performance. As a result, the Company is reporting financial performance based on 4 reportable segments: Broadband, Home, OWN and VCN. Thesehas four reportable segments ~~are based upon the nature of the products and services they offer.~~as described below.

The Broadband Networks (Broadband) segment provides an end-to-end product portfolio serving the telco and cable provider broadband market. The segment ~~brings together the Network Cable and Connectivity business with the Network and Cloud business and~~ includes converged cable access platform, passive optical networking, video systems, access technologies, fiber and coaxial cable, fiber and copper connectivity and hardened closures.

The ~~Home~~Outdoor Wireless Networks (OWN) segment ~~comprises the former Consumer Premises Equipment business and~~ focuses on the ~~future of the connected home~~macro and ~~connected devices inside the home.~~metro cell markets. The segment includes base station antennas, RF filters, tower connectivity, microwave antennas, metro cell products, cabinets, steel, accessories, Spectrum Access Systems and Comsearch.

The Venue and Campus Networks (VCN) segment targets both public and private networks for campuses, venues, data centers and buildings. The segment combines Wi-Fi and switching, distributed antenna systems, licensed and unlicensed small cells and enterprise fiber and copper infrastructure.

The Home Networks (Home) segment includes subscriber-based solutions that support broadband and video applications connecting cable, telecommunications and satellite service providers to a customer’s home and adds wireless connectivity or other wired connections integrating in-home devices together to enable the consumption of internet-based services and the delivery of broadcast, streamed and stored video to televisions and other connected devices.applications. The broadband offerings in the Home segment include devices that provide residential connectivity to a service provider’s network, such as digital subscriber line and cable modems and telephony and data gateways which incorporate routing and Wi-Fi functionality. Video offerings include set top boxes that support cable, satellite and ~~IPTV~~IP television content delivery and include products such as digital video recorders, high definition set top boxes and hybrid set top devices.

~~The OWN segment focuses on~~In the macro and metro cell markets. The segment includes base station antennas, RF filters, tower connectivity, microwave antennas, metro cell products, cabinets, steel accessories, Spectrum Access System and Comsearch. Assecond quarter of 2021, management shifted certain product lines from the Company’s ~~wireless operator customers shift a portion~~Broadband segment to its Home segment to better align with how the business is being managed in light of ~~their 5G capital expenditures from~~ the ~~macro tower~~planned spin-off of the Home Networks business. All prior period amounts in these condensed consolidated financial statements have been recast to ~~the metro cell, the portfolio will strategically help to make the transition smooth and cost-effective.~~

~~The VCN~~reflect these operating segment targets both public and private networks for campuses, venues, data centers and buildings. The segment combines Wi-Fi and switching, distributed antenna systems, licensed and unlicensed small cells and enterprise fiber and copper infrastructure.changes.

The following table provides summary financial information by reportable segment:



	September 30, 2020		December 31, 2019		September 30, 2021		December 31, 2020
Identifiable segment-related assets:
Broadband	$	6,494.5	$	6,681.1	$	6,315.1	$	6,441.1
Home		1,763.3		2,178.7
OWN		1,237.2		1,394.1		1,341.9		1,264.4
VCN		3,385.1		3,476.4		3,311.7		3,352.3
Home						1,438.7		1,709.0
Total identifiable segment-related assets		12,880.1		13,730.3		12,407.4		12,766.8
Reconciliation to total assets:
Cash and cash equivalents		582.8		598.2		411.5		521.9
Deferred income tax assets		238.1		103.1		433.1		288.1
Total assets	$	13,701.0	$	14,431.6	$	13,252.0	$	13,576.8

CommScope Holding Company, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In millions, unless otherwise noted)

The Company’s ~~measure~~measurement of segment performance is adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization). The Company defines adjusted EBITDA as operating income (loss), adjusted to exclude depreciation, amortization of intangible assets, restructuring costs, asset impairments, equity-based compensation, transaction, transformation and integration costs and other items that the Company believes are useful to exclude in the evaluation of operating performance from period to period because these items are not representative of the Company’s core business.

The following table provides net sales, adjusted EBITDA, depreciation expense and additions to property, plant and equipment by reportable segment:


	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	September 30,						September 30,						September 30,						September 30,
	2020			2019			2020			2019			2021			2020			2021			2020
Net sales:
Broadband	$	820.9		$	694.8		$	2,106.3		$	1,690.7		$	779.7		$	811.0		$	2,366.4		$	2,069.8
Home		563.6			826.4			1,789.1			1,715.4
OWN		271.8			334.4			949.0			1,183.4			355.6			271.8			1,036.2			949.0
VCN		511.8			524.6			1,459.7			1,456.9			554.9			511.8			1,587.4			1,459.7
Home														415.1			573.5			1,372.6			1,825.6
Consolidated net sales	$	2,168.1		$	2,380.2		$	6,304.1		$	6,046.4		$	2,105.3		$	2,168.1		$	6,362.6		$	6,304.1

Segment adjusted EBITDA:
Broadband	$	204.2		$	153.5		$	427.2		$	329.6		$	158.1		$	202.3		$	488.3		$	414.9
Home		28.5			59.7			75.8			121.8
OWN		53.6			75.3			218.4			312.6			60.5			53.6			214.4			218.4
VCN		55.6			81.3			131.6			209.8			56.0			55.6			135.1			131.6
Home														(15.5	)		30.4			18.6			88.1
Total segment adjusted EBITDA		341.9			369.8			853.0			973.8			259.1			341.9			856.4			853.0
Amortization of intangible assets		(158.1	)		(163.9	)		(473.5	)		(387.3	)		(153.0	)		(158.1	)		(461.9	)		(473.5	)
Restructuring costs, net		(40.3	)		(19.5	)		(83.6	)		(78.3	)
Restructuring (costs) credits, net														3.1			(40.3	)		(100.2	)		(83.6	)
Equity-based compensation		(34.0	)		(28.0	)		(90.0	)		(58.7	)		(21.0	)		(34.0	)		(61.0	)		(90.0	)
Asset impairments		—			—			(206.7	)		—			—			—			—			(206.7	)
Transaction and integration costs		(4.8	)		(2.2	)		(17.8	)		(189.8	)
Transaction, transformation and integration costs														(26.2	)		(4.8	)		(62.7	)		(17.8	)
Acquisition accounting adjustments		(5.1	)		(108.7	)		(15.8	)		(272.9	)		(2.8	)		(5.1	)		(9.0	)		(15.8	)
Patent claims and litigation		1.4			(55.0	)		(11.4	)		(55.0	)
Patent claims and litigation settlements														(5.0	)		1.4			(46.5	)		(11.4	)
Executive severance		(6.3	)		—			(6.3	)		—			—			(6.3	)		—			(6.3	)
Depreciation		(38.9	)		(43.3	)		(118.7	)		(101.0	)		(33.2	)		(38.9	)		(103.6	)		(118.7	)
Consolidated operating income (loss)	$	55.8		$	(50.8	)	$	(170.8	)	$	(169.2	)	$	21.0		$	55.8		$	11.5		$	(170.8	)

Depreciation expense:
Broadband	$	14.8		$	17.7		$	44.8		$	39.4		$	14.1		$	14.6		$	42.8		$	44.2
Home		8.3			10.7			26.3			20.1
OWN		4.1			4.3			12.7			13.2			3.8			4.1			11.4			12.7
VCN		11.7			10.6			34.9			28.3			10.3			11.7			31.8			34.9
Home														5.0			8.5			17.6			26.9
Consolidated depreciation expense	$	38.9		$	43.3		$	118.7		$	101.0		$	33.2		$	38.9		$	103.6		$	118.7

Additions to property, plant and equipment:
Broadband	$	11.1		$	10.1		$	32.7		$	28.2		$	22.5		$	9.0		$	55.3		$	27.1
Home		3.7			1.5			10.7			3.9
OWN		6.1			2.8			12.9			12.2			2.7			3.6			7.6			10.3
VCN		4.9			9.9			17.2			28.0			8.0			7.4			26.1			20.3
Home														2.8			5.8			7.2			15.8
Consolidated additions to property, plant and equipment	$	25.8		$	24.3		$	73.5		$	72.3		$	36.0		$	25.8		$	96.2		$	73.5

2218

CommScope Holding Company, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In millions, unless otherwise noted)

Sales to customers located outside of the U.S. comprised ~~39.2%~~42.9% and ~~38.3%~~42.7% of total net sales for the three and nine months ended September 30, 2021, respectively, compared to 39.2% and 38.3%, of total net sales for the three and nine months ended September 30, 2020, ~~respectively, compared to 39.8% and 40.9% of total~~respectively. The following table presents net sales ~~for the three and nine months ended September 30, 2019, respectively. Sales~~ by ~~geographic region,~~reportable segment, disaggregated based on ~~the destination of product shipments, were as follows:~~geographic region:

Three Months Ended

Nine Months Ended

September 30,

September 30,

2020

2019

2020

2019

United States

$
1,318.2

$
1,432.7

$
3,892.3

$
3,572.5

Europe, Middle East and Africa

407.3

423.1

1,161.4

1,124.3

Asia Pacific

219.1

251.3

598.5

665.9

Caribbean and Latin America

149.9

187.6

432.3

476.5

Canada

73.6

85.5

219.6

207.2

Consolidated net sales

$
2,168.1

$
2,380.2

$
6,304.1

$
6,046.4


	Three Months Ended September 30,
	Broadband				OWN				VCN				Home				Total
	2021		2020		2021		2020		2021		2020		2021		2020		2021		2020
Geographic Region:
United States	$	477.4	$	545.4	$	227.6	$	163.2	$	300.8	$	277.9	$	196.0	$	331.7	$	1,201.8	$	1,318.2
Europe, Middle East and Africa		127.7		109.6		67.4		61.5		116.2		109.9		107.5		126.3		418.8		407.3
Asia Pacific		60.9		79.8		35.0		22.6		108.4		103.9		24.1		12.8		228.4		219.1
Caribbean and Latin America		87.2		56.3		13.2		21.4		23.4		13.3		32.4		58.9		156.2		149.9
Canada		26.5		19.9		12.4		3.1		6.1		6.8		55.1		43.8		100.1		73.6
Consolidated net sales	$	779.7	$	811.0	$	355.6	$	271.8	$	554.9	$	511.8	$	415.1	$	573.5	$	2,105.3	$	2,168.1

	Nine Months Ended September 30,
	Broadband				OWN				VCN				Home				Total
	2021		2020		2021		2020		2021		2020		2021		2020		2021		2020
Geographic Region:
United States	$	1,495.1	$	1,334.0	$	649.1	$	645.6	$	816.3	$	808.1	$	687.4	$	1,104.6	$	3,647.9	$	3,892.3
Europe, Middle East and Africa		343.0		310.0		195.3		185.0		345.0		310.6		330.0		355.8		1,213.3		1,161.4
Asia Pacific		180.6		193.6		111.6		62.1		340.5		279.9		65.2		62.9		697.9		598.5
Caribbean and Latin America		278.3		162.6		32.8		43.9		57.8		39.2		169.7		186.6		538.6		432.3
Canada		69.4		69.6		47.4		12.4		27.8		21.9		120.3		115.7		264.9		219.6
Consolidated net sales	$	2,366.4	$	2,069.8	$	1,036.2	$	949.0	$	1,587.4	$	1,459.7	$	1,372.6	$	1,825.6	$	6,362.6	$	6,304.1

~~10.~~8. RESTRUCTURING COSTS (CREDITS), NET

The Company incurs costs associated with restructuring initiatives intended to improve overall operating performance and profitability. The costs related to restructuring actions are generally cash-based and primarily consist of employee-related costs, which include severance and other one-time termination benefits.

In addition to the employee-related costs, the Company also records other costs associated towith restructuring actions such as the gain or loss on the sale of facilities and impairment costs arising from unutilized real estate or equipment. ~~As a result of prior restructuring and consolidation actions, the~~The Company ~~owns unutilized real estate and is attempting~~attempts to sell or lease this unutilized ~~space. Additional~~space but additional impairment charges may be incurred related to these or other excess ~~assets, which are recorded as other associated costs.~~ assets.

The Company’s net pretax restructuring ~~charges,~~activity included in restructuring costs (credits), net on the Condensed Consolidated Statements of Operations, by segment, were as follows:


	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2021			2020		2021		2020
Broadband	$	(3.6	)	$	11.7	$	69.6	$	16.9
OWN		0.4			5.9		6.6		9.8
VCN		(0.1	)		18.9		16.0		29.0
Home		0.2			3.8		8.0		27.9
Total	$	(3.1	)	$	40.3	$	100.2	$	83.6

CommScope Holding Company, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In millions, unless otherwise noted)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2020

2019

2020

2019

Broadband

$
11.7

$
5.4

$
16.9

$
31.1

Home

3.8

6.8

27.9

21.9

OWN

5.9

1.1

9.8

6.9

VCN

18.9

6.2

29.0

18.4

Total

$
40.3

$
19.5

$
83.6

$
78.3

Restructuring liabilities were included in the Company’s Condensed Consolidated Balance Sheets as follows:



	September 30, 2020		December 31, 2019		September 30, 2021		December 31, 2020
Accrued and other liabilities	$	36.0	$	24.0	$	47.2	$	22.0
Other noncurrent liabilities		5.2		4.4		33.9		4.0
Total liability	$	41.2	$	28.4
Total restructuring liabilities					$	81.1	$	26.0

CommScope ~~Holding Company, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~(In millions, unless otherwise noted)~~

~~ARRIS Integration~~NEXT Restructuring Actions

In ~~anticipation~~the first quarter of ~~and following the Acquisition,~~2021, the Company ~~initiated~~announced and began implementing a ~~series of restructuring actions, which are currently ongoing,~~business transformation initiative called CommScope NEXT. This initiative is designed to ~~integrate~~drive shareholder value through three pillars: focusing on strategies to drive profitable growth, undertaking a full portfolio evaluation and ~~streamline operations~~optimizing the business by focusing on efficiency and ~~achieve~~eliminating unnecessary non-value-added complexity and cost ~~synergies.~~ across the business. The activity within the liability established for ~~the ARRIS integration~~CommScope NEXT restructuring actions was as follows:

Employee-
Related
Costs

Other Associated Costs

Total

Balance at June 30, 2020

$
25.5

$
1.7

$
27.2

Additional charge recorded

37.1

3.2

40.3

Cash paid

(23.5
)

(1.3
)

(24.8
)
Non-cash items

—

(2.6
)

(2.6
)
Balance at September 30, 2020

$
39.1

$
1.0

$
40.1

Balance at December 31, 2019

$
23.1

$
2.0

$
25.1

Additional charge recorded

80.1

3.5

83.6

Cash paid

(64.1
)

(1.6
)

(65.7
)
Non-cash items

—

(2.9
)

(2.9
)
Balance at September 30, 2020

$
39.1

$
1.0

$
40.1


	Employee- Related Costs			Other			Total
Balance at June 30, 2021	$	68.4		$	—		$	68.4
Expense reversal, net		(5.1	)		—			(5.1	)
Cash paid		(4.9	)		—			(4.9	)
Balance at September 30, 2021	$	58.4		$	—		$	58.4

Balance at December 31, 2020	$	—		$	—		$	—
Additional expense, net		83.1			4.0			87.1
Cash paid		(24.7	)		—			(24.7	)
Non-cash items		—			(4.0	)		(4.0	)
Balance at September 30, 2021	$	58.4		$	—		$	58.4

CommScope Holding Company, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In millions, unless otherwise noted)

~~The ARRIS integration~~CommScope NEXT actions ~~include~~to date have included the planned closure of a manufacturing facility as well as headcount reductions in manufacturing, ~~sales,~~ engineering, marketing, sales and administrative functions.

The Company expects to make cash payments of ~~$16.9~~$2.3 million during the remainder of ~~2020~~2021 and additional cash payments of ~~$23.2~~$56.1 million between ~~2021~~2022 and ~~2022~~2023 to settle ~~the announced ARRIS integration initiatives. The Company has recognized~~CommScope NEXT restructuring ~~charges of $169.7 million since the Acquisition for integration and synergy~~ actions. Additional restructuring actions related to ~~the ARRIS integration~~CommScope NEXT are expected to be identified and the resulting charges and cash requirements are expected to be material.

In addition, during the three and nine months ended September 30, 2020, other associated costs include a $2.6 million impairment of operating lease right of use assets related to ceasing use and consolidating operations at certain locations as part of restructuring activities. This impairment expense is included in restructuring costs, net on the Company's Condensed Consolidated Statements of Operations. Prior to recording these impairments, the carrying value of the right of use assets related to these properties was $5.1 million. The Company estimated that the fair market value of the remaining right of use assets after impairment was $2.5 million.

~~BNS~~ARRIS Integration Restructuring Actions

~~Following~~In anticipation of and following the acquisition of ~~the Broadband Network Solutions (BNS) business in 2015,~~ARRIS, the Company initiated a series of restructuring actions to integrate and streamline operations and achieve cost synergies. The ~~BNS~~activity within the liability established for the ARRIS integration restructuring actions was as follows:


	Employee- Related Costs			Other			Total
Balance at June 30, 2021	$	22.6		$	0.2		$	22.8
Additional expense, net		1.3			0.7			2.0
Cash paid		(1.6	)		(0.3	)		(1.9	)
Non-cash items		—			(0.6	)		(0.6	)
Balance at September 30, 2021	$	22.3		$	—		$	22.3

Balance at December 31, 2020	$	24.4		$	0.8		$	25.2
Additional expense, net		10.5			2.6			13.1
Cash paid		(12.6	)		(1.3	)		(13.9	)
Non-cash items		—			(2.1	)		(2.1	)
Balance at September 30, 2021	$	22.3		$	—		$	22.3

The ARRIS integration actions included ~~the announced closures or reduction in activities at various U.S. and international facilities as well as~~ headcount reductions in manufacturing, sales, engineering, marketing and administrative functions. The Company has recognized restructuring charges of ~~$153.0~~$187.7 million since the ~~BNS~~ARRIS acquisition for integration actions. ~~NaN additional restructuring actions are expected in connection with~~For the ~~BNS integration initiatives. The Company has accrued $1.1 million for these BNS integration restructuring actions as of September 30, 2020. The Company paid $2.2 million during the~~three and nine months ended September 30, ~~2020 and~~2021, the other restructuring category primarily includes activity from impairment of operating lease right of use assets related to ceasing use of certain leased facilities as part of restructuring activities, which is included in restructuring costs, net on the Condensed Consolidated Statements of Operations.

The Company expects to make cash payments of ~~$0.4~~$17.9 million during the remainder of ~~2020~~2021 and additional cash payments of ~~$0.7~~$4.4 million ~~between 2021 and 2022.~~in 2022 to settle the ARRIS integration initiatives. The Company does not expect to identify significant additional restructuring actions related to the ARRIS integration.

~~11.~~9. SERIES A CONVERTIBLE PREFERRED STOCK

On April 4, 2019, the Company issued and sold 1,000,000 shares of the Convertible Preferred Stock to Carlyle for ~~$1.0~~$1.0 billion, or ~~$1,000~~$1,000 per share, pursuant to an Investment Agreement between the Company and Carlyle, dated November 8, ~~2018.~~2018. The Convertible Preferred Stock is convertible at the option of the holders at any time into shares of CommScope common stock at an initial conversion rate of 36.3636 shares of common stock per share of the Convertible Preferred Stock (equivalent to ~~$27.50~~$27.50 per common share). The conversion rate is subject to customary anti-dilution and other adjustments.

~~CommScope Holding Company, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~(In millions, unless otherwise noted)~~

Holders of the Convertible Preferred Stock are entitled to a cumulative dividend at the rate of ~~5.5%~~5.5% per year, payable quarterly in arrears. Dividends can be paid in cash, in-kind through the issuance of additional shares of the Convertible Preferred Stock or any combination of the two, at the Company’s option. During the three and nine months ended September 30, 2021, the Company paid cash dividends of $14.3 million and $43.0 million, respectively. During the three and nine months ended September 30, 2020, the Company paid dividends in-kind of ~~$14.1~~$14.1 million and ~~$41.8~~$41.8 million, respectively, which was recorded as additional Convertible Preferred Stock onin the Condensed Consolidated Balance Sheets.

~~12.~~

CommScope Holding Company, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In millions, unless otherwise noted)

10. STOCKHOLDERS’ EQUITY

Equity-Based Compensation Plans

As of September 30, ~~2020, $138.3~~2021, $127.0 million of total unrecognized compensation expense related to unvested stock options, restricted stock units (RSUs) and performance share units (PSUs) is expected to be recognized over a remaining weighted average period of ~~1.4~~2.1 years. There were 0 significant capitalized equity-based compensation costs at September 30, ~~2020.~~2021.

During the nine months ended September 30, 2021, the Company’s stockholders approved the termination of certain executive performance stock options, which is reflected as forfeited stock options below, and the grant of selective performance-based retention equity awards, which is reflected in PSUs granted below. The impact under modification accounting was not material to the condensed consolidated financial statements.

The following table shows a summary of the equity-based compensation expense included in the Condensed Consolidated Statements of Operations:


	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
	September 30,				September 30,				September 30,				September 30,
	2020		2019		2020		2019		2021		2020		2021		2020
Selling, general and administrative	$	18.6	$	17.6	$	49.3	$	38.5	$	10.8	$	18.6	$	31.2	$	49.3
Cost of sales		5.5		3.7		14.5		7.7		3.5		5.5		10.0		14.5
Research and development		9.9		6.7		26.2		12.5		6.7		9.9		19.8		26.2
Total equity-based compensation expense	$	34.0	$	28.0	$	90.0	$	58.7	$	21.0	$	34.0	$	61.0	$	90.0

Stock Options

Stock options are awards that allow the recipient to purchase shares of the Company’s common stock at a fixed price. Stock options are granted at an exercise price equal to the Company’s stock price at the date of grant. These awards generally vest over ~~three to~~ five years following the grant date and have a contractual term of ten ~~years. These awards vest based on a time-based component or a combination of time and performance-based components.~~

~~The following table summarizes the stock option activity (in millions, except per share data and years):~~

Shares

Weighted
Average Option
Exercise Price
Per Share

Weighted
Average Remaining
Contractual Term
in Years

Aggregate
Intrinsic Value

Options outstanding at June 30, 2020

9.2

$
17.57

Expired

—

$
—

Forfeited

(0.1
)

$
18.60

Options outstanding at September 30, 2020

9.1

$
17.54

6.3

$
6.9

Options outstanding at December 31, 2019

9.6

$
17.70

Exercised

(0.1
)

$
8.25

Expired

(0.1
)

$
30.29

Forfeited

(0.3
)

$
20.05

Options outstanding at September 30, 2020

9.1

$
17.54

6.3

$
6.9

Options vested at September 30, 2020

3.9

$
15.74

3.2

$
6.9

Options unvested at September 30, 2020

5.2

$
18.88

8.6

$
—

~~CommScope Holding Company, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~(In millions, unless otherwise noted)~~

~~The exercise prices of outstanding options at September 30, 2020 were in the following ranges (in millions, except per share data and years):~~

Options Outstanding

Options Exercisable

Range of Exercise Prices

Shares

Weighted Average
Remaining
Contractual Life
in Years

Weighted
Average
Exercise
Price Per Share

Shares

Weighted
Average
Exercise
Price Per Share

$2.96 to $5.74

2.1

0.3

$
5.74

2.1

$
5.74

$5.75 to $22.99

5.7

8.6

$
18.33

0.6

$
17.60

$23.00 to $42.32

1.3

6.0

$
33.35

1.2

$
32.84

$2.96 to $42.32

9.1

6.3

$
17.54

3.9

$
15.74

years. The Company uses the Black-Scholes model to estimate the fair value of stock option awards at the date of grant. Key inputs and assumptions used in the model include the grant date fair value of common stock, exercise price of the award, the expected option term, the risk-free interest rate, stock price volatility and the Company’s projected dividend yield. The expected term represents the period over which the Company’s employees are expected to hold their options. The risk-free interest rate reflects the yield on zero-coupon U.S. treasury securities with a term equal to the option’s expected term. Expected volatility is derived based on the historical volatility of the Company’s stock. The Company’s projected dividend yield is 0. The Company believes the valuation technique and the approach utilized to develop the underlying assumptions are appropriate in estimating the fair values of its stock options. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by employees who receive equity awards. Subsequent events are not indicative of the reasonableness of the original estimates of fair value made by the Company.

There were 0 ~~stock option awards granted during the three or nine months ended September 30, 2020. The following table presents the weighted average assumptions used to estimate the fair value of~~ stock option awards granted during the three and nine months ended September 30, ~~2019.~~2021 or 2020.

Three Months Ended

Nine Months Ended

September 30, 2019

September 30, 2019

Expected option term (in years)

6.4

6.3

Risk-free interest rate

1.6
%

2.2
%
Expected volatility

40.0
%

40.0
%
Weighted average exercise price

$
12.20

$
18.47

Weighted average fair value at grant date

$
5.21

$
8.00

The following table summarizes the stock option activity (in millions, except per share data and years):


	Shares			Weighted Average Option Exercise Price Per Share		Weighted Average Remaining Contractual Term in Years		Aggregate Intrinsic Value
Options outstanding at June 30, 2021		3.2		$	23.95		5.8	$	6.5
Exercised		(0.1	)	$	18.60
Forfeited		(0.1	)	$	18.60
Expired		(0.1	)	$	27.82
Options outstanding at September 30, 2021		2.9		$	24.19		5.1	$	0.5

Options outstanding at December 31, 2020		6.2		$	19.86		6.6	$	5.6
Exercised		(0.8	)	$	7.18
Forfeited		(2.4	)	$	18.40
Expired		(0.1	)	$	25.88
Options outstanding at September 30, 2021		2.9		$	24.19		5.1	$	0.5
Options vested at September 30, 2021		2.2		$	25.93		4.3	$	0.4
Options unvested at September 30, 2021		0.7		$	18.14		7.6	$	0.1

CommScope Holding Company, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In millions, unless otherwise noted)

The exercise prices of outstanding options at September 30, 2021 were in the following ranges (in millions, except per share data and years):


	Options Outstanding						Options Exercisable
Range of Exercise Prices	Shares		Weighted Average Remaining Contractual Life in Years		Weighted Average Exercise Price Per Share		Shares		Weighted Average Exercise Price Per Share
$5.50 to $18.50		0.1		4.6	$	10.15		0.1	$	9.20
$18.51 to $30.00		1.9		5.6	$	19.59		1.2	$	20.06
$30.01 to $45.00		0.9		4.0	$	36.45		0.9	$	36.45
$5.50 to $45.00		2.9		5.1	$	24.19		2.2	$	25.93

Restricted Stock Units

RSUs entitle the holder to shares of common stock after a vesting period that generally ranges from one to three ~~years.~~years. The fair value of the awards is determined on the grant date based on the Company’s stock price.

~~CommScope Holding Company, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~(In millions, unless otherwise noted)~~

The following table summarizes the RSU activity (in millions, except per share data):

	Restricted Stock Units			Weighted Average Grant Date Fair Value Per Share
Non-vested share units at June 30, 2020		15.0		$	14.28
						Restricted Stock Units			Weighted Average Grant Date Fair Value Per Share
Non-vested share units at June 30, 2021							11.3		$	15.00
Forfeited							(0.4	)	$	14.84
Non-vested share units at September 30, 2021							10.9		$	15.01

Non-vested share units at December 31, 2020							13.2		$	13.62
Granted		—		$	—		3.8		$	20.39
Vested and shares issued		(1.4	)	$	17.29		(5.0	)	$	15.72
Forfeited		(0.6	)	$	14.27		(1.1	)	$	13.78
Non-vested share units at September 30, 2020		13.0		$	13.94

Non-vested share units at December 31, 2019		7.7		$	22.30
Granted		9.6		$	10.57
Vested and shares issued		(3.2	)	$	23.12
Forfeited		(1.1	)	$	16.26
Non-vested share units at September 30, 2020		13.0		$	13.94
Non-vested share units at September 30, 2021							10.9		$	15.01

Performance Share Units

~~Performance share units (PSUs)~~PSUs are ~~stock-based~~stock awards in which the number of shares ultimately received by the employee depends on ~~Company~~either a market-based performance ~~against specified targets. Such awards typically vest over three years~~measure or an internal performance measure and the number of shares ~~issued~~ can vary from 0%0% to ~~200%~~300% depending on the achievement. Certain of CommScope's PSUs have a market condition performance measure based on stock price milestones as well as a service condition. The Company used a Monte Carlo simulation model to estimate the fair value of these PSUs at the date of grant. Key assumptions used in the model include the risk-free interest rate, which reflects the yield on zero-coupon U.S. treasury securities, and stock price volatility, which is derived based on the historical volatility of the ~~number~~Company’s stock. The following table presents the weighted average assumptions used to estimate the fair value of these awards granted during the nine months ended September 30, 2021. These awards were not granted during the three months ended September 30, 2021.


	Nine Months Ended September 30, 2021
Risk-free interest rate		0.4	%
Expected volatility		56.0	%
Weighted average fair value at grant date	$	11.21

CommScope Holding Company, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In millions, unless otherwise noted)

During the three months ended September 30, 2021, the Company granted certain PSUs ~~granted, depending on performance.~~with an internal performance measure vesting at the end of three years. The fair value of ~~each PSU is~~these awards was determined on the date of grant based on the ~~Company’s~~Company's stock price. ~~The ultimate number of shares issued and the related compensation cost recognized is based on the final performance metrics compared to the targets specified in the grants.~~

The following table summarizes the PSU activity (in millions, except per share data):

Performance
Share Units

Weighted
Average Grant
Date Fair Value
Per Share

Non-vested share units at June 30, 2020

2.7

$
7.73

Granted

—

$
—

Vested and shares issued

(0.1
)

$
6.67

Forfeited

(0.2
)

$
10.00

Non-vested share units at September 30, 2020

2.4

$
7.66

Non-vested share units at December 31, 2019

2.7

$
12.47

Granted

0.2

$
10.32

Vested and shares issued

(0.2
)

$
17.63

Forfeited

(0.3
)

$
9.26

Non-vested share units at September 30, 2020

2.4

$
7.66


	Performance Share Units			Weighted Average Grant Date Fair Value Per Share
Non-vested share units at June 30, 2021		2.2		$	6.30
Granted		0.3		$	18.97
Forfeited		(0.1	)	$	13.88
Non-vested share units at September 30, 2021		2.4		$	8.02

Non-vested share units at December 31, 2020		1.5		$	4.03
Granted		1.0		$	14.48
Forfeited		(0.1	)	$	13.88
Non-vested share units at September 30, 2021		2.4		$	8.02

~~13. SUBSEQUENT EVENTS~~24

On October 13, 2020, the Company informed holders of the 2025 Notes that it would redeem $100.0 million aggregate principal amount of the 2025 Notes on October 23, 2020. The redemption price included the accrued and unpaid interest up to the date of redemption. Following the redemption, $1,300.0 million aggregate principal amount of the 2025 Notes remained outstanding.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following narrative is an analysis of the three and nine months ended September 30, ~~2020~~2021 compared to the three and nine months ended September 30, ~~2019.~~2020. The discussion is provided to increase the understanding of, and should be read in conjunction with, the unaudited condensed consolidated financial statements and accompanying notes included in this report as well as the audited consolidated financial statements, related notes thereto and management’s discussion and analysis of financial condition and results of operations, including management’s discussion and analysis regarding the application of critical accounting policies ~~as well as~~and the risk factors ~~included~~ in our Annual Report on Form 10-K for the year ended December 31, ~~2019 (2019~~2020 (2020 Annual Report) ~~and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.~~.

We discuss certain financial measures in management’s discussion and analysis of financial condition and results of operations, including adjusted EBITDA, that differ from measures calculated in accordance with generally accepted accounting principles in the United States ~~(GAAP)~~(U.S. GAAP). See "Reconciliation of Non-GAAP Measures" included elsewhere in this quarterly report for more information about these non-GAAP financial measures, including our reasons for including the measures and material limitations with respect to the usefulness of the measures.

Overview

We are a global provider of infrastructure solutions for communication and entertainment networks. Our solutions for wired and wireless networks enable service providers including cable, telephone and digital broadcast satellite operators and media programmers to deliver media, voice, IPInternet 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. Our solutions are complemented by a broad array of services including technical support, systems design and integration. We are a leader in digital video and ~~Internet Protocol Television~~IP television distribution systems, broadband access infrastructure platforms and ~~associated~~equipment that delivers data and voice ~~customer premises equipment.~~networks to homes. Our global leadership position is built upon innovative technology, broad solution offerings, high-quality and cost-effective customer solutions, and global manufacturing and distribution scale.

~~On April 4, 2019,~~In the first quarter of 2021, we ~~completed~~announced a transformation initiative called CommScope NEXT designed to drive shareholder value through three pillars: focusing on strategies to drive profitable growth, undertaking a full portfolio evaluation and optimizing our business by focusing on efficiency and eliminating unnecessary non-value-added complexity and cost across the ~~acquisition~~business. We believe these efforts are critical to making us more competitive and allowing us to invest in growth and maximize shareholder and stakeholder value. We have incurred $100.2 million of ~~ARRIS International plc (ARRIS) (the Acquisition) in an all-cash~~restructuring costs and $62.7 million of transaction, ~~with a total purchase price of approximately $7.7 billion, including debt assumed. The operations of~~transformation and integration costs during the ~~ARRIS business are included in our consolidated operating results for the three and~~ nine months ended September 30, ~~2020~~2021, both primarily related to CommScope NEXT. We expect to continue to incur restructuring costs and 2019; however, for the comparative nine months ended September 30, 2019, the operations of the ARRIS business are included only from the date of the Acquisition. During the three and nine months ended September 30, 2020, we recognized $4.8 million and $17.8 million, respectively, of transaction, transformation and integration costs ~~and $40.3 million and $83.6 million, respectively, of restructuring costs mostly~~ related to the Acquisition and integration activities. During the three and nine months ended September 30, 2019, we recognized $2.2 million and $189.8 million, respectively, of transaction and integration costs and $19.5 million and $78.3 million, respectively, of restructuring costs related to the Acquisition and integration activities. We will continue to incur integration and restructuring costsCommScope NEXT and such costs ~~may~~are expected to be material.

As of January 1, 2020, we reorganized our internal management and reporting structure as part of the integration of the Acquisition. The reorganization changed the information regularly reviewed by our chief operating decision maker for purposes of allocating resources and assessing performance. As a ~~result,~~step in our CommScope NEXT transformation plan, on April 8, 2021, we ~~are reporting~~announced our plan to spin-off the Home Networks business to form a new stand-alone publicly traded company. Below we refer to certain supplementary “Core” financial ~~performance based on four new operating segments:~~measures, which reflect the results of our Broadband Networks (Broadband)~~, Home Networks (Home)~~, Outdoor Wireless Networks (OWN) and Venue and Campus Networks (VCN). segments, in the aggregate. Our Core financial measures exclude the results and performance of our Home Networks (Home) segment. See the Segment Results section below for illustration of the aggregation of our Core financial measures. These ~~four segments~~metrics represent non-aggregated reportable operating segments. Prior to this change, we operated and reported five operating segments: Connectivity Solutions, Mobility Solutions, Customer Premises Equipment, Network and Cloud and Ruckus Networks. Our change inthe business segments as ~~of January 1, 2020 resulted in a realignment of our existing reporting units. Although~~we have reported. However, the reporting units were realigned, our reporting units remained the same except for where two reporting units have been combined into a new reporting unit. In this case, goodwill was simply combined in the new reporting units. Since the compositionultimate definition of the ~~reporting units~~Home Networks business that we expect to spin-off may vary, and the assignment of goodwill to the reporting units were unaffected, an interim goodwill impairment test was not performed due to our change in segments during the first quarter of 2020. See the discussion below under “Critical Accounting Policies” for more information regarding the interim goodwill impairment test performed duringfuture results may differ materially.

In the second quarter of ~~2020.~~

~~In March 2020,~~2021, we shifted certain product lines from our Broadband segment to our Home segment to better align with how the World Health Organization declared the new strain of coronavirus (COVID-19) a pandemic and the United States (U.S.) declared a national emergency with respect to COVID-19. The COVID-19 pandemic has negatively impacted regional and global economies, disrupted global supply chains and created significant volatility and disruption of financial markets. The global impactbusiness is being managed in light of the outbreak has been rapidly evolving and certain jurisdictions, including those where we have operations, have also reacted by instituting quarantines, restrictions on travel, “shelter in place” rules, social distancing protocols and restrictions on typesplanned spin-off of ~~business that may continue to operate. While we~~the Home Networks business. All prior period amounts have been ~~deemed an “essential” (or equivalent) business in many jurisdictions and, therefore, have been permitted~~recast to continue most of our operations in those jurisdictions, the impact of the COVID-19 pandemic on our operational and financial performance has included temporary closures of our facilities and the facilities of certain of our customers, suppliers and other vendors in our supply chain. We have taken measures to protect the health and safety of our employees, including implementing new and increased cleaning procedures, health screenings, safety protocols and social distancing requirements where appropriate, work with our customers and vendors to minimize potential disruptions and support our community in addressing the challenges posed by this global pandemic.reflect these operating segment changes.

COVID-19 Update

The COVID-19 outbreak ~~has negatively impacted~~had an adverse impact on our financial performance ~~during the three and nine months ended September 30,~~in 2020 ~~as discussed more below, particularly in our VCN, OWN and Home segments. While the impacts in the first quarter 2020 were~~ primarily related to decreased demand, supply constraints due to the temporary shutdown of certain of our ~~factories in Suzhou, China, the second~~facilities and ~~third quarters reflected a combination of changes in demand,~~increased business continuity ~~costs~~costs. We took a variety of actions in 2020 to help mitigate the financial impacts such as headcount reductions, lower capital spending and ~~supply constraints. Currently, most CommScope factories are fully operational,but we have experienced periodic, temporary factory closures in certain jurisdictions due to health concerns. From a demand standpoint, the~~lower discretionary spending. The negative impact of COVID-19 on our financial performance has ~~been mixed~~eased during 2021, with network strain driving increased demand for our Broadband segment products ~~while VCN~~in particular. The recovery in demand has ~~been negatively impacted due~~also had unfavorable business impacts, including commodity inflation (primarily copper and resins), logistics cost increases, extended lead times and certain component part shortages. We expect certain of these unfavorable impacts to ~~social distancing measures~~continue for the remainder of 2021 and the general economic slowdown. We currently expect the decline in revenue caused by the economic slowdown due to COVID-19 to persist through 2020. Additionally, we have taken a number of actions to reduce our operating costs and manage our balance sheet in light of the COVID-19 pandemic, including headcount reductions, improved working capital management, lower capital spending and suspension of certain discretionary spending.into 2022.

The extent of the negative impact of the COVID-19 pandemic on our operational and financial performance will depend on future developments, including the duration and spread of the pandemic, including new variants, the effectiveness and adoption of vaccines and related actions taken by domestic and international jurisdictions to maintain and prevent disease spread, and the extent of any financial recession resulting from the pandemic, all of which are uncertain and cannot be predicted. ~~We have considered the impact of the economic slowdown on our evaluation~~

Performance Highlights

The below are highlights of our significant estimates, including goodwill impairment indicators and credit losses, as of September 30, 2020. Although no indicators of goodwill impairment or significant changes in credit risk were identified as of September 30, 2020, it is possible credit losses could emerge as the impact of the crisis becomes clearer and those losses could be material. See the discussion below under “Critical Accounting Policies” for more information regarding the interim goodwill impairment test performed during the second quarter of 2020.

~~CRITICAL ACCOUNTING POLICIES~~

~~Interim Impairment Review of Goodwill~~

We estimate the fair value of a reporting unit using a discounted cash flow (DCF) method or, as appropriate, a combination of the DCF method and a market approach known as the guideline public company method. Under the DCF method, we calculate the fair value of a reporting unit based on the present value of estimated future cash flows. The significant assumptions in the DCF model primarily include, but are not limited to, forecasts of annual revenue growth rates, annual operating income margin, the terminal growth rate and the discount rate used to determine the present value of the cash flow projections. When determining these assumptions and preparing these estimates, we consider historical performance trends, industry data, insight derived from customers, relevant changes in the reporting unit’s underlying business and other market trends that may affect the reporting unit. The discount rate is based on the estimated weighted average cost of capital as of the test date of market participants in the industry in which the reporting unit operates. Under the guideline public company method, we estimate the fair value based upon market multiples of revenue and earnings derived from publicly traded companies with similar operating and investment characteristics as the reporting unit. The weighting of the fair value derived from the market approach may vary depending on the level of comparability of these publicly-traded companies to the reporting unit. When comparable public companies are not meaningful or not available, we may estimate the fair value of a reporting unit using only the DCF method.

~~During the second quarter of 2020, we determined that indicators of impairment existed for our Home Networks reporting unit due to lower projected operating~~ results primarily driven by the accelerated decline in demand for video devices. This trend was projected to continue as consumers adopt the use of other streaming applications and was further impacted negatively by the macro-economic effects of COVID-19. Accordingly, we assessed the fair value of our Home Networks reporting unit as of May 31, 2020 and recorded a goodwill impairment charge of $206.7 million in the Home segment. This reflects a full impairment of the remaining goodwill in the Home segment, and as such, the Home segment has no remaining goodwill balance as of September 30, 2020.

~~To determine the fair value of our Home Networks reporting unit and test for goodwill impairment, we developed a revised forecast for 2020 and updated the annual financial forecasts~~ for the ~~years beyond 2020. We used an income approach (DCF method) because we believe this is the most direct approach to incorporate the specific economic attributes~~three and risk profile of the reporting unit into our valuation model. Consistent with our 2019 annual impairment test, we used a 9.0% discount rate for the interim goodwill impairment test for the Home Networks reporting unit. We determined that the utilization of a market approach for the interim goodwill impairment test would not impact the conclusion.

~~While no indicators of impairment existed for our other reporting units during the~~ nine months ended September 30, ~~2020, we believe our Enterprise and Network and Cloud (N&C) reporting units could be at risk due~~2021 compared to ~~continued challenges in operating results and our ability~~the prior year periods. We refer to ~~grow these businesses. The Enterprise reporting unit is in our VCN segment~~the three-month period as the "quarter" and the ~~N&C reporting unit is in~~nine-month period as "year-to-date." Core financial measures reflect the results of our Broadband, OWN and VCN segments, in the aggregate. Core financial measures exclude the results of our Home segment. ~~If assumed~~See the Segment Results section below for illustration of the aggregation of our Core financial measures.



Net sales decreased 2.9% for the quarter and increased 0.9% year-to-date



Core net sales increased 6.0% for the quarter and ~~cash flow projections are not achieved in future periods, it is possible that~~11.4% year-to-date



Net loss increased 6.8% for the ~~goodwill of these or other reporting units could be deemed to be impaired~~quarter and decreased 37.1% year-to-date



Non-GAAP adjusted EBITDA decreased 24.2% for the ~~impairment could be material.~~quarter and increased 0.4% year-to-date



Core adjusted EBITDA decreased 11.8% for the quarter and increased 9.5% year-to-date



Diluted loss per share increased 3.0% for the quarter and decreased 36.8% year-to-date

CRITICAL ACCOUNTING POLICIES

~~Other Developments~~

There have been no changes in our critical accounting policies as disclosed in our ~~2019~~2020 Annual Report. ~~See Note 1 in the Notes to Unaudited Condensed Consolidated Financial Statements for discussion of our adoption of Accounting Standards Update (ASU) No. 2016-13,~~ ~~Measurement of Credit Losses on Financial Instruments~~, as of January 1, 2020. Our allowance for doubtful accounts is a significant accounting estimate and while the adoption of this new guidance impacted our allowance for doubtful accounts policy, it did not materially impact the estimate of our allowance for doubtful accounts. There were no other changes in our significant accounting estimates as disclosed in our 2019 Annual Report.

COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, ~~2020~~2021 WITH THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, ~~2019~~2020


	Three Months Ended
	September 30,
	2021						2020
	Amount			% of Net Sales			Amount			% of Net Sales			$ Change			% Change
	(dollars in millions, except per share amounts)
Net sales	$	2,105.3			100.0	%	$	2,168.1			100.0	%	$	(62.8	)		(2.9	)%
Core net sales (1)		1,690.2			80.3			1,594.6			73.5			95.6			6.0
Gross profit		653.0			31.0			735.5			33.9			(82.5	)		(11.2	)
Operating income		21.0			1.0			55.8			2.6			(34.8	)		(62.4	)
Core operating income (1)		89.4			5.3			57.8			3.6			31.6			54.7
Non-GAAP adjusted EBITDA (2)		259.1			12.3			341.9			15.8			(82.8	)		(24.2	)
Core adjusted EBITDA (1)		274.6			16.2			311.5			19.5			(36.9	)		(11.8	)
Net loss		(124.2	)		(5.9	)		(116.3	)		(5.4	)		(7.9	)		6.8
Diluted loss per share	$	(0.68	)				$	(0.66	)				$	(0.02	)		3.0

	Nine Months Ended
	September 30,
	2021						2020
	Amount			% of Net Sales			Amount			% of Net Sales			$ Change			% Change
	(dollars in millions, except per share amounts)
Net sales	$	6,362.6			100.0	%	$	6,304.1			100.0	%	$	58.5			0.9	%
Core net sales (1)		4,990.0			78.4			4,478.5			71.0			511.5			11.4
Gross profit		1,998.5			31.4			2,032.8			32.2			(34.3	)		(1.7	)
Operating income (loss)		11.5			0.2			(170.8	)		(2.7	)		182.3			(106.7	)
Core operating income (1)		164.8			3.3			98.5			1.6			66.3			67.3
Non-GAAP adjusted EBITDA (1)		856.4			13.5			853.0			13.5			3.4			0.4
Core adjusted EBITDA (1)		837.8			16.8			764.9			12.1			72.9			9.5
Net loss		(375.6	)		(5.9	)		(597.3	)		(9.5	)		221.7			(37.1	)
Diluted loss per share	$	(2.06	)				$	(3.26	)				$	1.20			(36.8	)

Three Months Ended

September 30,

2020

2019

Amount

% of Net
Sales

Amount

% of Net
Sales

$
Change

%
Change

(dollars in millions, except per share amounts)

Net sales

$
2,168.1

100.0
%

$
2,380.2

100.0
%

$
(212.1
)

(8.9
)%
Gross profit

735.5

33.9

609.9

25.6

125.6

20.6

Operating income (loss)

55.8

2.6

(50.8
)

(2.1
)

106.6

NM

Non-GAAP adjusted EBITDA ⁽¹⁾

341.9

15.8

369.8

15.5

(27.9
)

(7.5
)
Net loss

(116.3
)

(5.4
)%

(156.5
)

(6.6
)%

40.2

NM

Diluted loss per share

$
(0.66
)

$
(0.88
)

$
0.22

NM

Nine Months Ended

September 30,

2020

2019

Amount

% of Net
Sales

Amount

% of Net
Sales

$
Change

%
Change

(dollars in millions, except per share amounts)

Net sales

$
6,304.1

100.0
%

$
6,046.4

100.0
%

$
257.7

4.3
%
Gross profit

2,032.8

32.2

1,667.9

27.6

364.9

21.9

Operating income (loss)

(170.8
)

(2.7
)

(169.2
)

(2.8
)

(1.6
)

NM

Non-GAAP adjusted EBITDA ⁽¹⁾

853.0

13.5

973.8

16.1

(120.8
)

(12.4
)
Net loss

(597.3
)

(9.5
)%

(492.8
)

(8.2
)%

(104.5
)

NM

Diluted loss per share

$
(3.26
)

$
(2.70
)

$
(0.56
)

NM

(1)

Core financial measures reflect the results of our Broadband, OWN and VCN segments, in the aggregate. Core financial measures exclude the results of our Home segment. See the Segment Results section below for illustration of the aggregation of our Core financial measures.

(2)

See “Reconciliation of Non-GAAP Measures.”

~~(1)~~

~~See “Reconciliation of Non-GAAP Measures.”~~

~~NM – Not meaningful~~

Net sales


																					Three Months Ended										Nine Months Ended
	Three Months Ended										Nine Months Ended										September 30,				$			%			September 30,				$			%
	September 30,				$			%			September 30,				$			%			2021		2020		Change			Change			2021		2020		Change			Change
	2020		2019		Change			Change			2020		2019		Change			Change			(dollars in millions)
Net sales	$	2,168.1	$	2,380.2	$	(212.1	)		(8.9	)%	$	6,304.1	$	6,046.4	$	257.7			4.3	%	$	2,105.3	$	2,168.1	$	(62.8	)		(2.9	)%	$	6,362.6	$	6,304.1	$	58.5			0.9	%
Domestic		1,318.2		1,432.7		(114.5	)		(8.0	)		3,892.3		3,572.5		319.8			9.0			1,201.8		1,318.2		(116.4	)		(8.8	)		3,647.9		3,892.3		(244.4	)		(6.3	)
International		849.9		947.5		(97.6	)		(10.3	)		2,411.8		2,473.9		(62.1	)		(2.5	)		903.5		849.9		53.6			6.3			2,714.7		2,411.8		302.9			12.6

~~Net~~

Compared to the prior year periods, net sales decreased $62.8 million, or 2.9%, for the three months ended September 30, 2021 and increased $58.5 million, or 0.9%, for the nine months ended September 30, 2021. Core net sales for the three months ended September 30, ~~2020 decreased~~2021 increased $95.6 million, or 6.0%, compared to the prior year period ~~by $262.8 million in the Home segment, $62.6 million~~with increases in the OWN segment ~~and $12.8~~of $83.8 million ~~in the VCN segment. The declines in the Home~~ and OWN segments were driven primarily by a slowdown in sales to both U.S. and international service provider customers as demand for video products and wireless network equipment decreased. The decline in the VCN segment ~~was driven~~of $43.1 million, partially offset by ~~decreases in sales of enterprise products. Net sales~~a decrease in the Broadband segment ~~increased $126.1 million for the three months ended September 30, 2020 due to increased demand for both Network Cable and Connectivity (NCC) and N&C products. Net~~of $31.3 million. Core net sales for the nine months ended September 30, ~~2020~~2021 increased ~~primarily due~~$511.5 million, or 11.4%, compared to ~~the increase of approximately $559 million related to the ARRIS business because~~ the prior year period ~~only included~~with increases in the Broadband segment of $296.6 million, the VCN segment of $127.7 million and the OWN segment of $87.2 million. For the three and nine months ended September 30, 2021, net sales ~~since the April 4, 2019 acquisition date. This increase was partially offset by declines~~ in the ~~existing CommScope businesses primarily due~~Home segment decreased $158.4 million and $453.0 million, respectively, compared to ~~lower~~the prior year periods. In the three and nine months ended September 30, 2021, all our segments experienced supply shortages and extended lead times for certain materials that negatively affected our ability to meet customer demand for our products. We expect these shortages and delays to persist for the remainder of 2021 and into 2022. In addition, our Broadband segment faced capacity constraints that negatively affected net sales ~~to wireless service providers~~in the three and ~~enterprise customers.~~nine months ended September 30, 2021.

From a regional perspective, for the three months ended September 30, ~~2020, net sales were lower~~2021 compared to the prior year period, ~~across all regions, including decreases of $114.5 million~~net sales decreased in the U.S.~~, $37.7 million~~ by $116.4 million. The decrease in the ~~Caribbean and Latin American (CALA) region, $32.2~~U.S. was partially offset by increases in Canada by $26.5 million, ~~in the Asia Pacific (APAC) region, $15.8 million in~~ the Europe, Middle East and Africa (EMEA) region by $11.5 million, the Asia Pacific (APAC) region by $9.3 million and ~~$11.9~~the Caribbean and Latin American (CALA) region by $6.3 million. For the nine months ended September 30, 2021, net sales increased in the CALA region by $106.3 million, the APAC region by $99.4 million, the EMEA region by $51.9 million and Canada by $45.3 million. The increases in ~~Canada. From a regional perspective,~~international net sales for the nine months ended September 30, ~~2020, net sales~~2021 were higher across all regions except for the APAC and CALA regions due to the Acquisition. Excluding the ARRIS business, for the nine months ended September 30, 2020, net sales were lower compared to the prior year period across all regions, including decreasespartially offset by a decrease of ~~approximately $113 million in the APAC region, $98 million in the EMEA region, $45 million in the CALA region, $36~~$244.4 million in the U.S. For additional information on regional sales by segment, see discussion of Segment Results below and ~~$9 million~~Note 7 in ~~Canada.~~

~~We believe lower demand caused by COVID-19 reduced our~~the Notes to Unaudited Condensed Consolidated Financial Statements herein. Foreign exchange rate changes impacted net sales ~~during the three and nine months ended September 30, 2020. While it is difficult to quantify the demand impacts, we believe the most significant reductions in demand related to COVID-19~~favorably by approximately 1% for both the three and nine months ended September 30, ~~2020 were in our VCN segment. We do not believe that supply chain disruptions related~~2021 compared to ~~COVID-19 materially impacted net sales during~~ the three months ended September 30, 2020, but we estimate that supply chain disruptions reduced revenue by approximately $90 million during the first half of 2020. Management currently expects the decline in net sales caused by the economic slowdown to persist through the remainder of 2020.same prior year periods.

Net sales to customers located outside of the U.S. comprised ~~39.2%~~42.9% and ~~38.3%~~42.7% of total net sales for the three and nine months ended September 30, ~~2020,~~2021, respectively, compared to ~~39.8%~~39.2% and ~~40.9%~~38.3% for the three and nine months ended September 30, ~~2019,~~2020, respectively. For further details by segment, see the section titled “Segment Results” below.

Gross profit, SG&A expense and R&D expense


																									Three Months Ended												Nine Months Ended
	Three Months Ended												Nine Months Ended												September 30,						$			%			September 30,						$			%
	September 30,						$			%			September 30,						$			%			2021			2020			Change			Change			2021			2020			Change			Change
	2020			2019			Change			Change			2020			2019			Change			Change			(dollars in millions)
Gross profit	$	735.5		$	609.9		$	125.6			20.6	%	$	2,032.8		$	1,667.9		$	364.9			21.9	%	$	653.0		$	735.5		$	(82.5	)		(11.2	)%	$	1,998.5		$	2,032.8		$	(34.3	)		(1.7	)%
As a percent of sales		33.9	%		25.6	%								32.2	%		27.6	%								31.0	%		33.9	%								31.4	%		32.2	%
SG&A expense		296.7			305.8			(9.1	)		(3.0	)		898.7			972.0			(73.3	)		(7.5	)		314.3			296.7			17.6			5.9			909.3			898.7			10.6			1.2
As a percent of sales		13.7	%		12.8	%								14.3	%		16.1	%								14.9	%		13.7	%								14.3	%		14.3	%
R&D expense		184.6			171.5			13.1			7.6			541.1			399.5			141.6			35.4			167.8			184.6			(16.8	)		(9.1	)		515.6			541.1			(25.5	)		(4.7	)
As a percent of sales		8.5	%		7.2	%								8.6	%		6.6	%								8.0	%		8.5	%								8.1	%		8.6	%

Gross profit (net sales less cost of sales)

~~Despite lower sales, gross~~Gross profit ~~increased~~decreased for the three months ended September 30, ~~2020~~2021 compared to the prior year period primarily due to ~~$108.7 million of acquisition accounting adjustments in~~higher material and freight costs as well as lower net sales. For the nine months ended September 30, 2021, gross profit decreased despite higher net sales compared to the prior year period primarily due to higher freight and material costs as well as pricing pressures related ~~mostly~~ to ~~the mark-up~~certain of ~~inventory to its estimated fair value~~our OWN segment products that were only partially offset by increased pricing on certain of our VCN segment products. In addition, we recorded charges of $5.0 million and ~~$55.0~~$46.5 million ~~of costs~~that reduced gross profit in the ~~prior year period~~three and nine months ended September 30, 2021, respectively, related to the settlement of intellectual property ~~litigation. Excluding~~assertions.

Selling, general and administrative expense

In the first quarter of 2021, we announced a transformation initiative, CommScope NEXT, and in early April 2021, we announced our intention to spin-off our Home Networks business. We are also continuing to integrate the 2019 acquisition of ARRIS International plc (ARRIS), including our work to combine our enterprise resource planning systems. Due to these ~~adjustments, gross profit was $773.6~~efforts, we incurred $26.2 million ~~or 32.5%~~and $62.7 million of ~~sales, for~~transaction, transformation and integration costs during the three and nine months ended September 30, ~~2019, which indicates a current year decline in gross profit primarily due~~2021, respectively, compared to ~~lower net sales. Gross profit as a percentage of sales for~~$4.8 million and $17.8 million during the three ~~months ended September 30, 2020 is higher than the adjusted prior period due to favorable product mix~~ and ~~lower material costs. Gross profit increased for the~~ nine months ended September 30, 2020, ~~compared to~~respectively. Transaction, transformation and integration costs during the prior year ~~period due to~~periods were mainly focused on the ~~addition~~integration of the ARRIS business. ~~Excluding~~We expect to continue to incur transaction, transformation and integration costs related to CommScope NEXT, the spin-off of the Home Networks business, and the integration of the ARRIS business, ~~gross profit decreased slightly for~~and such costs are expected to be material.

For the three and nine months ended September 30, 2020 to approximately $1,059 million, or 34.9% of sales, from approximately $1,170 million, or 35.0% of sales, in the prior year primarily due to lower net sales in the existing CommScope businesses. We estimate that incremental business continuity2021, excluding transaction, transformation and integration costs, related to COVID-19 reduced gross profit by $10 million during the three months ended September 30, 2020 and a combination of supply chain disruptions and business continuity costs related to COVID-19 reduced gross profit by $55 million for the nine months ended September 30, 2020.

~~Selling, general and administrative expense~~

~~For the three months ended September 30, 2020,~~ selling, general and administrative (SG&A) expense decreased by $3.8 million and $34.3 million, respectively. For the three months ended September 30, 2021, the decrease was primarily due to ~~the benefits from acquisition synergies~~lower variable compensation expense of $9.4 million and cost savings initiatives ~~and an $8.3 million reduction in bad debt expense. These favorable impacts were~~ offset partially by ~~an increase in variable incentive compensation and $6.3 million in executive severance costs.~~higher bad debt expense of $16.3 million. For the nine months ended September 30, ~~2020, SG&A~~2021, the decrease was primarily due to cost savings initiatives. Our cost savings initiatives in certain back-office functions have allowed us to reinvest in selling and marketing activities in our Core segments.

Research and development expense

R&D expense decreased ~~compared to~~for the ~~prior year period due to a reduction of $172.0 million in transaction~~three and ~~integration costs related to the Acquisition. Excluding transaction and integration costs, SG&A expense for the~~ nine months ended September 30, ~~2020 increased~~2021 primarily due to the addition of SG&A expense of approximately $117 million related to the ARRIS business. When compared to the prior year period, SG&A expense for the nine months ended September 30, 2020 benefitted from acquisition synergies and other cost savings initiatives offset partially by higher variable incentive compensation.

~~Research and development expense~~

For the three months ended September 30, 2020, research and development (R&D) expense and R&D expense as a percentage of sales increased compared to the prior year period due to our continued investment in certain VCNdecreased spending on Home segment products and higher variable compensation expense. R&D expense increased for the nine months ended September 30, 2020 compared to the prior year period due to the addition of R&D expenses of approximately $125 million related to the ARRIS business. Excluding the ARRIS business, R&D expense and R&D expense as a percentage of sales increased for the nine months ended September 30, 2020 due to our continuing investment in certain VCN segment products and higher variable incentive costs.products. R&D activities generally relate to ensuring that our products are capable of meeting the evolving technological needs of our customers, bringing new products to market and modifying existing products to better serve our customers.

Amortization of purchased intangible assets, Restructuring costs (credits), net and Asset impairments

Three Months Ended

Nine Months Ended

September 30,

$

%

September 30,

$

%

2020

2019

Change

Change

2020

2019

Change

Change

Amortization of purchased intangible assets

$
158.1

$
163.9

$
(5.8
)

(3.5
%)

$
473.5

$
387.3

$
86.2

22.3
%
Restructuring costs, net

40.3

19.5

20.8

106.7
%

83.6

78.3

5.3

6.8
%
Asset impairments

—

—

��

NM

206.7

—

206.7

NM


	Three Months Ended											Nine Months Ended
	September 30,					$			%			September 30,				$			%
	2021			2020		Change			Change			2021		2020		Change			Change
	(dollars in millions)
Amortization of purchased intangible assets	$	153.0		$	158.1	$	(5.1	)		(3.2	)%	$	461.9	$	473.5	$	(11.6	)		(2.4	%)
Restructuring costs (credits), net		(3.1	)		40.3		(43.4	)	NM				100.2		83.6		16.6			19.9
Asset impairments		—			—		—		NM				—		206.7		(206.7	)	NM

NM – Not meaningful

Amortization of purchased intangible assets

For the three and nine months ended September 30, ~~2020,~~2021, amortization of purchased intangible assets was lower compared to the prior year ~~period~~periods because certain of our intangible assets became fully amortized.

Restructuring costs (credits), net

The ~~amortization of purchased intangible assets was higher in~~net restructuring costs (credits) recorded during the three and nine months ended September 30, ~~2020 compared to the prior year period primarily due to the addition of approximately $90~~2021 reflected actions initiated during 2021 and included $(5.1) million ~~of amortization~~and $87.1 million, respectively, related to CommScope NEXT. For the ~~ARRIS business. Excluding the ARRIS business, amortization decreased for the~~three and nine months ended September 30, ~~2020 compared~~2021, restructuring costs (credits) also reflected $2.0 million and $13.1 million, respectively, related to integrating the ARRIS business. Restructuring credits arise as estimates are refined or severance is forfeited when employees depart prior to the ~~prior year period because certain of our intangible assets became fully amortized.~~

~~Restructuring costs, net~~

termination date. The restructuring costs recorded induring the three and nine months ended September 30, 2020 ~~and 2019~~ were primarily related to integrating ~~and preparing to integrate~~ the ARRIS business. From a cash perspective, we paid ~~$24.8~~$6.8 million and ~~$67.9~~$38.6 million to settle restructuring liabilities during the three and nine months ended September 30, ~~2020,~~2021, respectively, and expect to pay an additional ~~$17.3~~$20.2 million by the end of ~~2020 related to restructuring actions that have been initiated. In addition, we expect to pay $23.9~~2021 and $60.5 million between ~~2021~~2022 and ~~2022~~2023 related to restructuring actions that have been initiated. Additional restructuring actions related to ~~the Acquisition~~CommScope NEXT are expected to be identified and the resulting charges and cash requirements are expected to be material. The Company does not expect to identify significant additional restructuring actions related to the ARRIS integration.

Asset impairments

~~For the three months ended September 30, 2020, we~~We did not record any asset impairment charges ~~other than those identified as restructuring costs because they resulted from restructuring initiatives.~~during the three or nine months ended September 30, 2021. For the three and nine months ended September 30, 2020, we recorded a goodwill impairment charge of $206.7 million related to our Home Networks reporting unit within our Home segment. See the discussion above under “Critical Accounting Policies” for more information regarding the interim goodwill impairment test performed during the second quarter of 2020. We did not record any asset impairment charges during the three or nine months ended September 30, 2019.

Other ~~income (expense),~~expense, net


																									Three Months Ended												Nine Months Ended
	Three Months Ended												Nine Months Ended												September 30,						$			%			September 30,						$			%
	September 30,						$			%			September 30,						$			%			2021			2020			Change			Change			2021			2020			Change			Change
	2020			2019			Change			Change			2020			2019			Change			Change			(dollars in millions)
Foreign currency loss	$	(5.6	)	$	(4.1	)	$	(1.5	)	NM			$	(19.5	)	$	(9.7	)	$	(9.8	)	NM			$	(1.4	)	$	(5.6	)	$	4.2			(75.0	)%	$	(2.3	)	$	(19.5	)	$	17.2			(88.2	)%
Other income (expense), net		(11.3	)		5.6			(16.9	)		(301.8	%)		(10.7	)		6.1			(16.8	)		(275.4	%)
Other expense, net																										(30.9	)		(11.3	)		(19.6	)		173.5			(27.5	)		(10.7	)		(16.8	)		157.0

~~NM – Not meaningful~~

Foreign currency loss

Foreign currency loss includes the net foreign currency gains and losses resulting from the settlement of receivables and payables, foreign currency contracts and short-term intercompany advances in a currency other than the subsidiary’s functional currency. The ~~increase in~~ foreign currency loss ~~for the three and nine months ended September 30, 2020 compared to~~in the prior year periods was primarily driven by certain unhedged currencies.

~~Other income (expense), net~~

~~In connection with~~Other expense, net

For the three and nine months ended September 30, 2021, other expense, net was driven by the redemption fee of $34.4 million related to the refinancing of the 5.50% senior secured notes due March 2024 (the 2024 Secured Notes) as further described in Note 5 in the Notes to Unaudited Condensed Consolidated Financial Statements. For the three and nine months ended September 30, 2020, other expense, net was driven by redemption fees of $14.9 million related to the refinancing of the 5.00% senior notes due 2021 (the 2021 Notes) and the 5.50% senior notes due June 2024 (the 2024 Notes) and the redemption of $100.0 million of the 6.00% senior notes due 2025 (the 2025 Notes),.

Interest expense, Interest income and Income taxes


	Three Months Ended												Nine Months Ended
	September 30,						$			%			September 30,						$			%
	2021			2020			Change			Change			2021			2020			Change			Change
	(dollars in millions)
Interest expense	$	(148.6	)	$	(147.2	)	$	(1.4	)		1.0	%	$	(424.1	)	$	(437.7	)	$	13.6			(3.1	%)
Interest income		0.5			1.3			(0.8	)		(61.5	)		1.5			4.2			(2.7	)		(64.3	)
Income tax (expense) benefit		35.2			(9.3	)		44.5		NM				65.3			37.2			28.1			75.5

NM – Not meaningful

Interest expense and interest income

For the three and nine months ended September 30, 2021, we wrote off $9.9 million of debt issuance costs related to the refinancing of the 2024 Secured Notes as further described in Note 75 in the Notes to Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, we paid redemption premiums of $14.9 million that were included in other income (expense), net during the three and nine months ended September 30, 2020.

~~Interest expense, Interest income and Income taxes~~

Three Months Ended

Nine Months Ended

September 30,

$

%

September 30,

$

%

2020

2019

Change

Change

2020

2019

Change

Change

Interest expense

$
(147.2
)

$
(160.7
)

$
13.5

NM

$
(437.7
)

$
(423.5
)

$
(14.2
)

NM

Interest income

1.3

1.8

(0.5
)

(27.8
%)

4.2

15.9

(11.7
)

(73.6
%)
Income tax (expense) benefit

(9.3
)

51.7

(61.0
)

(118.0
%)

37.2

87.6

(50.4
)

(57.5
%)

~~NM – Not meaningful~~

~~Interest expense and interest income~~

~~Interest expense for~~Statements. For the three months ended September 30, 2020, decreased compared to the prior year period due primarily to lower variable interest rates on our senior secured term loan due 2026 (the 2026 Term Loan) which reduced interest expense by approximately $17 million. This favorable impact was partially offset by the write-off of debt issuance costs ofwe wrote off $6.0 million related to the refinancing of the 2021 Notes and 2024 Notes and the partial redemption of the 2025 ~~Notes as further described in Note 7 to~~Notes. Excluding the ~~Notes to Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q. Interest~~write-off of debt issuance costs, interest expense decreased for the three and nine months ended September 30, ~~2020 increased compared to the prior year period~~2021 due to ~~the financing of the Acquisition that occurred in February 2019. The increase was partially offset by~~ lower variable interest rates ~~and lower debt balances~~on our senior secured term loan due ~~to voluntary repayments in 2019 and 2020.~~

In March 2019, we entered into pay-fixed, receive-variable interest rate swap derivatives and designated them as cash flow hedges of interest rate risk. These swaps effectively fixed the interest rate on a portion the2026 (the 2026 Term ~~Loan. The total notional amount of the interest rate swap derivatives as of September 30, 2020 was $600 million with outstanding maturities of up to forty-two months.~~

Loan). Our weighted average effective interest rate on outstanding borrowings, including the impact of the interest rate swap and the amortization of debt issuance costs and original issue discount, was 5.74% at September 30, 2021, 5.86% at December 31, 2020 and 5.87% at September 30, ~~2020, 6.17% at December 31, 2019 and 6.18% at September 30, 2019.~~2020.

~~Interest income decreased during the nine months ended September~~ 30 2020 primarily due to $10.9 million of interest earned on the proceeds of the acquisition-related debt that were held in an interest-bearing escrow account in the prior year period until the Acquisition date.

Income tax ~~expense~~(expense) benefit

For the three months ended September 30, ~~2020,~~2021, our effective tax rate was 22.1% and we recognized a tax benefit of $35.2 million on a pretax loss of $159.4 million. Our tax benefit was higher than the statutory rate of 21% due to favorable changes in uncertain tax positions. For the nine months ended September 30, 2021, our effective tax rate was 14.8% and we recognized a tax benefit of $65.3 million on a pretax loss of $440.9 million. Our tax benefit was lower than the statutory rate primarily due to the impact of $37.4 million in tax expense related to a foreign tax rate change.

Our effective income tax rate was (8.7)% and we5.9% for the three and nine months ended September 30, 2020. We recognized income tax expense of $9.3 million on a pretax loss of $107.0 ~~million. The~~million and a tax benefit of $37.2 million on a pretax loss of $634.5 million respectively. For the three months ended September 30, 2020, the income tax expense on our pretax loss was driven by $19.2 million of tax expense related to a foreign tax rate change. ~~For the nine months ended September 30, 2020, our effective tax rate was 5.9% and we recognized a tax benefit of $37.2 million on a pretax loss of $634.5 million.~~ Our tax benefit ~~was less than the statutory rate of 21.0%~~ in the nine months ended September 30, 2020 was impacted unfavorably primarily ~~due to~~by a goodwill impairment charge of $206.7 million, for which minimal tax benefits were recorded, $22.7 million of tax expense related to state valuation allowances and $19.2 million in income tax expense related to a foreign tax rate change. For both the three and nine months ended September 30, 2020, ~~the Company’s~~our tax rate was also impacted favorably by federal tax credits and unfavorably by U.S. anti-deferral provisions and foreign withholding taxes. Excess tax costs of $1.2 million and $9.0 million related to equity compensation awards also impacted the income taxes unfavorably for the three and nine months ended September 30, 2020, ~~respectively.~~respectively

Our effective income tax rate was 24.8% and 15.1% for the three and nine months ended September 30, 2019, respectively. We recognized a tax benefit of $51.7 million on a pretax loss of $208.2 million and a tax benefit of $87.6 million on a pretax loss of $580.4 million, respectively. For the three and nine months ended September 30, 2019, our tax benefit was impacted favorably by federal tax credits, benefits recognized from adjustments related to prior years’ tax returns and the expiration of statutes of limitations on various uncertain tax positions and impacted unfavorably by U.S. anti-deferral provisions and foreign withholding taxes. Excess tax costs related to equity-based compensation awards had an unfavorable impact on our tax benefit of $1.1 million and $1.5 million for the three and nine months ended September 30, 2019, respectively.

Segment Results


	Three Months Ended
	September 30,
	2021							2020
	Amount			% of Net Sales				Amount			% of Net Sales				$ Change			% Change
	(dollars in millions)
Net sales by segment:
Broadband	$	779.7			37.0		%	$	811.0			37.4		%	$	(31.3	)		(3.9	)	%
OWN		355.6			16.9				271.8			12.5				83.8			30.8
VCN		554.9			26.4				511.8			23.6				43.1			8.4
Core net sales (1)		1,690.2			80.3				1,594.6			73.5				95.6			6.0
Home		415.1			19.7				573.5			26.5				(158.4	)		(27.6	)
Consolidated net sales	$	2,105.3			100.0		%	$	2,168.1			100.0		%	$	(62.8	)		(2.9	)	%

Operating income (loss) by segment:
Broadband	$	50.8			6.5		%	$	75.0			9.2		%	$	(24.2	)		(32.3	)	%
OWN		43.2			12.1				26.0			9.6				17.2			66.2
VCN		(4.6	)		(0.8	)			(43.2	)		(8.4	)			38.6			(89.4	)
Core operating income (1)		89.4			5.3				57.8			3.6				31.6			54.7
Home		(68.4	)		(16.5	)			(2.0	)		(0.3	)			(66.4	)		3,320.0
Consolidated operating income	$	21.0			1.0		%	$	55.8			2.6		%	$	(34.8	)		(62.4	)	%

Adjusted EBITDA by segment:
Broadband	$	158.1			20.3		%	$	202.3			24.9		%	$	(44.2	)		(21.8	)	%
OWN		60.5			17.0				53.6			19.7				6.9			12.9
VCN		56.0			10.1				55.6			10.9				0.4			0.7
Core adjusted EBITDA (1)		274.6			16.2				311.5			19.5				(36.9	)		(11.8	)
Home		(15.5	)		(3.7	)			30.4			5.3				(45.9	)		(151.0	)
Non-GAAP consolidated adjusted EBITDA (2)	$	259.1			12.3		%	$	341.9			15.8		%	$	(82.8	)		(24.2	)	%


	Nine Months Ended
	September 30,
	2021							2020
	Amount			% of Net Sales				Amount			% of Net Sales				$ Change			% Change
Net sales by segment:
Broadband	$	2,366.4			37.2		%	$	2,069.8			32.8		%	$	296.6			14.3		%
OWN		1,036.2			16.3				949.0			15.1				87.2			9.2
VCN		1,587.4			24.9				1,459.7			23.2				127.7			8.7
Core net sales (1)		4,990.0			78.4				4,478.5			71.0				511.5			11.4
Home		1,372.6			21.6				1,825.6			29.0				(453.0	)		(24.8	)
Consolidated net sales	$	6,362.6			100.0		%	$	6,304.1			100.0		%	$	58.5			0.9		%

Operating income (loss) by segment:
Broadband	$	70.0			3.0		%	$	55.8			2.7		%	$	14.2			25.4		%
OWN		158.4			15.3				146.5			15.4				11.9			8.1
VCN		(63.6	)		(4.0	)			(103.8	)		(7.1	)			40.2			(38.7	)
Core operating income (1)		164.8			3.3				98.5			2.2				66.3			67.3
Home		(153.5	)		(11.2	)			(269.3	)		(14.8	)			115.8			(43.0	)	%
Consolidated operating income (loss)	$	11.5			0.2		%	$	(170.8	)		(2.7	)	%	$	182.1		NM

Adjusted EBITDA by segment:
Broadband	$	488.3			20.6		%	$	414.9			20.0		%	$	73.4			17.7		%
OWN		214.4			20.7				218.4			23.0				(4.0	)		(1.8	)
VCN		135.1			8.5				131.6			9.0				3.5			2.7
Core adjusted EBITDA (1)		837.8			16.8				764.9			17.1				72.9			9.5
Home		18.6			1.4				88.1			4.8				(69.5	)		(78.9	)
Non-GAAP consolidated adjusted EBITDA (1)	$	856.4			13.5		%	$	853.0			13.5		%	$	3.4			0.4		%

Three Months Ended

September 30,

2020

2019

Amount

% of Net
Sales

Amount

% of Net
Sales

$
Change

%
Change

(dollars in millions)
Net sales by segment:

Broadband

$
820.9

37.9

%

$
694.8

29.2

%

$
126.1

18.1

%
Home

563.6

26.0

826.4

34.7

(262.8
)

(31.8
)

OWN

271.8

12.5

334.4

14.0

(62.6
)

(18.7
)

VCN

511.8

23.6

524.6

22.0

(12.8
)

(2.4
)

Consolidated net sales

$
2,168.1

100.0

%

$
2,380.2

100.0

%

$
(212.1
)

(8.9
)
%

Operating income (loss) by segment:

Broadband

$
76.7

9.3

%

$
(13.0
)

(1.9
)
%

$
89.7

NM

Home

(3.7
)

(0.7
)

3.8

0.5

(7.5
)

NM

OWN

26.0

9.6

(2.2
)

(0.7
)

28.2

(1,281.8
)
%
VCN

(43.2
)

(8.4
)

(39.4
)

(7.5
)

(3.8
)

NM

Consolidated operating income (loss)

$
55.8

2.6

%

$
(50.8
)

(2.1
)
%

$
106.6

NM

Adjusted EBITDA by segment:

Broadband

$
204.2

24.9

%

$
153.5

22.1

%

$
50.7

33.0

%
Home

28.5

5.1

59.7

7.2

(31.2
)

(52.3
)

OWN

53.6

19.7

75.3

22.5

(21.7
)

(28.8
)

VCN

55.6

10.9

81.3

15.5

(25.7
)

(31.6
)

Non-GAAP consolidated adjusted
EBITDA ⁽¹⁾

$
341.9

15.8

%

$
369.8

15.5

%

$
(27.9
)

(7.5
)
%
(1)

Core financial measures reflect the results of our Broadband, OWN and VCN segments, in the aggregate. Core financial measures exclude the results of our Home segment.

(2)

See “Reconciliation of Non-GAAP Measures.”

Nine Months Ended

September 30,

2020

2019

Amount

% of Net
Sales

Amount

% of Net
Sales

$
Change

%
Change

(dollars in millions)
Net sales by segment:

Broadband

$
2,106.3

33.4

%

$
1,690.7

28.0

%

$
415.6

24.6

%
Home

1,789.1

28.4

1,715.4

28.4

73.7

4.3

OWN

949.0

15.1

1,183.4

19.6

(234.4
)

(19.8
)

VCN

1,459.7

23.2

1,456.9

24.1

2.8

0.2

Consolidated net sales

$
6,304.1

100.0

%

$
6,046.4

100.0

%

$
257.7

4.3

%

Operating income (loss) by segment:

Broadband

$
67.5

3.2

%

$
(180.2
)

(10.7
)
%

$
247.7

NM

Home

(281.0
)

(15.7
)

(21.2
)

(1.2
)

(259.8
)

NM

OWN

146.5

15.4

173.2

14.6

(26.7
)

(15.4
)
%
VCN

(103.8
)

(7.1
)

(141.0
)

(9.7
)

37.2

NM

Consolidated operating loss

$
(170.8
)

(2.7
)
%

$
(169.2
)

(2.8
)
%

$
(1.6
)

NM

Adjusted EBITDA by segment:

Broadband

$
427.2

20.3

%

$
329.6

19.5

%

$
97.6

29.6

%
Home

75.8

4.2

121.8

7.1

(46.0
)

(37.8
)

OWN

218.4

23.0

312.6

26.4

(94.2
)

(30.1
)

VCN

131.6

9.0

209.8

14.4

(78.2
)

(37.3
)

Non-GAAP consolidated adjusted
EBITDA ⁽¹⁾

$
853.0

13.5

%

$
973.8

16.1

%

$
(120.8
)

(12.4
)
%

~~(1)~~

~~See “Reconciliation of Non-GAAP Measures.”~~

Note: Components may not sum to total due to rounding.

NM – Not meaningful

Broadband Networks Segment

Our Broadband segment provides an end-to-end product portfolio serving the telco and cable provider broadband market. The segment brings together the NCC business with the N&C business. The Broadband segment includes converged cable access platform, passive optical networking, video systems, access technologies, fiber and coaxial cable, fiber and copper connectivity and hardened closures.

Net sales for the Broadband segment ~~increased~~decreased for the three months ended September 30, ~~2020~~2021 compared to the prior year period primarily due to a slowdown in service provider spending in the U.S. on our network and cloud products, and certain software licensing revenue recorded in the prior year period that did not recur in the current year. These decreases were somewhat offset by higher sales of our network connectivity products. For the nine months ended September 30, 2021, net sales increased compared to the prior year period due to increased demand for ~~both~~ our ~~NCC~~products and ~~N&C products.~~services as service providers enhance their networks to keep pace with broadband demand. We are experiencing capacity constraints and supply shortages with certain of our network cable products, which hindered our ability to meet customer demand for our Broadband segment products in the three and nine months ended September 30, 2021. We are investing to alleviate our capacity constraints and expect them to ease in the fourth quarter of 2021. We expect the supply shortages to extend for the remainder of 2021 and into 2022. From a regional perspective, for the three months ended September 30, ~~2020,~~2021, net sales decreased in the U.S. by $68.0 million and the APAC region by $18.9 million but increased in the CALA region by $30.9 million, the EMEA region by $18.1 million and Canada by $6.6 million. For the nine months ended September 30, 2021, net sales increased in the U.S. by ~~$110.8~~$161.1 million, inthe CALA region by $115.7 million and the EMEA region by ~~$17.5~~$33.0 million ~~and~~but decreased in the APAC region by ~~$13.5 million but decreased in the CALA region by $8.6~~$13.0 million and in Canada by ~~$7.1~~$0.2 million. Foreign exchange rate changes impacted Broadband segment net sales ~~were higher in~~favorably by approximately 1% during both the three and nine months ended September 30, ~~2020~~2021 compared to the same prior year period primarily as a result of the Acquisition. For the nine months ended September 30, 2020 and 2019, incremental net sales from the ARRIS business were approximately $1,093 million and $708 million, respectively. From a regional perspective, for the nine months ended September 30, 2020, excluding the ARRIS business, Broadband segment net sales increased approximately $95 million in the U.S. but decreased across all other major regions, including decreases of approximately $33 million in the APAC region, $24 million in the CALA region, $4 million in Canada and $3 million in the EMEA region. Supply constraints related to the COVID-19 pandemic negatively affected Broadband segment net sales during the first half of 2020; however, we believe the segment also benefitted from increased demand for certain of its products. Management currently expects that the impact from COVID-19 will not significantly affect the Broadband segment for the remainder of 2020.periods.

For the three months ended September 30, ~~2020,~~2021, Broadband segment operating income and adjusted EBITDA decreased compared to the prior year period primarily due to higher material and freight costs, lower sales volumes and increased expenses to expand capacity to meet demand. For the nine months ended September 30, 2021, Broadband segment operating income and adjusted EBITDA increased compared to the prior year period due to increased sales volumes, partially offset by higher freight and material costs and increased expenses to expand capacity to meet demand. Broadband segment operating income was unfavorably impacted by increased restructuring costs of $52.7 million and an intellectual property settlement charge of $20.0 million for the nine months ended September 30, 2021. Restructuring costs and intellectual property settlements are not reflected in adjusted EBITDA. See “Reconciliation of Segment Adjusted EBITDA” below.

Outdoor Wireless Networks Segment

For the three months ended September 30, 2021, OWN segment net sales increased compared to the prior year period primarily due to ~~reductions~~an increase in spending on wireless network equipment by certain of ~~$54.9 million in acquisition accounting adjustments related to the mark-up of inventory to its estimated fair value and deferred revenue as well as increased sales volumes.~~our U.S. service provider customers. For the nine months ended September 30, ~~2020, Broadband~~2021, OWN segment ~~operating income was favorably impacted by reductions~~net sales increased compared to the prior year period primarily due to an increase in ~~acquisition accounting adjustments of $129.1 million, reductions~~spending on macro cell solutions in ~~transaction~~the APAC region and integration costs of $112.2 million and reductions in restructuring costs of $14.9 million. Transaction and integration costs, acquisition accounting adjustments and restructuring costs are not reflected in adjusted EBITDA. ForCanada. Although OWN segment net sales increased year over year for both the three and nine months ended September 30, ~~2020, Broadband segment adjusted EBITDA increased due to higher~~2021, net sales ~~the impact~~were negatively affected by supply shortages of cost savings initiatives and lower material costs. Since the Broadband segment includes the acquired N&C business, both operating income and adjusted EBITDA for the nine months ended September 30, 2020 are higher than the prior year period duecertain materials that hindered our ability to ~~the incremental period of ARRIS results included in the current year. See “Reconciliation of Segment Adjusted EBITDA” below.~~

~~Home Networks Segment~~

Our Home segment offers broadband and video products. The segment includes subscriber-based solutions that support broadband and video applications connecting cable, telco and satellite service providers to a customer’s home and adds wireless connectivity or other wired connections integrating in-home devices together to enable the consumption of internet-based services and the delivery of broadcast, streamed and stored video to televisions and other connected devices. Broadband offerings include devices that provide residential connectivity to a service providers’ network, such as digital subscriber line and cable modems and telephony and data gateways which incorporate routing and Wi-Fi functionality. Video offerings include set top boxes that support cable, satellite and IPTV content delivery and include products such as digital video recorders, high definition set top boxes and hybrid set top devices.

Net sales for the Home segment decreased for the three months ended September 30, 2020 primarily due to lower sales volumes of video products to both U.S. and international service provider customers.meet customer demand. From a regional perspective, for the three months ended September 30, ~~2020,~~2021, OWN segment net sales ~~were down across all major regions including decreases of $183.1 million~~increased in the U.S.~~, $40.4~~ by $64.4 million, the APAC region by $12.4 million, Canada by $9.3 million and the EMEA region by $5.9 million but decreased in the CALA region by $8.2 million. For the nine months ended September 30, 2021, OWN segment net sales increased in the APAC region ~~$35.1~~by $49.5 million, Canada by $35.0 million, the EMEA region by $10.3 million and the U.S. by $3.5 million and decreased in the CALA region ~~$2.6 million in~~by $11.1 million. Foreign exchange rate changes impacted OWN segment net sales favorably by approximately 1% during both the ~~EMEA region~~three and ~~$1.6 million in Canada. Net~~nine months ended September 30, 2021 compared to the same prior year periods.

For the three months ended September 30, 2021, OWN segment operating income and adjusted EBITDA increased compared to the prior year period primarily due to increased sales ~~for~~volumes, partially offset by pricing pressure on certain products and higher material and freight costs. For the ~~Home~~nine months ended September 30, 2021, OWN segment operating income and adjusted EBITDA both benefitted from increased sales volumes and benefits from cost savings initiatives, partially offset by pricing pressures on certain products and higher freight and material costs. In addition, OWN segment operating income for the nine months ended September 30, ~~2020 because~~2021 also increased as a result of a $9.1 million reduction in amortization expense compared to the prior year ~~period only included net sales since the April 4, 2019 acquisition date.~~ period. Amortization expense is excluded from adjusted EBITDA. See “Reconciliation of Segment Adjusted EBITDA” below.

Venue and Campus Networks Segment

For the three months ended September 30, ~~2020, we believe the COVID-19 pandemic impacts to Home segment~~2021, net sales ~~were mostly related~~increased in the VCN segment due to ~~demand.~~higher sales of enterprise copper and fiber products, partially offset by lower net sales of Ruckus products and distributed antenna systems. For the nine months ended September 30, ~~2020, we believe~~2021, net sales increased in the ~~impacts from COVID-19~~VCN segment with higher net sales of enterprise and Ruckus products, partially offset by lower net sales of distributed antenna systems. Net sales of Ruckus products decreased in the third quarter and were ~~a combination~~unfavorably impacted for the year-to-date period due to shortages of ~~supply chain disruptions and lower~~certain materials that negatively affected our ability to meet customer demand. We ~~anticipate ongoing softness in the Home segment~~expect this supply shortage to continue for the remainder of ~~2020 partially~~2021 and into 2022. From a regional perspective, for the three months ended September 30, 2021, net sales increased in the U.S. by $22.9 million, CALA region by $10.1 million, EMEA region by $6.3 million and APAC region by $4.5 million but decreased in Canada by $0.7 million. For the nine months ended September 30, 2021, net sales increased in the APAC region by $60.6 million, the EMEA region by $34.4 million, the CALA region by $18.6 million, the U.S. by $8.2 million and Canada by $5.9 million. Foreign exchange rate changes impacted VCN segment net sales favorably by approximately 1% and 2% during the three and nine months ended September 30, 2021, respectively, compared to the same prior year periods.

For the three and nine months ended September 30, 2021, VCN segment operating loss decreased and adjusted EBITDA increased compared to the prior year periods primarily due to favorable pricing impacts on certain products, higher sales volumes and favorable geographic and product mix, partially offset by higher material and freight costs. See “Reconciliation of Segment Adjusted EBITDA” below.

Home Networks Segment

Net sales for the ~~impacts of COVID-19 but also~~Home segment decreased for the three and nine months ended September 30, 2021 primarily due to the continuing ~~declines~~decline in demand for video ~~products.~~products from both U.S. and international service providers as well as the negative impact of supply shortages and delays on our ability to meet customer demand. From a regional perspective, for the three months ended September 30, 2021, net sales decreased in the U.S. by $135.7 million, CALA region by $26.5 million, EMEA region by $18.8 million and increased in the APAC region by $11.3 million and Canada by $11.3 million. For the nine months ended September 30, 2021, net sales decreased in the U.S. by $417.2 million, EMEA region by $25.8 million and CALA region by $16.9 million and increased in Canada by $4.6 million and the APAC region by $2.3 million. Foreign exchange rate changes impacted Home segment net sales favorably by approximately 1% during both the three and nine months ended September 30, 2021 compared to the same prior year periods.

For the three months ended September 30, ~~2020, the~~2021, Home segment operating loss ~~for the Home segment~~ increased and adjusted EBITDA decreased compared to the prior year period primarily due to lower sales volumes, higher material costs and higher bad debt expense, offset partially by benefits from cost savings initiatives. For the nine months ended September 30, 2021, excluding the impact of the $206.7 million prior year period goodwill impairment charge, Home segment operating loss increased and adjusted EBITDA decreased primarily due to lower sales volumes, higher material costs and higher bad debt expense, partially offset by benefits from cost savings initiatives. Home segment operating loss was also unfavorably impacted for the three and nine months ended September 30, 2021 by higher transaction, transformation and integration costs of $11.9 million and $27.3 million, respectively, and higher intellectual property litigation charges of $20.1 million and $31.5 million, respectively. During the three and nine months ended September 30, 2020, the Home segment benefited from the release of a $23.6 million accrual related to ~~a patent~~an intellectual property royalty matter that was settled for less than anticipated. For the nine months ended September 30, 2020, the Home segment operating loss increased compared to the prior year period primarily due to the goodwill impairment charge of $206.7 million in the current year period offset partially by a $25.9 million reduction in acquisition accounting adjustments mainly related to the mark-up of inventory to its estimated fair value as well as the $23.6 million release discussed above. Asset impairments, acquisition accounting adjustments and a portion of the patent and litigation settlement described above are not reflected in adjusted EBITDA. Of the $23.6 million ~~patent royalty~~ accrual release, $15.1 million related to pre-acquisition sales and was excluded from the calculation of adjusted EBITDA; the remaining $8.5 million release provided a benefit to Home segment adjusted EBITDA in the three and nine months ended September 30, 2020. ~~Despite that benefit,~~ Home segment ~~adjusted EBITDA decreased for the three~~transaction, transformation and ~~nine months ended September 30, 2020~~integration costs were primarily ~~due to lower sales offset partially by lower material costs. See “Reconciliation of Segment Adjusted EBITDA” below.~~

~~Outdoor Wireless Networks Segment~~

Our OWN segment focuses on the macro and metro cell wireless markets. The segment’s offerings include base station antennas, RF filters, tower connectivity, microwave antennas, metro cell products, cabinets, steel accessories, Spectrum Access System and Comsearch. As our wireless operator customers shift a portion of their 5G capital expenditures from the macro towerrelated to the ~~metro cell, the portfolio will strategically help make the transition smooth and cost-effective.~~

OWN segment net sales decreased during the three and nine months ended September 30, 2020 compared to the prior year periods primarily due to a slowdown in sales of wireless network equipment to both U.S. and international service provider customers. From a regional perspective, for the three and nine months ended September 30, 2020, OWN segment net sales were lower across all regions, except the CALA region for the three month period, and were primarily driven by decreases in the U.S. of $53.5 million and $143.9 million, respectively, the EMEA region of $15.8 million and $51.4 million, respectively, and the APAC region of $4.6 million and $34.5 million, respectively. U.S. net sales of OWN segment products in the three and nine months ended September 30, 2019 benefitted from the build out of next generation 4G networks to support commercial and public safety markets, and that spending did not recur at the same level in 2020 periods. In addition, we believe a portionannounced planned spin-off of the ~~decline in OWN segment net sales for the three~~Home Networks business. Transaction, transformation and nine months ended September 30, 2020 was caused by lower demand as a result of the macroeconomic slowdown caused by the COVID-19 pandemic. We currently believe the impact from COVID-19 could continue to negatively affect the OWN segment for the remainder of 2020.

For the three months ended September 30, 2020, OWN segment operating income increased compared to the prior year period due to the impact of a patent litigation claim settled during the prior year period for $55.0 million offset partially by lower sales in the current year period. For the nine months ended September 30, 2020, OWN segment operating income decreased due to lower net sales in the current year period partially offset by the impact of the patent litigation claim described above settled in the prior year period. Adjusted EBITDA decreased for the threeintegration costs and ~~nine months ended September 30, 2020 compared to the prior year periods primarily due to the decrease in net sales. Patent litigation~~intellectual property settlements are not reflected in adjusted EBITDA. See “Reconciliation of Segment Adjusted EBITDA” below.

~~Venue and Campus Networks Segment~~

Our VCN segment targets both public and private networks for campuses, venues, data centers and buildings. The segment combines Wi-Fi and switching, distributed antenna systems, licensed and unlicensed small cells, and enterprise fiber and copper infrastructure.

For the three months ended September 30, 2020, net sales decreased in the VCN segment as higher sales of Ruckus solutions and distributed antenna systems were more than offset by lower sales of enterprise products. From a regional perspective, for the three months ended September 30, 2020, net sales increased in the U.S. by $11.3 million but decreased across all other major regions driven by decreases of $14.9 million in the EMEA region and $6.8 million in the CALA region. VCN segment net sales were higher in the nine months ended September 30, 2020 compared to the prior year period primarily as a result of the Acquisition. For the nine months ended September 30, 2020 and 2019, incremental net sales related to the ARRIS business were approximately $384 million and $283 million, respectively. From a regional perspective, for the nine months ended September 30, 2020, excluding the ARRIS business, VCN segment net sales increased approximately $14 million in the U.S. but decreased across all other major regions, driven by decreases of approximately $46 million in the APAC region, $43 million in the EMEA region and $18 million in the CALA region. We believe the primary driver for lower VCN segment net sales for the three and nine months ended September 30, 2020 was lower demand resulting from the COVID-19 pandemic. Management currently expects the impact of COVID-19 to continue to negatively affect the VCN segment for the remainder of 2020.

For the three months ended September 30, 2020, VCN segment operating loss increased primarily due to lower sales, higher restructuring costs of $13.0 million and increased patent litigation costs of $13.7 million. These unfavorable impacts on VCN segment operating loss were partially offset by a $46.1 million reduction in acquisition accounting adjustments primarily related to the mark-up of inventory to its estimated fair value. For the nine months ended September 30, 2020, VCN segment operating loss decreased due to a $102.1 million reduction in acquisition accounting adjustments related to the mark-up of inventory to its estimated fair value as well as reductions in transaction and integration costs of $50.9 million. These favorable impacts were offset partially by the impacts of lower VCN segment net sales, higher patent litigation costs of $13.7 million and higher restructuring costs of $11.3 million. VCN segment operating results for the nine months ended September 30, 2019 only include the acquired Ruckus business after the April 4, 2019 acquisition date, which affects the segment’s comparability to the current year period. For the three and nine months ended September 30, 2020, adjusted EBITDA decreased primarily due to unfavorable product mix and, to a lesser extent, lower sales, offset partially by the impacts of cost savings initiatives. Acquisition accounting adjustments, restructuring costs, patent litigation costs and transaction and integration costs are not reflected in adjusted EBITDA. See “Reconciliation of Segment Adjusted EBITDA” below.

LIQUIDITY AND CAPITAL RESOURCES

The following table summarizes certain key measures of our liquidity and capital resources (in millions, except percentage data).



														September 30, 2021			December 31, 2020			$ Change			% Change
	September 30, 2020			December 31, 2019			$ Change			% Change				(dollars in millions)
Cash and cash equivalents	$	582.8		$	598.2		$	(15.4	)		(2.6	)	%	$	411.5		$	521.9		$	(110.4	)		(21.2	)	%
Working capital ⁽¹⁾, excluding cash and cash equivalents and current portion of long-term debt		807.0			903.6			(96.6	)		(10.7	)			972.3			911.2			61.1			6.7
Availability under revolving credit facility		733.6			796.8			(63.2	)		(7.9	)			686.4			735.1			(48.7	)		(6.6	)
Long-term debt, including current portion		9,621.3			9,832.4			(211.1	)		(2.1	)			9,513.0			9,520.6			(7.6	)		(0.1	)
Total capitalization ⁽²⁾		10,917.2			11,668.7			(751.5	)		(6.4	)			10,471.4			10,917.4			(446.0	)		(4.1	)
Long-term debt as a percentage of total capitalization		88.1	%		84.3	%									90.8	%		87.2	%

(1) Working capital consisted of current assets of $3,438.5 million less current liabilities of $2,086.7 million at September 30, 2021. Working capital consisted of current assets of $3,354.5 million less current liabilities of $1,953.4 million at December 31, 2020.

(2) Total capitalization includes long-term debt, including the current portion, Series A convertible preferred stock (the Convertible Preferred Stock) and stockholders’ equity.

~~(1)~~

Working capital consisted of current assets of $3,415.4 million less current liabilities of $2,057.6 million at September 30, 2020. Working capital consisted of current assets of $3,511.8 million less current liabilities of $2,042.0 million at December 31, 2019.

~~(2)~~

~~Total capitalization includes long-term debt, convertible preferred stock and stockholders’ equity.~~

Our principal sources of liquidity on a short-term basis are cash and cash equivalents, cash flows provided by operations, ~~and~~ availability under our credit ~~facilities. In April 2020, we borrowed $250.0 million under our senior secured revolving credit facility (the Revolving Credit Facility) as a precautionary measure~~facilities and potential distributions related to ~~reinforce our cash position and preserve financial flexibility in light~~the spin-off of the uncertainty in the global economy at that time resulting from the COVID-19 pandemic. We subsequently repaid the full amount in July 2020 because we did not believe the proceeds were needed for future liquidity as our cash flow generation has continued to improve and the broader financial markets have continued to stabilize.Home Networks business. On a long-term basis, our potential sources of liquidity also include raising capital through the issuance of additional equity and/or debt.

The primary uses of liquidity include debt service requirements, ~~(including~~ voluntary debt repayments or ~~redemptions), funding~~redemptions, working capital requirements, ~~paying~~capital expenditures, transaction separation costs, transformation costs, restructuring costs, acquisition integration costs, ~~capital expenditures, paying restructuring costs, paying~~ dividends related to the Convertible Preferred Stock if we elect to pay such dividends in cash, ~~paying~~ litigation ~~claims and~~ settlements and income tax payments. We believe that our existing cash, cash equivalents and cash flows from operations, combined with availability under ~~the~~our senior secured revolving credit facility (the Revolving Credit ~~Facility,~~Facility), will be sufficient to meet our presently anticipated future cash needs. We may experience volatility in cash flows between periods due to, among other reasons, variability in the timing of vendor payments and customer receipts. We may, from time to time, borrow additional amounts under the Revolving Credit Facility or issue debt securities, if market conditions are favorable, to meet future cash needs or to reduce our borrowing costs.

Although there are no financial maintenance covenants under the terms of our senior notes, there is a limitation, among other limitations, on certain future borrowings based on an adjusted leverage ratio or a fixed charge coverage ratio. These ratios are based on financial measures similar to non-GAAP adjusted EBITDA as presented in the “Reconciliation of Non-GAAP Measures” section below, but also give pro forma effect to certain events, including acquisitions, synergies and savings from cost reduction initiatives such as facility closures and headcount reductions. For the twelve months ended September 30, ~~2020,~~2021, our pro forma adjusted EBITDA, as measured pursuant to the indentures governing our notes, was ~~$1,281.5~~$1,303.8 million, which included annualized synergies expected to be mostly realized inwithin the next ~~two years~~year ($~~45.8~~6.1 million) and annualized savings expected from ~~announced~~ cost reduction initiatives ($~~59.1~~79.1 million) so that the impact of the synergies and cost reduction initiatives is fully reflected in the twelve-month period used in the calculation of the ratios. In addition to limitations under these indentures, our senior secured credit facilities contain customary negative covenants based on similar financial measures. We believe we are in compliance with the covenants under our indentures and senior secured credit facilities at September 30, ~~2020.~~2021.

Cash and cash equivalents decreased during the nine months ended September 30, ~~2020 due to cash used in financing activities of $259.8 million,~~2021 primarily driven by cash paid for capital expenditures of $96.2 million, cash dividends paid for the ~~$800.0~~Convertible Preferred Stock of $43.0 million, ~~combined redemptions~~a debt extinguishment payment of ~~the 2021 Notes~~$34.4 million, tax withholding payments for vested equity-based compensation awards of $24.7 million, a payment to settle a net investment hedge of $18.0 million and ~~2024 Notes and the $100.0~~debt issuance costs paid of $9.6 million, ~~partial redemption of the 2025 Notes~~ partially offset by the issuance of $700.0 million of 7.125% senior unsecured notes due in 2028 (the 2028 Notes); cash used in investing activities of $76.8 million, driven by capital expenditures; and the unfavorable impact of exchange rates on cash of $17.3 million. These decreases were offset partially by cash generated byfrom operating activities of ~~$338.5~~$134.7 million. We expect cash generation to be lower in 2021 than the prior year as we continue to expand capacity for our Broadband segment and invest in CommScope NEXT initiatives. As of September 30, ~~2020,~~2021, approximately ~~49%~~62% of our cash and cash equivalents were held outside the U.S.

Working capital, excluding cash and cash equivalents and the current portion of long-term debt, ~~decreased~~increased during the nine months ended September 30, ~~2020~~2021 primarily due to higher inventory balances as a ~~decrease~~result of rising material costs and increases in ~~accounts receivable due~~stock as we build inventory waiting for certain materials or components to ~~lower sales and favorable collections partially offset by~~complete our products for sale. Partially offsetting the increase in inventory is an increase in ~~inventory.~~ accounts payable due to the timing of payments. In September 2021, we sold approximately $31 million of accounts receivable under customer-sponsored supplier financing agreements. Of that amount, approximately $25 million impacted working capital as of September 30, 2021. Under these agreements, we are able to sell accounts receivable to a bank, and we retain no interest in and have no servicing responsibilities for the accounts receivable sold.

The net reduction in total capitalization during the ~~three and~~ nine months ended September 30, ~~2020~~2021 reflected the net loss for the period and ~~the $224.0 million net reduction in gross debt.~~foreign currency translation losses.

Cash Flow Overview


													Nine Months Ended
													September 30,						$			%
	September 30,						$			%			2021			2020			Change			Change
	2020			2019			Change			Change			(dollars in millions)
Net cash generated by operating activities	$	338.5		$	260.4		$	78.1			30.0	%	$	134.7		$	338.5		$	(203.8	)		(60.2	)%
Net cash used in investing activities		(76.8	)		(5,125.1	)		5,048.3		NM				(111.6	)		(76.8	)		(34.8	)		45.3
Net cash generated by (used in) financing activities		(259.8	)		5,019.7			(5,279.5	)		(105.2	%)
Net cash used in financing activities														(127.7	)		(259.8	)		132.1			(50.8	)

~~NM – Not meaningful~~35

Operating Activities

Nine Months Ended

September 30,

2020

2019

Operating Activities:

Net loss

$
(597.3
)

$
(492.8
)
Adjustments to reconcile net loss to net cash generated by
operating activities:

Depreciation and amortization

618.8

514.5

Equity-based compensation

90.0

58.7

Deferred income taxes

(96.6
)

(172.4
)
Asset impairments

206.7

—

Changes in assets and liabilities:

Accounts receivable

200.9

165.3

Inventories

(130.3
)

356.3

Prepaid expenses and other assets

32.2

63.8

Accounts payable and other liabilities

(25.0
)

(228.0
)
Other

39.1

(5.0
)
Net cash generated by operating activities

$
338.5

$
260.4

During the nine months ended September 30, 2020, operating cash flows increased compared to the prior year period due to the Acquisition, which was included in the prior year period only since April 4, 2019, as well as a year-over-year reduction of $187.8 million in cash paid for transaction and integration costs related to the Acquisition. These increases in cash generation were offset partially by $98.5 million in additional interest paid in the current year period as a result of the Acquisition-related debt as well as $66.2 million paid in the current year period related to patent claims and litigation.

~~Investing Activities~~

Nine Months Ended

September 30,

2020

2019

Investing Activities:

Additions to property, plant and equipment

$
(73.5
)

$
(72.3
)
Proceeds from sale of property, plant and equipment

0.2

1.2

Proceeds from sale of long-term investments

—

9.3

Cash paid for ARRIS acquisition, net of cash acquired

—

(5,053.4
)
Cash paid for Cable Exchange acquisition

(3.5
)

(11.0
)
Other

—

1.1

Net cash used in investing activities

$
(76.8
)

$
(5,125.1
)


	Nine Months Ended
	September 30,
	2021			2020
	(in millions)
Net loss	$	(375.6	)	$	(597.3	)
Adjustments to reconcile net loss to net cash generated by operating activities:
Depreciation and amortization		595.8			618.8
Equity-based compensation		61.0			90.0
Deferred income taxes		(158.1	)		(96.6	)
Asset impairments		—			206.7
Changes in assets and liabilities:
Accounts receivable		(36.2	)		200.9
Inventories		(173.5	)		(130.3	)
Prepaid expenses and other assets		11.0			32.2
Accounts payable and other liabilities		170.5			(25.0	)
Other		39.8			39.1
Net cash generated by operating activities	$	134.7		$	338.5

During the nine months ended September 30, ~~2020,~~2021, operating cash flows decreased compared to the prior year period primarily as a result of increases in working capital in the current year as net sales improved. We participated in a customer-sponsored supplier financing arrangement that favorably impacted operating cash flows by approximately $25 million during the nine months ended September 30, 2021.

Investing Activities


	Nine Months Ended
	September 30,
	2021			2020
	(in millions)
Additions to property, plant and equipment	$	(96.2	)	$	(73.5	)
Proceeds from sale of property, plant and equipment		2.6			0.2
Payments upon settlement of net investment hedge		(18.0	)		—
Cash paid for Cable Exchange acquisition		—			(3.5	)
Net cash used in investing activities	$	(111.6	)	$	(76.8	)

During the nine months ended September 30, 2021, the increase in cash used in investing activities was driven by a payment made to settle a net investment hedge and an increase of $22.7 million in our investment in property, plant and equipment was relatively unchanged despite the incremental time the ARRIS business was owned in the current year, as management intentionally slowed capital spending in light of the economic uncertainty caused by the COVID-19 pandemic. Our investments in property, plant and equipment werethat primarily related to supporting improvements in manufacturing operations, including expanding production capacity and investing in information technology, including software developed for internal use. ~~During~~

Financing Activities


	Nine Months Ended
	September 30,
	2021			2020
	(in millions)
Long-term debt repaid	$	(1,274.0	)	$	(1,174.0	)
Long-term debt proceeds		1,250.0			950.0
Debt issuance costs		(9.6	)		(11.6	)
Debt extinguishment costs		(34.4	)		(14.9	)
Dividends paid on Series A convertible preferred stock		(43.0	)		—
Proceeds from the issuance of common shares under equity-based compensation plans		5.5			1.0
Tax withholding payments for vested equity-based compensation awards		(24.7	)		(10.3	)
Other		2.5			—
Net cash used in financing activities	$	(127.7	)	$	(259.8	)

In August 2021, we issued $1,250.0 million of 4.75% senior secured notes due 2029 (the 2029 Secured Notes) and used the ~~nine months ended September 30, 2020 and 2019, we paid $3.5 million and $11.0 million, respectively, related to our August 2017 acquisition of Cable Exchange. The payment in~~net proceeds from the ~~third quarter 2020 was the final payment related to the Cable Exchange acquisition. During the nine months ended September 30, 2019, we paid $5.1 billion, net of cash acquired, using a combination of~~offering, together with cash on hand, ~~proceeds from~~to redeem and retire $1,250.0 million outstanding under the ~~issuance of long-term debt and proceeds from~~2024 Secured Notes. In connection with the issuance of the ~~Convertible Preferred Stock~~2029 Secured Notes, we paid $9.6 million of debt issuance costs. We paid a redemption premium of $34.4 million to ~~fund~~retire the ~~Acquisition.~~2024 Secured Notes. We also paid three quarterly scheduled amortization payments totaling $24.0 million on the senior secured term loan due in 2026 (the 2026 Term Loan). We may continue to look for favorable opportunities to refinance portions of our existing debt to lower borrowing costs, extent the term or adjust the total amount of fixed-rate or floating-rate debt.

~~Financing Activities~~

Nine Months Ended

September 30,

2020

2019

Financing Activities:

Long-term debt repaid

$
(1,174.0
)

$
(2,753.3
)
Long-term debt proceeds

950.0

6,933.0

Debt issuance costs

(11.6
)

(120.8
)
Debt extinguishment costs

(14.9
)

—

Series A convertible preferred stock proceeds

—

1,000.0

Dividends paid on Series A convertible preferred stock

—

(29.9
)
Proceeds from the issuance of common shares under equity-based
compensation plans

1.0

3.0

Tax withholding payments for vested equity-based compensation
awards

(10.3
)

(12.3
)
Net cash generated by (used in) financing activities

$
(259.8
)

$
5,019.7

In July 2020, we issued $700.0 million of 7.125% senior notes due 2028 (the 2028 Notes) and used the net proceeds from the offering to redeem and retire the $700.0 million outstanding under the 5.00% senior notes due 2021 ~~Notes~~(the 2021 Notes) and the 2024 Notes. We incurred $11.6 million of debt issuance costs in connection with the issuance of the 2028 Notes. Also during the nine months ended September 30, 2020, we borrowed and repaid $250.0 million under ~~the~~our senior secured asset-based revolving credit facility (the Revolving Credit ~~Facility.~~Facility). In addition, we redeemed $100.0 million aggregate principal amount of the 2021 Notes, redeemed $100.0 million aggregate principal amount of the 2025 Notes and paid three quarterly scheduled amortization payments totaling $24.0 million on the 2026 Term Loan. We paid redemption premiums of $11.9 million to retire the 2024 Notes and $3.0 million to partially redeem the 2025 Notes. ~~We may continue to look for favorable opportunities to refinance portions of our existing debt to lower borrowing costs, extend the term or adjust the total amount of fixed or floating-rate debt.~~

During the nine months ended September 30, 2019, we received net proceeds from the acquisition-related debt of approximately $6.9 billion to fund the Acquisition. We repaid $225.0 million of the senior secured term loan due 2022 in the first quarter of 2019 and we repaid the remaining balance of $261.3 million using proceeds from the 2026 Term Loan. As part of funding the Acquisition, we repaid ARRIS’ outstanding debt of $2.1 billion under its senior secured credit facilities. We also borrowed and repaid $15.0 million under the Revolving Credit Facility. In connection with the acquisition-related debt, we paid $120.8 million of debt issuance costs during the nine months ended September 30, 2019.

As of September 30, ~~2020,~~2021, we had no outstanding borrowings under the Revolving Credit Facility and the remaining availability was ~~$733.6~~$686.4 million, reflecting a borrowing base of ~~$763.8~~$731.6 million reduced by ~~$30.2~~$45.2 million of letters of credit issued under the Revolving Credit Facility.

Also impacting cash used in financing activities for the nine months ended September 30, 2021 was the increase of $43.0 million in cash dividends paid for the Convertible Preferred Stock. In the prior year period, the dividends for the Convertible Preferred Stock were paid in additional shares of Convertible Preferred Stock. During the nine months ended September 30, ~~2020,~~2021, we received proceeds of ~~$1.0~~$5.5 million related to the exercise of stock ~~options. Also during~~options compared to $1.0 million in the prior year period. During the nine months ended September 30, ~~2020,~~2021, employees surrendered ~~1.1 million~~ shares of our common stock to satisfy their tax withholding requirements on vested restricted stock units and performance share units, which reduced cash flows by $24.7 million compared to $10.3 ~~million. During~~million in the nine months ended September 30, 2019, we received proceeds of $3.0 million related to the exercise of stock options and employees surrendered 0.6 million shares of our common stock to satisfy their tax withholding requirements on vested restricted stock units and performance share units, which reduced cash flows by $12.3 million.prior year period.

Off-Balance Sheet Arrangements

We were not party to any significant off-balance sheet arrangements during the nine months ended September 30, ~~2020.~~2021.

Reconciliation of Non-GAAP Measures

We believe that presenting certain non-GAAP financial measures enhances an investor’s understanding of our financial performance. We further believe that these financial measures are useful in assessing our operating performance from period to period by excluding certain items that we believe are not representative of our core business. We also use certain of these financial measures for business planning purposes and in measuring our performance relative to that of our competitors.

We believe these financial measures are commonly used by investors to evaluate our performance and that of our competitors. However, our use of the term non-GAAP adjusted EBITDA may vary from that of others in our industry. These financial measures should not be considered as alternatives to operating income (loss), net income (loss) or any other performance measures derived in accordance with U.S. GAAP as measures of operating performance, operating cash flows or liquidity.

We also believe presenting these non-GAAP results for the twelve months ended September 30, ~~2020~~2021 provides an additional tool for assessing our recent performance. Such amounts are unaudited and are derived by subtracting the data for the nine months ended September 30, ~~2019~~2020 from the data for the year ended December 31, ~~2019~~2020 and then adding the data for the nine months ended September 30, ~~2020.~~2021.

Consolidated


	Three Months						Nine Months						Year			Twelve Months
	Ended						Ended						Ended			Ended
	September 30,						September 30,						December 31,			September 30,
	2021			2020			2021			2020			2020			2021
	(in millions)
Net loss	$	(124.2	)	$	(116.3	)	$	(375.6	)	$	(597.3	)	$	(573.4	)	$	(351.7	)
Income tax expense (benefit)		(35.2	)		9.3			(65.3	)		(37.2	)		(81.1	)		(109.2	)
Interest income		(0.5	)		(1.3	)		(1.5	)		(4.2	)		(4.4	)		(1.7	)
Interest expense		148.6			147.2			424.1			437.7			577.8			564.2
Other expense, net		32.3			16.9			29.8			30.2			29.3			28.9
Operating income (loss)	$	21.0		$	55.8		$	11.5		$	(170.8	)	$	(51.8	)	$	130.5
Adjustments:
Amortization of purchased intangible assets		153.0			158.1			461.9			473.5			630.5			618.9
Restructuring costs (credits), net		(3.1	)		40.3			100.2			83.6			88.4			105.0
Equity-based compensation		21.0			34.0			61.0			90.0			115.0			86.0
Asset impairments		—			—			—			206.7			206.7			—
Transaction, transformation and integration costs (1)		26.2			4.8			62.7			17.8			24.9			69.8
Acquisition accounting adjustments (2)		2.8			5.1			9.0			15.8			20.6			13.8
Patent claims and litigation settlements		5.0			(1.4	)		46.5			11.4			16.3			51.4
Executive severance		—			6.3			—			6.3			6.3			—
Depreciation		33.2			38.9			103.6			118.7			158.3			143.2
Non-GAAP adjusted EBITDA	$	259.1		$	341.9		$	856.4		$	853.0		$	1,215.2		$	1,218.6

Three Months

Nine Months

Year

Twelve Months

Ended

Ended

Ended

Ended

September 30,

September 30,

December 31,

September 30,

2020

2019

2020

2019

2019

2020

Net loss

$
(116.3
)

$
(156.5
)

$
(597.3
)

$
(492.8
)

$
(929.5
)

$
(1,034.0
)
Income tax expense (benefit)

9.3

(51.7
)

(37.2
)

(87.6
)

(144.5
)

(94.1
)
Interest income

(1.3
)

(1.8
)

(4.2
)

(15.9
)

(18.1
)

(6.4
)
Interest expense

147.2

160.7

437.7

423.5

577.2

591.4

Other expense (income), net

16.9

(1.5
)

30.2

3.6

6.4

33.0

Operating income (loss)

$
55.8

$
(50.8
)

$
(170.8
)

$
(169.2
)

$
(508.5
)

$
(510.1
)
Adjustments:

Amortization of purchased
intangible assets

158.1

163.9

473.5

387.3

593.2

679.4

Restructuring costs, net

40.3

19.5

83.6

78.3

87.7

93.0

Equity-based compensation

34.0

28.0

90.0

58.7

90.8

122.1

Asset impairments

—

—

206.7

—

376.1

582.8

Transaction and integration
costs ⁽¹⁾

4.8

2.2

17.8

189.8

195.3

23.3

Acquisition accounting adjustments ⁽²⁾

5.1

108.7

15.8

272.9

264.2

7.1

Patent claims and litigation

(1.4
)

55.0

11.4

55.0

55.0

11.4

Executive severance

6.3

—

6.3

—

—

6.3

Depreciation

38.9

43.3

118.7

101.0

143.7

161.4

Non-GAAP adjusted EBITDA

$
341.9

$
369.8

$
853.0

$
973.8

$
1,297.5

$
1,176.7

(1)

In 2021, primarily reflects transaction separation costs related to the planned spin-off of the Home Networks business, transformation costs related to CommScope NEXT and integration costs related to the ARRIS acquisition. In 2020, primarily reflects integration costs related to the ARRIS acquisition.

(2)

In 2021 and 2020, reflects acquisition accounting adjustments related to reducing deferred revenue to its estimated fair value.

~~(1)~~

~~In 2020 and 2019, primarily reflects transaction and integration costs related to the Acquisition.~~

~~(2)~~

For the three and nine months ended September 30, 2020, reflects acquisition accounting adjustments related to reducing deferred revenue to its estimated fair value. For the three and nine months ended September 30, 2019, reflects acquisition accounting adjustments of $94.9 million and $240.7 million, respectively, related to the mark up of inventory to its estimated fair value and acquisition accounting adjustments of $13.8 million $32.2 million, respectively, related to reducing deferred revenue to its estimated fair value. For the year ended December 31, 2019, reflects acquisition accounting adjustments of $218.8 million related to the mark up of inventory to its estimated fair value and acquisition accounting adjustments of $45.4 million related to reducing deferred revenue to its estimated fair value.

Note: Components may not sum to total due to rounding.

Reconciliation of Segment Adjusted EBITDA

Segment adjusted EBITDA is provided as a performance measure in Note 97 in the Notes to Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q. Below we reconcile segment adjusted EBITDA for each segment individually to operating income (loss) for that segment to supplement the reconciliation of the total segment adjusted EBITDA to consolidated operating ~~income~~loss in that footnote.

Broadband Networks Segment

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2019

2020

2019

Operating income (loss)

$
76.7

$
(13.0
)

$
67.5

$
(180.2
)
Adjustments:

Amortization of purchased intangible assets

81.2

72.0

243.4

160.1

Restructuring costs, net

11.7

5.6

16.9

31.8

Equity-based compensation

13.1

11.2

34.7

22.5

Transaction and integration costs

1.7

2.0

6.1

118.3

Acquisition accounting adjustments

2.8

57.7

8.6

137.7

Patent claims and litigation

—

—

3.0

—

Executive severance

2.2

—

2.2

—

Depreciation

14.8

17.7

44.8

39.4

Adjusted EBITDA

$
204.2

$
153.5

$
427.2

$
329.6

~~Home Networks Segment~~

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019			Three Months Ended September 30,					Nine Months Ended September 30,
Operating income (loss)	$	(3.7	)	$	3.8		$	(281.0	)	$	(21.2	)
													2021			2020		2021		2020
													(in millions)
Operating income													$	50.8		$	75.0	$	70.0	$	55.8
Adjustments:
Amortization of purchased intangible assets		26.0			33.7			77.9			67.4			80.5			81.2		241.9		243.4
Restructuring costs, net		3.8			6.8			28.0			21.9
Restructuring costs (credits), net														(3.6	)		11.7		69.6		16.9
Equity-based compensation		6.5			4.9			17.3			8.5			8.6			13.1		25.0		34.7
Asset impairments		—			—			206.7			—
Transaction and integration costs		0.9			(3.5	)		3.2			(2.3	)
Transaction, transformation and integration costs														6.4			1.7		15.4		6.1
Acquisition accounting adjustments		0.5			3.3			1.4			27.3			1.2			2.8		3.6		8.6
Patent claims and litigation		(15.1	)		—			(5.3	)		—
Patent claims and litigation settlements														—			—		20.0		3.0
Executive severance		1.2			—			1.2			—			—			2.2		—		2.2
Depreciation		8.3			10.7			26.3			20.1			14.1			14.6		42.8		44.2
Adjusted EBITDA	$	28.5		$	59.7		$	75.8		$	121.8		$	158.1		$	202.3	$	488.3	$	414.9

Outdoor Wireless Networks Segment

	Three Months Ended September 30,					Nine Months Ended September 30,
	2020		2019			2020		2019		Three Months Ended September 30,				Nine Months Ended September 30,
Operating income (loss)	$	26.0	$	(2.2	)	$	146.5	$	173.2
										2021		2020		2021		2020
										(in millions)
Operating income										$	43.2	$	26.0	$	158.4	$	146.5
Adjustments:
Amortization of purchased intangible assets		11.4		12.2			34.4		37.4		8.2		11.4		25.3		34.4
Restructuring costs, net		5.9		1.1			9.8		6.9		0.4		5.9		6.6		9.8
Equity-based compensation		4.0		3.5			10.6		9.2		2.2		4.0		6.3		10.6
Transaction and integration costs		0.9		1.4			3.2		17.7
Patent claims and litigation		—		55.0			—		55.0
Transaction, transformation and integration costs											2.7		0.9		6.4		3.2
Executive severance		1.2		—			1.2		—		—		1.2		—		1.2
Depreciation		4.1		4.3			12.7		13.2		3.8		4.1		11.4		12.7
Adjusted EBITDA	$	53.6	$	75.3		$	218.4	$	312.6	$	60.5	$	53.6	$	214.4	$	218.4

Venue and Campus Networks Segment


													Three Months Ended September 30,						Nine Months Ended September 30,
	Three Months Ended September 30,						Nine Months Ended September 30,						2021			2020			2021				2020
	2020			2019			2020			2019			(in millions)
Operating loss	$	(43.2	)	$	(39.4	)	$	(103.8	)	$	(141.0	)	$	(4.6	)	$	(43.2	)	$	(63.6	)		$	(103.8	)
Adjustments:
Amortization of purchased intangible assets		39.6			45.8			117.9			122.4			38.3			39.6			116.9				117.9
Restructuring costs, net		18.9			5.9			29.0			17.7
Restructuring costs (credits), net														(0.1	)		18.9			16.0				29.0
Equity-based compensation		10.3			8.4			27.4			18.5			6.7			10.3			19.5				27.4
Transaction and integration costs		1.3			2.2			5.3			56.2
Transaction, transformation and integration costs														4.3			1.3			10.4				5.3
Acquisition accounting adjustments		1.7			47.8			5.7			107.8			1.0			1.7			3.9		��		5.7
Patent claims and litigation	��	13.7			—			13.7			—
Patent claims and litigation settlements														—			13.7			0.3				13.7
Executive severance		1.7			—			1.7			—			—			1.7			—				1.7
Depreciation		11.7			10.6			34.9			28.3			10.3			11.7			31.8				34.9
Adjusted EBITDA	$	55.6		$	81.3		$	131.6		$	209.8		$	56.0		$	55.6		$	135.1			$	131.6

Home Networks Segment


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
	(in millions)
Operating loss	$	(68.4	)	$	(2.0	)	$	(153.5	)	$	(269.3	)
Adjustments:
Amortization of purchased intangible assets		26.0			26.0			77.9			77.9
Restructuring costs, net		0.2			3.8			8.0			27.9
Equity-based compensation		3.5			6.5			10.2			17.3
Asset impairments		—			—			—			206.7
Transaction, transformation and integration costs		12.8			0.9			30.5			3.2
Acquisition accounting adjustments		0.5			0.5			1.4			1.4
Patent claims and litigation settlements		5.0			(15.1	)		26.2			(5.3	)
Executive severance		—			1.2			—			1.2
Depreciation		5.0			8.5			17.6			26.9
Adjusted EBITDA	$	(15.5	)	$	30.4		$	18.6		$	88.1

Note: Components may not sum to total due to rounding.

~~Contractual Obligations~~

FORWARD-LOOKING STATEMENTS

During 2020, the Company redeemed $150.0 million aggregate principal amount of the 2021 Notes, $650.0 million aggregate principal amount of the 2024 Notes and $100.0 million aggregate principal amount of the 2025 Notes. Also during 2020, the Company issued $700.0 million of the 2028 Notes.

Amount of Payments Due per Period

Contractual Obligations

Total
Payments Due

Remainder of 2020

2021-2022

2023-2024

Thereafter

(in millions)

Long-term debt, including current
maturities (a)

$
9,768.0

$
8.0

$
64.0

$
1,314.0

$
8,382.0

Interest on long-term debt (a)(b)

2,939.2

71.6

1,053.8

1,014.3

799.5

Operating leases

222.6

20.1

116.6

61.3

24.6

Purchase obligations and other supplier agreements (c)

320.5

262.4

58.1

—

—

Pension and other postretirement
benefit liabilities (d)

6.0

3.3

0.8

0.7

1.2

Restructuring costs, net (e)

41.2

17.3

23.9

—

—

Patent claims and litigation settlements (f)

39.8

39.8

—

—

—

Unrecognized tax benefits (g)

—

—

—

—

—

Total contractual obligations

$
13,337.3

$
422.5

$
1,317.2

$
2,390.3

$
9,207.3

~~(a)~~

No other prepayment or redemption of any of our long-term debt balances has been assumed. Refer to Note 7 in the Notes to Unaudited Condensed Consolidated Financial Statements included in this Form 10-Q and Note 8 in the Notes to Consolidated Financial Statements included in our 2019 Annual Report for information regarding the terms of our long-term debt agreements.

~~(b)~~

~~Interest on long-term debt excludes the amortization of debt issuance costs and original issue discount. Interest on variable rate debt is estimated based upon rates in effect at September 30, 2020.~~

~~(c)~~

Purchase obligations and other supplier agreements include $309.6 million related to obligations, primarily to our contract manufacturers, with non-cancelable terms to purchase goods or services, and payments of $10.9 million for minimum amounts owed under take-or-pay or requirements contracts. Generally, amounts covered by open purchase orders, other than the portion that is non-cancelable as disclosed above, are excluded as there is no contractual obligation until goods or services are received.

~~(d)~~

Amounts reflect expected contributions related to payments under the postretirement benefit plans through 2029 and expected pension contributions of $3.2 million during the remainder of 2020 (see Note 12 in the Notes to Consolidated Financial Statements included in our 2019 Annual Report).

~~(e)~~

~~Future restructuring payments exclude payments due under lease arrangements which are included in operating leases above.~~

~~(f)~~

~~Amount reflects the settlements of certain intellectual property assertions.~~

~~(g)~~

Due to the uncertainty in predicting the timing of tax payments related to our unrecognized tax benefits, $156.5 million has been excluded from the presentation. We anticipate a reduction of up to $4.9 million of unrecognized tax benefits during the remainder of 2020 (see Note 13 in the Notes to Consolidated Financial Statements included in our 2019 Annual Report).

~~FORWARD-LOOKING STATEMENTS~~

This Quarterly Report on Form 10-Q or any other oral or written statements made by us or on our behalf may include forward-looking statements that reflect our current views with respect to future events and financial performance. These statements may discuss goals, intentions or expectations as to future plans, trends, events, results of operations or financial condition or otherwise, in each case, based on current beliefs and expectations of management, as well as assumptions made by, and information currently available to, ~~such~~ management. These forward-looking statements are generally identified by their use of such terms and phrases as “intend,” “goal,” “estimate,” “expect,” “project,” “projections,” “plans,” “potential,” “anticipate,” “should,” “could,” “designed to,” “foreseeable future,” “believe,” “think,” “scheduled,” “outlook,” “target,” “guidance” and similar expressions, although not all forward-looking statements contain such terms. This list of indicative terms and phrases is not intended to be all-inclusive.

These forward-looking statements are subject to various risks and uncertainties, many of which are outside our control, including, without limitation, risks related to the ~~ARRIS acquisition (including risks associated with the integration~~planned spin-off of the Home Networks business, including uncertainty regarding whether such transaction will be commenced or completed and ~~systems~~the timing and value of such transaction; risks related to the potential separation of the Home Networks business; our ability to integrate and fully realize anticipated benefits from prior or future divestitures, acquisitions or equity investments; selling or discontinuing one or more of our product lines; potential difficulties in realigning global manufacturing capacity and capabilities among our global manufacturing facilities or those of our contract manufacturers that we may ~~not realize estimated cost savings, synergies, growth or other anticipated benefits);~~affect our ability to meet customer demands for products; possible future restructuring actions; our dependence on customers’ capital spending on data and communication systems; concentration of sales among a limited number of customers and channel partners; changes in technology; ~~the scope, duration and impact of disease outbreaks and pandemics, such as COVID-19, on our business including employees, sites, operations, customers and supply chain;~~ industry competition and the ability to retain customers through product innovation, introduction, and marketing; risks associated with our sales through channel partners; changes to the regulatory environment in which we and our customers operate; product quality or performance issues and associated warranty claims; our ability to maintain effective management information technology systems and to successfully implement major systems initiatives; cyber-security incidents, including data security breaches, ransomware or computer viruses; the risk our global manufacturing operations suffer production or shipping delays, causing difficulty in meeting customer demands; the risk that internal production capacity or that of contract manufacturers may be insufficient to meet customer demand or quality standards; the use of open standards; the long-term impact of climate change; changes in cost and availability of key raw materials, components and commodities and the potential effect on customer pricing; risks associated with our dependence on a limited number of key suppliers for certain raw materials and components; the risk that contract manufacturers we rely on encounter production, quality, financial or other difficulties; our ability to integrate and fully realize anticipated benefits from prior or future divestitures, acquisitions or equity investments; potential difficulties in realigning global manufacturing capacity and capabilities among our global manufacturing facilities or those of our contract manufacturers that may affect our ability to meet customer demands for products; possible future restructuring actions; substantial indebtedness and restrictive debt covenants; our ability to incur additional indebtedness; our ability to generate cash to service our indebtedness; possible future impairment charges for fixed or intangible assets, including goodwill; income tax rate variability and ability to recover amounts recorded as deferred tax assets; our ability to attract and retain qualified key employees; labor unrest; obligations under our defined benefit employee benefit plans requiring plan contributions in excess of current estimates; significant international operations exposing us to economic, political and other risks, including the impact of variability in foreign exchange rates; our ability to comply with governmental anti-corruption laws and regulations and export and import controls worldwide; our ability to compete in international markets due to export and import controls to which we may be subject; ~~the impact of Brexit;~~ changes in the laws and policies in the United States affecting trade, including the risk and uncertainty related to tariffs or a potential global trade war and potential changes to laws and policies as a result of a new administration in the United States, that may impact our products; cost of protecting or defending intellectual property; costs and challenges of compliance with domestic and foreign environmental laws; the impact of litigation and similar regulatory proceedings that we are involved in or may become involved in, including the costs of such litigation; the scope, duration and impact of disease outbreaks and pandemics, such as COVID-19, on our business including employees, sites, operations, customers, supply chain and the global economy; risks associated with stockholder activism, which could cause us to incur significant expense, hinder execution of our business strategy and impact the trading value of our securities; and other factors beyond our control. These and other factors are discussed in greater detail in our ~~2019~~2020 Annual Report on Form 10-K and in Part II, Item 1A, “Risk Factors” of our Quarterly Report on Form 10-Q for the quarter ended March 31, ~~2020~~2021 and may be updated from time to time in our annual reports, quarterly reports, current reports and other filings we make with the Securities and Exchange Commission. Although the information contained in this Quarterly Report on Form 10-Q represents our best judgment as of the date of this report based on information currently available and reasonable assumptions, we can give no assurance that the expectations will be attained or that any deviation will not be material. Given these uncertainties, we caution you not to place undue reliance on these forward-looking statements, which speak only as of the date made. We are not undertaking any duty or obligation to update this information to reflect developments or information obtained after the date of this report, except as otherwise may be required by law.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~Other than the changes disclosed below, there~~There have been no material changes in the interest rate risk, commodity price risk or foreign currency exchange rate risk information previously reported under Item 7A of our ~~2019~~2020 Annual Report, as filed with the SEC on February ~~20, 2020.~~

~~Interest Rate Risk~~17, 2021.

The table below summarizes the expected interest and principal payments associated with our variable rate debt outstanding at September 30, 2020 (mainly the $3.2 billion variable rate term loan and asset-based revolving credit facility). The principal payments presented below are based on scheduled maturities and assume no borrowings under the existing revolving credit facility. The interest payments presented below assume the interest rate in effect at September 30, 2020. The impact of a 1% increase in the interest rate index on projected future interest payments on the variable rate debt is also included in the table below.

Remainder of 2020

2021

2022

2023

2024

There-
after

Principal and interest payments
on variable rate debt

$
37.6

$
146.9

$
145.7

$
144.6

$
142.8

$
3,154.9

Average cash interest rate

3.74
%

3.65
%

3.65
%

3.66
%

3.64
%

3.63
%
Impact of 1% increase in interest rate index

$
7.9

$
31.4

$
31.1

$
30.8

$
30.5

$
33.9

We also have $6.6 billion aggregate principal amount of fixed rate senior notes. The table below summarizes our expected interest and principal payments related to our fixed rate debt at September 30, 2020.41

Remainder of 2020

2021

2022

2023

2024

There-
after

Principal and interest payments
on fixed rate debt

$
42.0

$
412.6

$
412.6

$
412.6

$
1,628.3

$
6,026.6

Average cash interest rate

6.25
%

6.25
%

6.25
%

6.25
%

6.33
%

6.83
%

As part of our hedging strategy to mitigate a portion of the exposure to changes in cash flows resulting from the variable interest rate on the 2026 Term Loan, in March 2019, we entered into and designated pay-fixed, receive-variable interest rate swap derivatives as cash flow hedges of interest rate risk. The total notional amount of the interest rate swap derivatives as of September 30, 2020 was $600.0 million with outstanding maturities of up to forty-two months. As of September 30, 2020, the combined fair value of the interest rate swaps was a $33.8 million loss. The table above excludes the impact of these interest rate swap derivatives.

~~Foreign Currency Risk~~

We hold certain foreign exchange forward contracts and cross currency swaps, with outstanding maturities of up to nine months, that are designated as net investment hedges and are intended to mitigate a portion of the foreign currency risk on the Euro net investment in a foreign subsidiary. As of September 30, 2020, the notional value of these derivative contracts was $300.0 million and the unrealized loss on the contracts was $6.3 million.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting

Reference should be made to our 2020 Annual Report for additional information regarding discussion of the effectiveness of the Company’s controls and procedures. There have been no other changes in ~~the Company’s~~our internal control over financial reporting during the quarter ended September 30, ~~2020~~ 2021 that have materially affected, or are reasonably likely to materially affect, ~~the Company’s~~our internal control over financial reporting.

PART II—OTHER INFORMATION

ITEM 1. 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, 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~~The outcome of ~~the~~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 ~~an adverse outcome~~or is estimated at the minimum amount of a range of estimates. The actual loss could ~~result in a~~be material ~~loss.~~and may vary significantly from our estimates.

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 pending legal matters will have a material adverse effect on the Company’s business or financial condition upon final disposition.

ITEM 1A. RISK FACTORS

The ~~Company's~~Company’s business, financial condition, results of operations and cash flows are subject to various risks which could cause actual results to vary from recent results or from anticipated future results. Other than the supplemental risk factor previously reported in Item 1A of our Quarterly Report on Form 10-Q for the quarter ended March 31, ~~2020~~2021, which ~~risk factor~~ is incorporated herein by ~~this~~ reference, there have been no material changes to our risk factors disclosed in Part I - Item 1A, Risk Factors, of our Form 10-K for the year ended December 31, ~~2019.~~2020.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Recent Sales of Unregistered Securities:

None.

Issuer Purchases of Equity Securities:

The following table summarizes the stock purchase activity for the three months ended September 30, ~~2020:~~2021:

Period

Total Number of Shares Purchased ⁽¹⁾

Average Price Paid Per Share

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

Maximum Value of Shares that May Yet be Purchased Under the Plans or Programs

July 1, 2020 - July 31, 2020

406,107

$
8.14

—

$
—

August 1, 2020 - August 31, 2020

65,715

$
9.60

—

$
—

September 1, 2020 -September 30, 2020

4,709

$
10.47

—

$
—

Total

476,531

$
8.36

—


Period	Total Number of Shares Purchased (1)		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Value of Shares that May Yet be Purchased Under the Plans or Programs
July 1, 2021 - July 31, 2021		593		21.58		—	$	—
August 1, 2021 - August 31, 2021		1,385		20.05		—		—
September 1, 2021 - September 30, 2021		2,381		14.94		—		—
Total		4,359	$	17.47		—

(1) The shares purchased were withheld to satisfy the withholding tax obligations related to restricted stock units and performance share units that vested during the period.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS


~~4.1~~3.1**	Fifth Amended and Restated By-Laws of CommScope Holding Company, Inc. (as adopted May 7, 2021).
4.1*	Indenture, dated as of ~~July 1, 2020,~~August 23, 2021, by and ~~between~~among CommScope, Inc., the ~~Issuer~~guarantors party thereto and Wilmington Trust, National Association, as trustee and collateral agent, including the form of ~~7.125%~~4.750% Senior Secured Note due ~~2028~~2029 (incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K (File No. 001-36146), filed with the SEC on ~~July 2, 2020)~~August 23, 2021).
10.1 **10.1	~~Employment~~Separation Agreement, dated ~~October 1, 2020,~~August 10, 2021, by and between ~~Charles L. Treadway~~Morgan C.S. Kurk and CommScope, Inc. (incorporated by reference to Exhibit ~~10.1 of~~10.1of the Registrant’s Current Report on Form 8-K (File No. 001-36146), filed with the SEC on ~~October 1, 2020)~~August 10, 2021).
10.2 ***	Form of Restricted Stock Unit Award Certificate (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K (File No. 001-36146), filed with the SEC on October 1, 2020).
10.3 ***	Form of Performance Share Unit Award Certificate (incorporated by reference to Exhibit 10.3 of the Registrant’s Current Report on Form 8-K (File No. 001-36146), filed with the SEC on October 1, 2020).
10.4 ***	Employment Agreement, dated October 1, 2020, by and between Claudius E. Watts IV and CommScope, Inc (incorporated by reference to Exhibit 10.4 of the Registrant’s Current Report on Form 8-K (File No. 001-36146), filed with the SEC on October 1, 2020).
31.1 **	Certification of Principal Executive Officer pursuant to Rule 13a-14(a).
31.2 **	Certification of Principal Financial Officer pursuant to Rule 13a-14(a).
32.1 **	Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished pursuant to Item 601(b)(32)(ii) of Regulation S-K).
101.INS	Inline XBRL Instance Document – The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCH	Inline XBRL Schema Document, furnished herewith.
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104	Cover Page Interactive Data File (embedded within the Inline XBRL document).
**	~~Filed herewith.~~Previously filed.
***	~~Management contract or compensatory plan or arrangement.~~Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	COMMSCOPE HOLDING COMPANY, INC.

November ~~4, 2020~~3, 2021	/s/ ~~Alexander W. Pease~~Kyle D. Lorentzen
Date	~~Alexander W. Pease~~Kyle D. Lorentzen
	Executive Vice President and Chief Financial Officer
	(Principal Financial Officer and duly authorized officer)


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 (Deficit)		6

Notes to Unaudited Condensed Consolidated Financial Statements		7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		2825

Item 3. Quantitative and Qualitative Disclosures About Market Risk		4741

Item 4. Controls and Procedures		4842

Part II—Other Information:

Item 1. Legal Proceedings		4943

Item 1A. Risk Factors		4943

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		4943

Item 3. Defaults Upon Senior Securities		4943

Item 4. Mine Safety Disclosures		4943

Item 5. Other Information		4943

Item 6. Exhibits		5044

Signatures		5145


	Unaudited September 30, 2021			December 31, 2020
Assets
Cash and cash equivalents	$	411.5		$	521.9
Accounts receivable, less allowance for doubtful accounts of $45.6 and $40.3, respectively		1,506.2			1,487.4
Inventories, net		1,252.2			1,088.9
Prepaid expenses and other current assets		268.6			256.3
Total current assets		3,438.5			3,354.5
Property, plant and equipment, net of accumulated depreciation of $775.1 and $705.7, respectively		664.6			684.5
Goodwill		5,253.7			5,286.5
Other intangible assets, net		3,179.9			3,650.4
Other noncurrent assets		715.3			600.9
Total assets	$	13,252.0		$	13,576.8
Liabilities and Stockholders' Equity (Deficit)
Accounts payable	$	1,170.1		$	1,010.8
Accrued and other liabilities		884.6			910.6
Current portion of long-term debt		32.0			32.0
Total current liabilities		2,086.7			1,953.4
Long-term debt		9,481.0			9,488.6
Deferred income taxes		199.1			206.2
Other noncurrent liabilities		526.8			531.8
Total liabilities		12,293.6			12,180.0
Commitments and contingencies
Series A convertible preferred stock, $0.01 par value		1,041.8			1,041.8
Stockholders' equity (deficit):
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: 204,247,592 and 200,095,232, respectively		2.2			2.1
Additional paid-in capital		2,536.3			2,512.9
Accumulated deficit		(2,128.3	)		(1,752.7	)
Accumulated other comprehensive loss		(217.5	)		(155.9	)
Treasury stock, at cost: 10,838,972 shares and 9,223,081 shares, respectively		(276.1	)		(251.4	)
Total stockholders' equity (deficit)		(83.4	)		355.0
Total liabilities and stockholders' equity (deficit)	$	13,252.0		$	13,576.8


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Number of common shares outstanding:
Balance at beginning of period		204,154,201			195,997,230			200,095,232			194,563,530
Issuance of shares under equity-based compensation plans		97,750			1,469,968			5,768,251			3,513,837
Shares surrendered under equity-based compensation plans		(4,359	)		(476,531	)		(1,615,891	)		(1,086,700	)
Balance at end of period		204,247,592			196,990,667			204,247,592			196,990,667
Common stock:
Balance at beginning and end of period	$	2.1		$	2.0		$	2.1		$	2.0
Issuance of shares under equity-based compensation plans		0.1			0.1			0.1			0.1
Balance at end of period	$	2.2		$	2.1		$	2.2		$	2.1
Additional paid-in capital:
Balance at beginning of period	$	2,528.1		$	2,474.3		$	2,512.9		$	2,445.1
Issuance of shares under equity-based compensation plans		1.5			—			5.4			0.9
Equity-based compensation		21.0			34.0			61.0			90.0
Dividend on Series A convertible preferred stock		(14.3	)		(14.1	)		(43.0	)		(41.8	)
Balance at end of period	$	2,536.3		$	2,494.2		$	2,536.3		$	2,494.2
Accumulated deficit:
Balance at beginning of period	$	(2,004.1	)	$	(1,660.3	)	$	(1,752.7	)	$	(1,179.3	)
Net loss		(124.2	)		(116.3	)		(375.6	)		(597.3	)
Balance at end of period	$	(2,128.3	)	$	(1,776.6	)	$	(2,128.3	)	$	(1,776.6	)
Accumulated other comprehensive loss:
Balance at beginning of period	$	(181.2	)	$	(275.4	)	$	(155.9	)	$	(197.0	)
Other comprehensive income (loss), net of tax		(36.3	)		54.6			(61.6	)		(23.8	)
Balance at end of period	$	(217.5	)	$	(220.8	)	$	(217.5	)	$	(220.8	)
Treasury stock, at cost:
Balance at beginning of period	$	(276.0	)	$	(240.8	)	$	(251.4	)	$	(234.5	)
Net shares surrendered under equity-based compensation plans		(0.1	)		(4.0	)		(24.7	)		(10.3	)
Balance at end of period	$	(276.1	)	$	(244.8	)	$	(276.1	)	$	(244.8	)
Total stockholders' equity (deficit)	$	(83.4	)	$	254.1		$	(83.4	)	$	254.1

See notes to unaudited condensed consolidated financial statements.

	Unaudited
	September 30, 2020			December 31, 2019
Assets
Cash and cash equivalents	$	582.8		$	598.2
Accounts receivable, less allowance for doubtful accounts of $43.1 and $35.4, respectively		1,497.2			1,698.8
Inventories, net		1,104.5			975.9
Prepaid expenses and other current assets		230.9			238.9
Total current assets		3,415.4			3,511.8
Property, plant and equipment, net of accumulated depreciation of $665.5 and $553.8, respectively		673.3			723.8
Goodwill		5,254.1			5,471.7
Other intangible assets, net		3,795.5			4,263.6
Other noncurrent assets		562.7			460.7
Total assets	$	13,701.0		$	14,431.6
Liabilities and Stockholders' Equity
Accounts payable	$	1,147.3		$	1,148.0
Accrued and other liabilities		878.3			862.0
Current portion of long-term debt		32.0			32.0
Total current liabilities		2,057.6			2,042.0
Long-term debt		9,589.3			9,800.4
Deferred income taxes		217.7			215.1
Other noncurrent liabilities		540.5			537.8
Total liabilities		12,405.1			12,595.3
Commitments and contingencies
Series A convertible preferred stock, $0.01 par value		1,041.8			1,000.0
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: 196,990,667 and 194,563,530,
respectively		2.1			2.0
Additional paid-in capital		2,494.2			2,445.1
Retained earnings (accumulated deficit)		(1,776.6	)		(1,179.3	)
Accumulated other comprehensive loss		(220.8	)		(197.0	)
Treasury stock, at cost: 8,498,082 shares and 7,411,382 shares,
respectively		(244.8	)		(234.5	)
Total stockholders' equity		254.1			836.3
Total liabilities and stockholders' equity	$	13,701.0		$	14,431.6


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


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


Large accelerated filer	☒	Accelerated filer		☐

~~Non-accelerated filer~~	☐		~~Smaller reporting company~~		☐
Non-accelerated filer	☐	Smaller reporting company		☐

		Emerging growth company		☐

	Operating Leases
Remainder of 2020	$	20.1
2021		69.9
2022		46.7
2023		36.1
2024		25.2
Thereafter		24.6
Total minimum lease payments	$	222.6
Less: imputed interest		(30.2	)
Total	$	192.4

	Employee- Related Costs			Other Associated Costs			Total
Balance at June 30, 2020	$	25.5		$	1.7		$	27.2
Additional charge recorded		37.1			3.2			40.3
Cash paid		(23.5	)		(1.3	)		(24.8	)
Non-cash items		—			(2.6	)		(2.6	)
Balance at September 30, 2020	$	39.1		$	1.0		$	40.1

Balance at December 31, 2019	$	23.1		$	2.0		$	25.1
Additional charge recorded		80.1			3.5			83.6
Cash paid		(64.1	)		(1.6	)		(65.7	)
Non-cash items		—			(2.9	)		(2.9	)
Balance at September 30, 2020	$	39.1		$	1.0		$	40.1

	Three Months Ended			Nine Months Ended
	September 30, 2019			September 30, 2019
Expected option term (in years)		6.4			6.3
Risk-free interest rate		1.6	%		2.2	%
Expected volatility		40.0	%		40.0	%
Weighted average exercise price	$	12.20		$	18.47
Weighted average fair value at grant date	$	5.21		$	8.00

			Amount of Payments Due per Period
Contractual Obligations	Total Payments Due		Remainder of 2020		2021-2022		2023-2024		Thereafter
	(in millions)
Long-term debt, including current maturities (a)	$	9,768.0	$	8.0	$	64.0	$	1,314.0	$	8,382.0
Interest on long-term debt (a)(b)		2,939.2		71.6		1,053.8		1,014.3		799.5
Operating leases		222.6		20.1		116.6		61.3		24.6
Purchase obligations and other supplier agreements (c)		320.5		262.4		58.1		—		—
Pension and other postretirement benefit liabilities (d)		6.0		3.3		0.8		0.7		1.2
Restructuring costs, net (e)		41.2		17.3		23.9		—		—
Patent claims and litigation settlements (f)		39.8		39.8		—		—		—
Unrecognized tax benefits (g)		—		—		—		—		—
Total contractual obligations	$	13,337.3	$	422.5	$	1,317.2	$	2,390.3	$	9,207.3

Period	Total Number of Shares Purchased ⁽¹⁾		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Value of Shares that May Yet be Purchased Under the Plans or Programs
July 1, 2020 - July 31, 2020		406,107	$	8.14		—	$	—
August 1, 2020 - August 31, 2020		65,715	$	9.60		—	$	—
September 1, 2020 -September 30, 2020		4,709	$	10.47		—	$	—
Total		476,531	$	8.36		—