Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________
FORM 10-Q
____________________________________
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x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2017
OR
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o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period to
Commission File Number 001-16441
____________________________________
CROWN CASTLE INTERNATIONAL CORP.
(Exact name of registrant as specified in its charter)
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| |
Delaware | 76-0470458 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| |
1220 Augusta Drive, Suite 600, Houston, Texas 77057-2261 (Address of principal executives office) (Zip Code) |
(713) 570-3000 (Registrant's telephone number, including area code) |
____________________________________
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 x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x No o
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.
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| | | | | | |
| Large accelerated filer | x | | Accelerated filer | o | |
| Non-accelerated filer | o | (Do not check if a smaller reporting company) | Smaller reporting company | o | |
| | | | Emerging growth company | o | |
| 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. o | |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
Number of shares of common stock outstanding at August 4, 2017: 406,267,208
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
INDEX
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ITEM 1. | | | |
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ITEM 2. | | | |
ITEM 3. | | | |
ITEM 4. | | | |
| | |
ITEM 1. | LEGAL PROCEEDINGS | | |
ITEM 1A. | | | |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | | |
ITEM 6. | | | |
EXHIBIT INDEX | | |
SIGNATURES | | |
Cautionary Language Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q ("Form 10-Q") contains forward-looking statements that are based on our management's expectations as of the filing date of this report with the Securities and Exchange Commission ("SEC"). Statements that are not historical facts are hereby identified as forward-looking statements. In addition, words such as "estimate," "anticipate," "project," "plan," "intend," "believe," "expect," "likely," "predicted," "positioned," any variations of these words and similar expressions are intended to identify forward-looking statements. Such statements include plans, projections and estimates contained in "Part I—Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" ("MD&A") and "Part I—Item 3. Quantitative and Qualitative Disclosures About Market Risk" herein. Such forward-looking statements include (1) expectations regarding anticipated growth in the wireless industry, carriers' investments in their networks, tenant additions, customer consolidation or ownership changes, or demand for our wireless infrastructure, (2) expectations regarding non-renewals of tenant leases (including the impact of our customers' decommissioning of the former Leap Wireless, MetroPCS and Clearwire networks (collectively, "Acquired Networks")), (3) availability and adequacy of cash flows and liquidity for, or plans regarding, future discretionary investments including capital expenditures, (4) potential benefits of our discretionary investments, including acquisitions, (5) anticipated growth in our financial results, including future revenues, margins, Adjusted EBITDA, segment site rental gross margin, segment network services and other gross margin, segment operating profit, and operating cash flows, (6) expectations regarding our capital structure and the credit markets, our availability and cost of capital, or our ability to service our debt and comply with debt covenants and the benefits of any future refinancings, (7) expectations related to remaining qualified as a real estate investment trust ("REIT") and the advantages, benefits or impact of, or opportunities created by, our REIT status, (8) the realization and utilization of our net operating loss carryforwards ("NOLs"), (9) our dividend policy and the timing, amount, growth or tax characterization of any dividends, (10) the anticipated closing of the Proposed Lightower Acquisition (as defined in note 12), and (11) our anticipated use of proceeds for the July 2017 Equity Financings and August 2017 Senior Notes Offering (each of which is defined in note 12).
Such forward-looking statements should, therefore, be considered in light of various risks, uncertainties and assumptions, including prevailing market conditions, risk factors described in "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 ("2016 Form 10-K") and other factors. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those expected. As used herein, the term "including," and any variation thereof, means "including without limitation." The use of the word "or" herein is not exclusive.
PART I—FINANCIAL INFORMATION
| |
ITEM 1. | FINANCIAL STATEMENTS |
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
(In thousands of dollars, except share amounts)
|
| | | | | | | |
| June 30, 2017 | | December 31, 2016 |
| | | |
ASSETS | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 199,663 |
| | $ | 567,599 |
|
Restricted cash | 117,913 |
| | 124,547 |
|
Receivables, net | 305,982 |
| | 373,532 |
|
Prepaid expenses | 175,976 |
| | 128,721 |
|
Other current assets | 151,801 |
| | 130,362 |
|
Total current assets | 951,335 |
| | 1,324,761 |
|
Deferred site rental receivables | 1,299,440 |
| | 1,317,658 |
|
Property and equipment, net of accumulated depreciation of $7,036,587 and $6,613,219, respectively | 10,507,736 |
| | 9,805,315 |
|
Goodwill | 6,919,358 |
| | 5,757,676 |
|
Other intangible assets, net | 3,953,812 |
| | 3,650,072 |
|
Long-term prepaid rent and other assets, net | 851,943 |
| | 819,610 |
|
Total assets | $ | 24,483,624 |
| | $ | 22,675,092 |
|
| | | |
LIABILITIES AND EQUITY | | | |
Current liabilities: | | | |
Accounts payable | $ | 178,927 |
| | $ | 188,516 |
|
Accrued interest | 107,764 |
| | 97,019 |
|
Deferred revenues | 387,065 |
| | 353,005 |
|
Other accrued liabilities | 209,224 |
| | 221,066 |
|
Current maturities of debt and other obligations | 114,932 |
| | 101,749 |
|
Total current liabilities | 997,912 |
| | 961,355 |
|
Debt and other long-term obligations | 13,726,333 |
| | 12,069,393 |
|
Other long-term liabilities | 2,169,070 |
| | 2,087,229 |
|
Total liabilities | 16,893,315 |
| | 15,117,977 |
|
Commitments and contingencies (note 8) |
| |
|
CCIC stockholders' equity: | | | |
Common stock, $.01 par value; 600,000,000 shares authorized; shares issued and outstanding: June 30, 2017—366,115,800 and December 31, 2016—360,536,659 | 3,661 |
| | 3,605 |
|
Additional paid-in capital | 11,433,018 |
| | 10,938,236 |
|
Accumulated other comprehensive income (loss) | (5,183 | ) | | (5,888 | ) |
Dividends/distributions in excess of earnings | (3,841,187 | ) | | (3,378,838 | ) |
Total equity | 7,590,309 |
| | 7,557,115 |
|
Total liabilities and equity | $ | 24,483,624 |
| | $ | 22,675,092 |
|
See notes to condensed consolidated financial statements.
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS) (Unaudited)
(In thousands of dollars, except per share amounts)
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Net revenues: | | | | | | | |
Site rental | $ | 868,806 |
| | $ | 804,600 |
| | $ | 1,725,742 |
| | $ | 1,603,893 |
|
Network services and other | 169,529 |
| | 157,809 |
| | 328,535 |
| | 292,899 |
|
Net revenues | 1,038,335 |
| | 962,409 |
| | 2,054,277 |
| | 1,896,792 |
|
Operating expenses: | | | | | | | |
Costs of operations(a): | | | | | | | |
Site rental | 269,285 |
| | 252,852 |
| | 534,302 |
| | 505,472 |
|
Network services and other | 104,622 |
| | 95,867 |
| | 203,430 |
| | 176,838 |
|
General and administrative | 97,736 |
| | 91,386 |
| | 198,460 |
| | 188,967 |
|
Asset write-down charges | 4,327 |
| | 11,952 |
| | 4,972 |
| | 19,912 |
|
Acquisition and integration costs | 8,250 |
| | 3,141 |
| | 13,900 |
| | 8,779 |
|
Depreciation, amortization and accretion | 295,615 |
| | 276,026 |
| | 584,164 |
| | 553,901 |
|
Total operating expenses | 779,835 |
| | 731,224 |
| | 1,539,228 |
| | 1,453,869 |
|
Operating income (loss) | 258,500 |
| | 231,185 |
| | 515,049 |
| | 442,923 |
|
Interest expense and amortization of deferred financing costs | (141,769 | ) | | (129,362 | ) | | (276,256 | ) | | (255,740 | ) |
Gains (losses) on retirement of long-term obligations | — |
| | (11,468 | ) | | (3,525 | ) | | (42,017 | ) |
Interest income | 1,027 |
| | 105 |
| | 1,397 |
| | 279 |
|
Other income (expense) | (1,106 | ) | | (518 | ) | | 3,494 |
| | (3,791 | ) |
Income (loss) before income taxes | 116,652 |
| | 89,942 |
| | 240,159 |
| | 141,654 |
|
Benefit (provision) for income taxes | (4,538 | ) | | (3,884 | ) | | (8,907 | ) | | (7,756 | ) |
Net income (loss) attributable to CCIC stockholders | 112,114 |
|
| 86,058 |
|
| 231,252 |
|
| 133,898 |
|
Dividends on preferred stock | — |
| | (10,997 | ) | | — |
| | (21,994 | ) |
Net income (loss) attributable to CCIC common stockholders | $ | 112,114 |
| | $ | 75,061 |
| | $ | 231,252 |
| | $ | 111,904 |
|
Net income (loss) | $ | 112,114 |
| | $ | 86,058 |
| | $ | 231,252 |
| | $ | 133,898 |
|
Other comprehensive income (loss): | | | | | | | |
Foreign currency translation adjustments | 530 |
| | 971 |
| | 705 |
| | 392 |
|
Total other comprehensive income (loss) | 530 |
| | 971 |
| | 705 |
| | 392 |
|
Comprehensive income (loss) attributable to CCIC stockholders | $ | 112,644 |
| | $ | 87,029 |
| | $ | 231,957 |
| | $ | 134,290 |
|
Net income (loss) attributable to CCIC common stockholders, per common share: | | | | | | | |
Net income (loss) attributable to CCIC common stockholders, basic | $ | 0.31 |
| | $ | 0.22 |
| | $ | 0.64 |
| | $ | 0.33 |
|
Net income (loss) attributable to CCIC common stockholders, diluted | $ | 0.31 |
| | $ | 0.22 |
| | $ | 0.64 |
| | $ | 0.33 |
|
Weighted-average common shares outstanding (in thousands): | | | | | | | |
Basic | 364,493 | | 337,560 |
| | 362,662 | | 335,857 |
Diluted | 365,832 | | 338,609 |
| | 363,892 | | 336,658 |
________________
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(a) | Exclusive of depreciation, amortization and accretion shown separately. |
See notes to condensed consolidated financial statements.
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(In thousands of dollars)
|
| | | | | | | |
| Six Months Ended June 30, |
| 2017 | | 2016 |
Cash flows from operating activities: | | | |
Net income (loss) | $ | 231,252 |
| | $ | 133,898 |
|
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: | | | |
Depreciation, amortization and accretion | 584,164 |
| | 553,901 |
|
Gains (losses) on retirement of long-term obligations | 3,525 |
| | 42,017 |
|
Amortization of deferred financing costs and other non-cash interest | 5,256 |
| | 7,993 |
|
Stock-based compensation expense | 45,232 |
| | 40,135 |
|
Asset write-down charges | 4,972 |
| | 19,912 |
|
Deferred income tax benefit (provision) | 261 |
| | 3,947 |
|
Other non-cash adjustments, net | (3,486 | ) | | 1,672 |
|
Changes in assets and liabilities, excluding the effects of acquisitions: | | | |
Increase (decrease) in accrued interest | 10,745 |
| | 29,964 |
|
Increase (decrease) in accounts payable | (16,928 | ) | | (6,715 | ) |
Increase (decrease) in deferred revenues, deferred ground lease payables, other accrued liabilities and other liabilities | 23,146 |
| | 60,896 |
|
Decrease (increase) in receivables | 91,252 |
| | 84,776 |
|
Decrease (increase) in prepaid expenses, deferred site rental receivables, long-term prepaid rent, restricted cash and other assets | (45,282 | ) | | (54,215 | ) |
Net cash provided by (used for) operating activities | 934,109 |
| | 918,181 |
|
Cash flows from investing activities: | | | |
Payments for acquisitions of businesses, net of cash acquired | (2,103,503 | ) | | (493,932 | ) |
Capital expenditures | (563,361 | ) | | (392,997 | ) |
Net (payments) receipts from settled swaps | (328 | ) | | 8,141 |
|
Other investing activities, net | (7,032 | ) | | 1,854 |
|
Net cash provided by (used for) investing activities | (2,674,224 | ) | | (876,934 | ) |
Cash flows from financing activities: | | | |
Proceeds from issuance of long-term debt | 1,345,115 |
| | 4,501,206 |
|
Principal payments on debt and other long-term obligations | (59,947 | ) | | (43,838 | ) |
Purchases and redemptions of long-term debt | — |
| | (3,536,362 | ) |
Borrowings under revolving credit facility | 1,755,000 |
| | 3,030,000 |
|
Payments under revolving credit facility | (1,405,000 | ) | | (3,720,000 | ) |
Payments for financing costs | (11,446 | ) | | (35,604 | ) |
Net proceeds from issuance of capital stock | 464,023 |
| | 323,798 |
|
Purchases of capital stock | (22,594 | ) | | (24,460 | ) |
Dividends/distributions paid on common stock | (696,025 | ) | | (597,846 | ) |
Dividends paid on preferred stock | — |
| | (21,994 | ) |
Net (increase) decrease in restricted cash | 2,351 |
| | (6,089 | ) |
Net cash provided by (used for) financing activities | 1,371,477 |
| | (131,189 | ) |
Net increase (decrease) in cash and cash equivalents - continuing operations | (368,638 | ) | | (89,942 | ) |
Discontinued operations: | | | |
Net cash provided by (used for) investing activities | — |
| | 113,150 |
|
Net increase (decrease) in cash and cash equivalents - discontinued operations | — |
|
| 113,150 |
|
Effect of exchange rate changes | 702 |
| | 320 |
|
Cash and cash equivalents at beginning of period | 567,599 |
| | 178,810 |
|
Cash and cash equivalents at end of period | $ | 199,663 |
| | $ | 202,338 |
|
See notes to condensed consolidated financial statements.
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
(In thousands of dollars, except share data) (Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| CCIC Stockholders | | |
| Common Stock | | 4.50% Mandatory Convertible Preferred Stock | | | | Accumulated Other Comprehensive Income (Loss) ("AOCI") | | | | |
| Shares | | ($0.01 Par) | | Shares | | ($0.01 Par) | | Additional paid-in capital | | Foreign Currency Translation Adjustments | | Dividends/Distributions in Excess of Earnings | | Total |
Balance, April 1, 2017 | 361,355,043 |
| | $ | 3,614 |
| | — |
| | $ | — |
| | $ | 10,968,564 |
| | $ | (5,713 | ) | | $ | (3,602,985 | ) | | $ | 7,363,480 |
|
Stock-based compensation related activity, net of forfeitures | 16,710 |
| | — |
| | — |
| | — |
| | 23,005 |
| | — |
| | — |
| | 23,005 |
|
Purchases and retirement of common stock | (5,953 | ) | | — |
| | — |
| | — |
| | (589 | ) | | — |
| | — |
| | (589 | ) |
Net proceeds from issuance of common stock | 4,750,000 |
| | 47 |
| | — |
| | — |
| | 442,038 |
| | — |
| | — |
| | 442,085 |
|
Other comprehensive income (loss)(a) | — |
| | — |
| | — |
| | — |
| | — |
| | 530 |
| | — |
| | 530 |
|
Common stock dividends/distributions | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (350,316 | ) | | (350,316 | ) |
Net income (loss) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 112,114 |
| | 112,114 |
|
Balance, June 30, 2017 | 366,115,800 |
| | $ | 3,661 |
| | — |
| | $ | — |
| | $ | 11,433,018 |
| | $ | (5,183 | ) | | $ | (3,841,187 | ) | | $ | 7,590,309 |
|
| |
(a) | See the condensed statement of operations and other comprehensive income (loss) for the components of "other comprehensive income (loss)." |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| CCIC Stockholders | | | |
| Common Stock | | 4.50% Mandatory Convertible Preferred Stock | | | | AOCI | | | | |
| Shares | | ($0.01 Par) | | Shares | | ($0.01 Par) | | Additional paid-in capital | | Foreign Currency Translation Adjustments | | Dividends/Distributions in Excess of Earnings | | Total |
Balance, April 1, 2016 | 337,559,718 |
| | $ | 3,375 |
| | 9,775,000 |
| | $ | 98 |
| | $ | 9,874,862 |
| | $ | (4,977 | ) | | $ | (2,720,364 | ) | | $ | 7,152,994 |
|
Stock-based compensation related activity, net of forfeitures | 3,826 |
| | — |
| | — |
| | — |
| | 20,165 |
| | — |
| | — |
| | 20,165 |
|
Purchases and retirement of common stock | (1,166 | ) | | — |
| | — |
| | — |
| | (106 | ) | | — |
| | — |
| | (106 | ) |
Other comprehensive income (loss)(a) | — |
| | — |
| | — |
| | — |
| | — |
| | 971 |
| | — |
| | 971 |
|
Common stock dividends/distributions | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (300,778 | ) | | (300,778 | ) |
Preferred stock dividends | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (10,997 | ) | | (10,997 | ) |
Net income (loss) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 86,058 |
| | 86,058 |
|
Balance, June 30, 2016 | 337,562,378 |
| | $ | 3,375 |
| | 9,775,000 |
| | $ | 98 |
| | $ | 9,894,921 |
| | $ | (4,006 | ) | | $ | (2,946,081 | ) | | $ | 6,948,307 |
|
| |
(a) | See the condensed statement of operations and other comprehensive income (loss) for the components of "other comprehensive income (loss)." |
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
(In thousands of dollars, except share data) (Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| CCIC Stockholders | | |
| Common Stock | | 4.50% Mandatory Convertible Preferred Stock | | | | AOCI | | | | |
| Shares | | ($0.01 Par) | | Shares | | ($0.01 Par) | | Additional paid-in capital | | Foreign Currency Translation Adjustments | | Dividends/Distributions in Excess of Earnings | | Total |
Balance, January 1, 2017 | 360,536,659 |
| | $ | 3,605 |
| | — |
| | $ | — |
| | $ | 10,938,236 |
| | $ | (5,888 | ) | | $ | (3,378,838 | ) | | $ | 7,557,115 |
|
Stock-based compensation related activity, net of forfeitures | 839,402 |
| | 8 |
| | — |
| | — |
| | 53,401 |
| | — |
| | — |
| | 53,409 |
|
Purchases and retirement of capital stock | (252,561 | ) | | (3 | ) | | — |
| | — |
| | (22,591 | ) | | — |
| | — |
| | (22,594 | ) |
Net proceeds from issuance of common stock | 4,992,300 |
| | 51 |
| | — |
| | — |
| | 463,972 |
| | — |
| | — |
| | 464,023 |
|
Other comprehensive income (loss)(a) | — |
| | — |
| | — |
| | — |
| | — |
| | 705 |
| | — |
| | 705 |
|
Common stock dividends/distributions | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (693,601 | ) | | (693,601 | ) |
Preferred stock dividends | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Net income (loss) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 231,252 |
| | 231,252 |
|
Balance, June 30, 2017 | 366,115,800 |
| | $ | 3,661 |
| | — |
| | $ | — |
| | $ | 11,433,018 |
| | $ | (5,183 | ) | | $ | (3,841,187 | ) | | $ | 7,590,309 |
|
| |
(a) | See the condensed statement of operations and other comprehensive income (loss) for the components of "other comprehensive income (loss)." |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| CCIC Stockholders | | | |
| Common Stock | | 4.50% Mandatory Convertible Preferred Stock | | | | AOCI | | | | |
| Shares | | ($0.01 Par) | | Shares | | ($0.01 Par) | | Additional paid-in capital | | Foreign Currency Translation Adjustments | | Dividends/Distributions in Excess of Earnings | | Total |
Balance, January 1, 2016 | 333,771,660 |
| | $ | 3,338 |
| | 9,775,000 |
| | $ | 98 |
| | $ | 9,548,580 |
| | $ | (4,398 | ) | | $ | (2,458,397 | ) | | $ | 7,089,221 |
|
Stock-based compensation related activity, net of forfeitures | 246,936 |
| | 2 |
| | — |
| | — |
| | 47,038 |
| | — |
| | — |
| | 47,040 |
|
Purchases and retirement of capital stock | (284,282 | ) | | (3 | ) | | — |
| | — |
| | (24,457 | ) | | — |
| | — |
| | (24,460 | ) |
Net proceeds from issuance of common stock | 3,828,064 |
| | 38 |
| |
| |
| | 323,760 |
| |
|
| |
| | 323,798 |
|
Other comprehensive income (loss)(a) | — |
| | — |
| | — |
| | — |
| | — |
| | 392 |
| | — |
| | 392 |
|
Common stock dividends/distributions | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (599,588 | ) | | (599,588 | ) |
Preferred stock dividends | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (21,994 | ) | | (21,994 | ) |
Net income (loss) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 133,898 |
| | 133,898 |
|
Balance, June 30, 2016 | 337,562,378 |
| | $ | 3,375 |
| | 9,775,000 |
| | $ | 98 |
| | $ | 9,894,921 |
| | $ | (4,006 | ) | | $ | (2,946,081 | ) | | $ | 6,948,307 |
|
| |
(a) | See the condensed statement of operations and other comprehensive income (loss) for the components of "other comprehensive income (loss)." |
See notes to condensed consolidated financial statements.
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited
(Tabular dollars in thousands, except per share amounts)
The information contained in the following notes to the consolidated financial statements is condensed from that which would appear in the annual consolidated financial statements; accordingly, the consolidated financial statements included herein should be reviewed in conjunction with the consolidated financial statements for the fiscal year ended December 31, 2016, and related notes thereto, included in the 2016 Form 10-K filed by Crown Castle International Corp. ("CCIC") with the SEC. Capitalized terms used but not defined in these notes to the condensed consolidated financial statements have the same meaning given to them in our 2016 Form 10-K. References to the "Company" include CCIC and its predecessor, as applicable, and their subsidiaries, unless otherwise indicated or the context indicates otherwise. As used herein, the term "including," and any variation thereof means "including without limitation." The use of the word "or" herein is not exclusive.
The Company owns, operates and leases shared wireless infrastructure that has been acquired or constructed over time and is geographically dispersed throughout the United States and Puerto Rico ("U.S."), including: (1) towers and other structures, such as rooftops (collectively, "towers"), and (2) fiber primarily supporting small cell networks and fiber based solutions (collectively, "small cells" and, together with towers, "wireless infrastructure").
The Company's core business is providing access, including space or capacity, to its shared wireless infrastructure via long-term contracts in various forms, including licenses, subleases and lease agreements.
The Company's operating segments consist of (1) Towers and (2) Small Cells. See note 10.
As part of the Company's effort to provide comprehensive wireless infrastructure solutions, the Company offers certain network services relating to its wireless infrastructure, consisting of (1) site development services relating to existing or new tenant equipment installations on its wireless infrastructure, including: site acquisition, architectural and engineering, or zoning and permitting and (2) tenant equipment installation or subsequent augmentations.
The Company operates as a REIT for U.S. federal income tax purposes. In addition, the Company has certain taxable REIT subsidiaries ("TRSs"). See note 6.
Approximately 53% of the Company's towers are leased or subleased or operated and managed under master leases, subleases, and other agreements with AT&T, Sprint, and T-Mobile. The Company has the option to purchase these towers at the end of their respective lease terms. The Company has no obligation to exercise such purchase options.
Basis of Presentation
The condensed consolidated financial statements included herein are unaudited; however, they include all adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are necessary to state fairly the consolidated financial position of the Company at June 30, 2017, and the consolidated results of operations and the consolidated cash flows for the six months ended June 30, 2017 and 2016. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
| |
2. | Summary of Significant Accounting Policies |
The significant accounting policies used in the preparation of the Company's condensed consolidated financial statements are disclosed in the 2016 Form 10-K, other than certain recent accounting pronouncements described below.
Recently Adopted Accounting Pronouncements
No accounting pronouncements adopted during the six months ended June 30, 2017 had a material impact on the Company's condensed consolidated financial statements.
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in thousands, except per share amounts)
Recent Accounting Pronouncements Not Yet Adopted
In February 2016, the FASB issued new guidance on the recognition, measurement, presentation and disclosure of leases. The new guidance requires lessees to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments for all leases with a term greater than 12 months. The accounting for lessors remains largely unchanged from existing guidance. This guidance is effective for the Company as of January 1, 2019 and is required to be applied using a modified retrospective approach for all leases existing at, or entered into after, the beginning of the earliest comparative period presented. Early adoption is permitted. The Company (1) has established and is progressing through the various steps of a cross functional project plan to assess the impact of the standard; (2) expects this guidance to have a material impact on its consolidated balance sheet due to the addition of right-of-use assets and lease liabilities for all leases with a term greater than 12 months; and (3) continues to assess additional impacts to its consolidated financial statements, including the consolidated statement of operations and the consolidated statement of cash flows.
In February 2017, the FASB issued new guidance which clarifies the scope and application on accounting for the de-recognition of non-financial assets and in substance non-financial assets, including sales and partial sales of real estate assets. The new guidance also eliminates the existing industry specific guidance for partial sales of real estate, and requires full gain recognition upon partial sales of real estate. The guidance is effective for the Company as of January 1, 2018. The guidance may be early adopted, but must be adopted concurrently with the FASB's May 2014 guidance on revenue from contracts with customers. The guidance is required to be applied, at the Company's election, either (1) retrospectively to each prior reporting period presented or (2) with the cumulative effect being recognized at the date of initial application. The Company does not expect this guidance to have a material impact on its condensed consolidated financial statements.
FiberNet Acquisition
On November 1, 2016, the Company announced that it had entered into a definitive agreement to acquire FPL FiberNet Holdings, LLC and certain other subsidiaries of NextEra Energy, Inc. (collectively, "FiberNet") for approximately $1.5 billion in cash, subject to certain limited adjustments ("FiberNet Acquisition"). FiberNet is a fiber services provider in Florida and Texas that, as of the agreement date, owned or had rights to approximately 11,500 route miles of fiber installed or under construction, inclusive of approximately 6,000 route miles in top metro markets. On January 17, 2017, the Company closed the FiberNet Acquisition which was financed using proceeds from its November 2016 Equity Financing and borrowings under the 2016 Revolver (see note 4).
The preliminary purchase price allocation for the FiberNet Acquisition is shown below and is based upon a preliminary valuation which is subject to change as the Company obtains additional information with respect to fixed assets, intangible assets and certain liabilities.
|
| | | |
Preliminary Purchase Price Allocation | |
Current Assets | $ | 56,569 |
|
Property and equipment | 439,961 |
|
Goodwill(a) | 772,177 |
|
Other intangible assets, net | 328,138 |
|
Other non-current assets | 72 |
|
Current liabilities | (34,552 | ) |
Other non-current liabilities | (41,535 | ) |
Net assets acquired(b) | $ | 1,520,830 |
|
| |
(a) | The preliminary purchase price allocation for the FiberNet Acquisition resulted in the recognition of goodwill based on: |
| |
• | the Company's expectation to leverage the FiberNet fiber footprint to support new small cell networks and fiber based solutions, |
| |
• | the complementary nature of the FiberNet fiber to the Company's existing fiber assets and its location in top metro markets where the Company expects to see wireless carrier network investments, |
| |
• | the Company's belief that the acquired fiber assets are well-positioned to benefit from the continued growth trends in the wireless industry, and |
| |
• | other intangibles not qualified for separate recognition, including the assembled workforce. |
| |
(b) | The vast majority of assets acquired in the FiberNet Acquisition are expected to be included in the Company's REIT and as such, no deferred taxes were recorded in connection with the FiberNet Acquisition. |
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in thousands, except per share amounts)
Net revenues attributable to the FiberNet Acquisition are included in the Company's consolidated statements of operations and comprehensive income (loss) since the date the acquisition was completed. For the six months ended June 30, 2017, the FiberNet Acquisition contributed $71.0 million to consolidated net revenues.
Wilcon Acquisition
On April 17, 2017, the Company announced that it had entered into a definitive agreement to acquire Wilcon Holdings LLC ("Wilcon") from Pamlico Holdings and other unit holders of Wilcon for approximately $600 million in cash, subject to certain limited adjustments ("Wilcon Acquisition"). Wilcon is a fiber services provider that owns approximately 1,900 route miles of fiber, primarily in Los Angeles and San Diego. On June 26, 2017, the Company closed the Wilcon Acquisition, which was financed using proceeds from the May 2017 Equity Financing (as defined in note 9) and the 4.75% Senior Notes (as defined in note 4).
The preliminary purchase price of approximately $600 million was primarily comprised of other intangible assets of approximately $130 million, property and equipment of approximately $130 million, and goodwill of approximately $380 million.
The preliminary purchase price allocation for the Wilcon Acquisition resulted in the recognition of goodwill based on (1) the Company's expectation to leverage the Wilcon fiber footprint to support new small cell networks and fiber based solutions, (2) the complementary nature of the Wilcon fiber to the Company's existing fiber assets and its location primarily in Los Angeles and San Diego, where the Company expects to see wireless carrier network investments, (3) the Company's belief that the acquired fiber assets are well positioned to benefit from the continued growth trends in the wireless industry, and (4) other intangibles not qualified for separate recognition, including the assembled workforce. The preliminary purchase price allocation for the Wilcon Acquisition is based upon a preliminary valuation which is subject to change as the Company obtains additional information with respect to fixed assets, intangible assets and certain liabilities.
See note 12 for a discussion of the Proposed Lightower Acquisition (as therein defined).
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in thousands, except per share amounts)
| |
4. | Debt and Other Obligations |
|
| | | | | | | | | | | | | | |
| Original Issue Date | | Contractual Maturity Date (a) | | Balance as of June 30, 2017 | | Balance as of December 31, 2016 | | Stated Interest Rate as of June 30, 2017(a) |
Bank debt - variable rate: | | | | | | | | | |
2016 Revolver | Jan. 2016 | | Jan. 2022 | (e) | $ | 350,000 |
| (b)(d)(f) | $ | — |
| | 2.6 | % |
2016 Term Loan A | Jan. 2016 | | Jan. 2022 | (e) | 2,426,473 |
| (e) | 1,954,173 |
| | 2.6 | % |
Total bank debt | | | | | 2,776,473 |
| | 1,954,173 |
| | |
Securitized debt - fixed rate: | | | | | | | | | |
Secured Notes, Series 2009-1, Class A-1 | July 2009 | | Aug. 2019 | | 41,333 |
| | 51,416 |
| | 6.3 | % |
Secured Notes, Series 2009-1, Class A-2 | July 2009 | | Aug. 2029 | | 69,438 |
| | 68,737 |
| | 9.0 | % |
Tower Revenue Notes, Series 2010-3 | Jan. 2010 | | Jan. 2040 | (c) | 1,245,171 |
| | 1,244,237 |
| | 6.1 | % |
Tower Revenue Notes, Series 2010-6 | Aug. 2010 | | Aug. 2040 | (c) | 994,456 |
| | 993,557 |
| | 4.9 | % |
Tower Revenue Notes, Series 2015-1 | May 2015 | | May 2042 | (c) | 296,892 |
| | 296,573 |
| | 3.2 | % |
Tower Revenue Notes, Series 2015-2 | May 2015 | | May 2045 | (c) | 691,805 |
| | 691,285 |
| | 3.7 | % |
Total securitized debt | | | | | 3,339,095 |
| | 3,345,805 |
| | |
Bonds - fixed rate: | | | | | | | | | |
5.250% Senior Notes | Oct. 2012 | | Jan. 2023 | | 1,638,153 |
| | 1,637,099 |
| | 5.3 | % |
3.849% Secured Notes | Dec. 2012 | | Apr. 2023 | | 991,971 |
| | 991,279 |
| | 3.8 | % |
4.875% Senior Notes | Apr. 2014 | | Apr. 2022 | | 841,202 |
| | 840,322 |
| | 4.9 | % |
3.400% Senior Notes | Feb./May 2016 | | Feb. 2021 | | 849,811 |
| | 849,698 |
| | 3.4 | % |
4.450% Senior Notes | Feb. 2016 | | Feb. 2026 | | 890,630 |
| | 890,118 |
| | 4.5 | % |
3.700% Senior Notes | May 2016 | | June 2026 | | 742,316 |
| | 741,908 |
| | 3.7 | % |
2.250% Senior Notes | Sept. 2016 | | Sept. 2021 | | 694,755 |
| | 693,893 |
| | 2.3 | % |
4.000% Senior Notes | Feb. 2017 | | March 2027 | | 493,656 |
| (d) | — |
| | 4.0 | % |
4.750% Senior Notes | May 2017 | | May 2047 | | 342,474 |
| (f) | — |
| | 4.8 | % |
Total bonds | | | | | 7,484,968 |
| | 6,644,317 |
| | |
Other: | | | | | | | | | |
Capital leases and other obligations | Various | | Various | | 240,729 |
| | 226,847 |
| | Various |
|
Total debt and other obligations | | | | | 13,841,265 |
| | 12,171,142 |
| | |
Less: current maturities and short-term debt and other current obligations | | | | | 114,932 |
| | 101,749 |
| | |
Non-current portion of long-term debt and other long-term obligations | | | | | $ | 13,726,333 |
| | $ | 12,069,393 |
| | |
| |
(a) | See the 2016 Form 10-K, including note 8, for additional information regarding the maturity and principal amortization provisions and interest rates relating to the Company's indebtedness. |
| |
(b) | As of June 30, 2017, the undrawn availability under the 2016 Revolver was $2.1 billion. |
| |
(c) | If the respective series of such debt is not paid in full on or prior to an applicable date then Excess Cash Flow (as defined in the indenture) of the issuers of such notes will be used to repay principal of the applicable series, and additional interest (of an additional approximately 5% per annum) will accrue on the respective series. See the 2016 Form 10-K for additional information regarding these provisions. |
| |
(d) | In February 2017, the Company issued $500 million aggregate principal amount of 4.000% senior unsecured notes with a maturity date of March 2027 ("4.0% Senior Notes"). The Company used the net proceeds from the 4.0% Senior Notes offering to repay a portion of the borrowings under the 2016 Revolver. |
| |
(e) | In February 2017, the Company entered into an amendment to the Credit Facility to (1) incur additional term loans in an aggregate principal amount of $500 million, and (2) extend the maturity of both the 2016 Term Loan A and the 2016 Revolver to January 2022. |
| |
(f) | In May 2017, the Company issued $350 million aggregate principal amount of 4.750% senior unsecured notes due May 2047 ("4.75% Senior Notes"). The Company used the net proceeds from the 4.75% Senior Notes offering to partially fund the Wilcon Acquisition and to repay a portion of the borrowings under the 2016 Revolver. |
See note 12 for information regarding our August 2017 Senior Notes Offering (as defined therein).
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in thousands, except per share amounts)
Contractual Maturities
The following are the scheduled contractual maturities of the total debt and other long-term obligations of the Company outstanding as of June 30, 2017. These maturities reflect contractual maturity dates and do not consider the principal payments that will commence following the anticipated repayment dates on the Tower Revenue Notes.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ending December 31, | | Years Ending December 31, | | | | | | Unamortized Adjustments, Net | | Total Debt and Other Obligations Outstanding |
| 2017 | | 2018 | | 2019 | | 2020 | | 2021 | | Thereafter | | Total Cash Obligations | | |
Scheduled contractual maturities | $ | 58,607 |
| | $ | 113,125 |
| | $ | 166,127 |
| | $ | 154,255 |
| | $ | 1,824,027 |
| | $ | 11,619,021 |
| | $ | 13,935,162 |
| | $ | (93,897 | ) | | $ | 13,841,265 |
|
Interest Expense and Amortization of Deferred Financing Costs
The components of interest expense and amortization of deferred financing costs are as follows:
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Interest expense on debt obligations | $ | 139,349 |
| | $ | 125,580 |
| | $ | 271,000 |
| | $ | 247,747 |
|
Amortization of deferred financing costs and adjustments on long-term debt | 4,540 |
| | 4,815 |
| | 9,091 |
| | 9,921 |
|
Other, net of capitalized interest | (2,120 | ) | | (1,033 | ) | | (3,835 | ) | | (1,928 | ) |
Total | $ | 141,769 |
| | $ | 129,362 |
| | $ | 276,256 |
| | $ | 255,740 |
|
|
| | | | | | | | | | | | | | | | | |
| Level in Fair Value Hierarchy | | June 30, 2017 | | December 31, 2016 |
| | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value |
Assets: | | | | | | | | | |
Cash and cash equivalents | 1 | | $ | 199,663 |
| | $ | 199,663 |
| | $ | 567,599 |
| | $ | 567,599 |
|
Restricted cash, current and non-current | 1 | | 122,913 |
| | 122,913 |
| | 129,547 |
| | 129,547 |
|
Liabilities: | | | | | | | | | |
Total debt and other obligations | 2 | | 13,841,265 |
| | 14,399,704 |
| | 12,171,142 |
| | 12,660,013 |
|
The fair value of cash and cash equivalents and restricted cash approximate the carrying value. The Company determines the fair value of its debt securities based on indicative, non-binding quotes from brokers. Quotes from brokers require judgment and are based on the brokers' interpretation of market information, including implied credit spreads for similar borrowings on recent trades or bid/ask prices or quotes from active markets if available. There were no changes since December 31, 2016 in the Company's valuation techniques used to measure fair values.
The Company operates as a REIT for U.S. federal income tax purposes. As a REIT, the Company is generally entitled to a deduction for dividends that it pays and therefore is not subject to U.S. federal corporate income tax on its net taxable income that is currently distributed to its stockholders. The Company also may be subject to certain federal, state, local, and foreign taxes on its income and assets, including (1) alternative minimum taxes, (2) taxes on any undistributed income, (3) taxes related to the TRSs, (4) certain state, local, or foreign income taxes, (5) franchise taxes, (6) property taxes, and (7) transfer taxes. In addition, the Company could in certain circumstances be required to pay an excise or penalty tax, which could be significant in amount, in order to utilize one or more relief provisions under the Internal Revenue Code of 1986, as amended ("Code") to maintain qualification for taxation as a REIT.
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in thousands, except per share amounts)
The Company's TRS assets and operations will continue to be subject, as applicable, to federal and state corporate income taxes or to foreign taxes in the jurisdictions in which such assets and operations are located. The Company's foreign assets and operations (including its tower operations in Puerto Rico) most likely will be subject to foreign income taxes in the jurisdictions in which such assets and operations are located, regardless of whether they are included in a TRS or not.
For the six months ended June 30, 2017 and 2016, the Company's effective tax rate differed from the federal statutory rate predominately due to the Company's REIT status, including the dividends paid deduction.
Basic net income (loss) attributable to CCIC common stockholders, per common share, excludes dilution and is computed by dividing net income (loss) attributable to CCIC common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net income (loss) attributable to CCIC common stockholders, per common share is computed by dividing net income (loss) attributable to CCIC common stockholders by the weighted-average number of common shares outstanding during the period plus any potential dilutive common share equivalents, including shares issuable (1) upon the vesting of restricted stock awards and restricted stock units as determined under the treasury stock method and (2) upon conversion of the Company's previously outstanding 4.50% Mandatory Convertible Preferred Stock, which converted to common stock during the fourth quarter of 2016, as determined under the if-converted method, for the three and six months ended June 30, 2016.
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Net income (loss) attributable to CCIC stockholders | $ | 112,114 |
| | $ | 86,058 |
| | $ | 231,252 |
| | $ | 133,898 |
|
Dividends on preferred stock | — |
| | (10,997 | ) | | — |
| | (21,994 | ) |
Net income (loss) attributable to CCIC common stockholders for basic and diluted computations | $ | 112,114 |
| | $ | 75,061 |
| | $ | 231,252 |
| | $ | 111,904 |
|
| | | | | | | |
Weighted-average number of common shares outstanding (in thousands): | | | | | | | |
Basic weighted-average number of common stock outstanding | 364,493 |
| | 337,560 |
| | 362,662 |
| | 335,857 |
|
Effect of assumed dilution from potential common shares relating to restricted stock units and restricted stock awards | 1,339 |
| | 1,049 |
| | 1,230 |
| | 801 |
|
Diluted weighted-average number of common shares outstanding | 365,832 |
| | 338,609 |
| | 363,892 |
| | 336,658 |
|
| | | | | | | |
Net income (loss) attributable to CCIC common stockholders, per common share: | | | | | | | |
Basic | $ | 0.31 |
| | $ | 0.22 |
| | $ | 0.64 |
| | $ | 0.33 |
|
Diluted | $ | 0.31 |
| | $ | 0.22 |
| | $ | 0.64 |
| | $ | 0.33 |
|
During the six months ended June 30, 2017, the Company granted 1.3 million restricted stock units. For the six months ended June 30, 2016, 11.5 million common share equivalents related to the previously outstanding 4.50% Mandatory Convertible Preferred Stock were excluded from the dilutive common shares because the impact of such conversion would be anti-dilutive, based on the Company's common stock price as of the end of the respective periods.
| |
8. | Commitments and Contingencies |
The Company is involved in various claims, lawsuits or proceedings arising in the ordinary course of business. While there are uncertainties inherent in the ultimate outcome of such matters and it is impossible to presently determine the ultimate costs or losses that may be incurred, if any, management believes the resolution of such uncertainties and the incurrence of such costs should not have a material adverse effect on the Company's consolidated financial position or results of operations. Additionally, the Company and certain of its subsidiaries are contingently liable for commitments or performance guarantees arising in the ordinary course of business, including certain letters of credit or surety bonds. In addition, the Company has the option to purchase approximately 53% of the Company's towers at the end of their respective lease terms. The Company has no obligation to exercise such purchase options.
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in thousands, except per share amounts)
Declaration and Payment of Dividends
During the six months ended June 30, 2017, the following dividends were declared and paid:
|
| | | | | | | | | | | | | | | |
Equity Type | | Declaration Date | | Record Date | | Payment Date | | Dividends Per Share | | Aggregate Payment Amount (In millions) | |
Common Stock | | February 17, 2017 | | March 17, 2017 | | March 31, 2017 | | $ | 0.95 |
| | $ | 343.3 |
| (a) |
Common Stock | | May 18, 2017 | | June 16, 2017 | | June 30, 2017 | | $ | 0.95 |
| | $ | 350.3 |
| (a) |
| |
(a) | Inclusive of dividends accrued for holders of unvested restricted stock units, which will be paid at the time the restricted stock units vest. |
Purchases of the Company's Common Stock
For the six months ended June 30, 2017, the Company purchased 0.3 million shares of its common stock utilizing $22.6 million in cash. The common stock shares purchased relate to shares withheld in connection with the payment of withholding taxes upon vesting of restricted stock.
"At the Market" Stock Offering Program
The Company maintains an "at the market" stock offering program ("ATM Program") through which it may, from time to time, issue and sell shares of its common stock having an aggregate cumulative gross sales price of up to $500.0 million to or through sales agents. Sales, if any, under the ATM Program may be made by means of ordinary brokers' transactions on the New York Stock Exchange or otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices or, subject to specific instructions of the Company, at negotiated prices. The Company intends to use the net proceeds from any sales under the ATM Program for general corporate purposes, which may include the funding of future acquisitions or investments and the repayment or repurchase of any outstanding indebtedness. During the six months ended June 30, 2017, 0.2 million shares of common stock were sold under the ATM Program generating net proceeds of $22.0 million after giving effect to sales agent commissions of $0.2 million. As of June 30, 2017, the Company had approximately $150 million of gross sales of common stock availability remaining on the ATM Program.
May 2017 Equity Financing
On May 1, 2017, the Company completed an offering of 4.75 million shares of its common stock, which generated net proceeds of approximately $442 million ("May 2017 Equity Financing"). The Company used the net proceeds of the May 2017 Equity Financing to partially fund the Wilcon Acquisition.
See note 12 for information regarding our July 2017 Equity Financings (as defined therein).
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in thousands, except per share amounts)
The Company's operating segments are (1) Towers and (2) Small Cells. The Towers segment provides access, including space or capacity, to the Company's approximately 40,000 towers geographically dispersed throughout the U.S. The Towers segment also reflects certain network services relating to the Company's towers, consisting of site development services and installation services. The Small Cells segment provides access, including space or capacity, to the Company's approximately 29,000 route miles of fiber primarily supporting small cell networks and fiber based solutions.
The measurement of profit or loss used by the Company's chief operating decision maker to evaluate the results of operations of its operating segments are (1) segment site rental gross margin, (2) segment network services and other gross margin, and (3) segment operating profit. The Company defines segment site rental gross margin as segment site rental revenues less segment site rental cost of operations, which excludes stock-based compensation expense and prepaid lease purchase price adjustments recorded in consolidated cost of operations. The Company defines segment network services and other gross margin as segment network services and other revenues less segment network services and other cost of operations, which excludes stock-based compensation expense recorded in consolidated cost of operations. The Company defines segment operating profit as segment site rental gross margin plus segment network services and other gross margin, less general and administrative expenses attributable to the respective segment.
Costs that are directly attributable to Towers and Small Cells are assigned to those respective segments. The "Other" column (1) represents amounts excluded from specific segments, such as restructuring charges (credits), asset write-down charges, acquisition and integration costs, depreciation, amortization and accretion, amortization of prepaid lease purchase price adjustments, interest expense and amortization of deferred financing costs, gains (losses) on retirement of long-term obligations, net gain (loss) on interest rate swaps, gains (losses) on foreign currency swaps, impairment of available-for-sale securities, interest income, other income (expense), cumulative effect of a change in accounting principle, income (loss) from discontinued operations, and stock-based compensation expense, and (2) reconciles segment operating profit to income (loss) before income taxes, as the amounts are not utilized in assessing each segment’s performance. The "Other" total assets balance includes corporate assets such as cash and cash equivalents which have not been allocated to specific segments. There are no significant revenues resulting from transactions between the Company's operating segments.
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in thousands, except per share amounts)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2017 | | Three Months Ended June 30, 2016 |
| Towers | | Small Cells | | Other | | Consolidated Total | | Towers | | Small Cells | | Other | | Consolidated Total |
Segment site rental revenues | $ | 717,645 |
| | $ | 151,161 |
| | | | $ | 868,806 |
| | $ | 705,716 |
| | $ | 98,884 |
| | | | $ | 804,600 |
|
Segment network services and other revenues | 157,977 |
| | 11,552 |
| | | | 169,529 |
| | 142,053 |
| | 15,756 |
| | | | 157,809 |
|
Segment revenues | 875,622 |
| | 162,713 |
| | | | 1,038,335 |
| | 847,769 |
| | 114,640 |
| | | | 962,409 |
|
Segment site rental cost of operations | 211,204 |
| | 51,861 |
| | | | 263,065 |
| | 210,444 |
| | 34,165 |
| | | | 244,609 |
|
Segment network services and other cost of operations | 95,837 |
| | 8,604 |
| | | | 104,441 |
| | 81,922 |
| | 12,423 |
| | | | 94,345 |
|
Segment cost of operations (a) | 307,041 |
| | 60,465 |
| | | | 367,506 |
| | 292,366 |
| | 46,588 |
| | | | 338,954 |
|
Segment site rental gross margin | 506,441 |
| | 99,300 |
| | | | 605,741 |
| | 495,272 |
| | 64,719 |
| | | | 559,991 |
|
Segment network services and other gross margin | 62,140 |
| | 2,948 |
| | | | 65,088 |
| | 60,131 |
| | 3,333 |
| | | | 63,464 |
|
Segment general and administrative expenses (a) | 22,875 |
| | 18,666 |
| | 40,754 |
| | 82,295 |
| | 22,505 |
| | 15,718 |
| | 35,563 |
| | 73,786 |
|
Segment operating profit | 545,706 |
| | 83,582 |
| | (40,754 | ) | | 588,534 |
| | 532,898 |
| | 52,334 |
| | (35,563 | ) | | 549,669 |
|
Stock-based compensation expense | | | | | 16,835 |
| | 16,835 |
| | | | | | 21,998 |
| | 21,998 |
|
Depreciation, amortization and accretion | | | | | 295,615 |
| | 295,615 |
| | | | | | 276,026 |
| | 276,026 |
|
Interest expense and amortization of deferred financing costs | | | | | 141,769 |
| | 141,769 |
| | | | | | 129,362 |
| | 129,362 |
|
Other income (expenses) to reconcile to income (loss) before income taxes(b) | | | | | 17,663 |
| | 17,663 |
| | | | | | 32,341 |
| | 32,341 |
|
Income (loss) before income taxes | | | | | | | $ | 116,652 |
| | | | | | | | $ | 89,942 |
|
Capital expenditures | $ | 106,950 |
| | $ | 188,090 |
| | $ | 5,906 |
| | $ | 300,946 |
| | $ | 104,180 |
| | $ | 87,450 |
| | $ | 7,878 |
| | $ | 199,508 |
|
Total assets (at period end) | $ | 18,207,697 |
| | $ | 5,810,961 |
| | $ | 464,966 |
| | $ | 24,483,624 |
| | $ | 18,479,117 |
| | $ | 3,199,577 |
| | $ | 474,380 |
| | $ | 22,153,074 |
|
| |
(a) | Segment cost of operations exclude (1) stock-based compensation expense of $1.4 million and $4.4 million for the three months ended June 30, 2017 and 2016, respectively, and (2) prepaid lease purchase price adjustments of $5.0 million and $5.4 million for the three months ended June 30, 2017 and 2016, respectively. Segment general and administrative expenses exclude stock-based compensation expense of $15.4 million and $17.6 million for the three months ended June 30, 2017 and 2016, respectively. |
| |
(b) | See condensed consolidated statement of operations for further information. |
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in thousands, except per share amounts)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2017 | | Six Months Ended June 30, 2016 |
| Towers | | Small Cells | | Other | | Consolidated Total | | Towers | | Small Cells | | Other | | Consolidated Total |
Segment site rental revenues | $ | 1,434,181 |
| | $ | 291,561 |
| | | | $ | 1,725,742 |
| | $ | 1,408,555 |
| | $ | 195,338 |
| | | | $ | 1,603,893 |
|
Segment network services and other revenues | 307,592 |
| | 20,943 |
| | | | 328,535 |
| | 267,063 |
| | 25,836 |
| | | | 292,899 |
|
Segment revenues | 1,741,773 |
| | 312,504 |
| | | | 2,054,277 |
| | 1,675,618 |
| | 221,174 |
| | | | 1,896,792 |
|
Segment site rental cost of operations | 420,668 |
| | 99,107 |
| | | | 519,775 |
| | 415,009 |
| | 71,648 |
| | | | 486,657 |
|
Segment network services and other cost of operations | 184,773 |
| | 16,833 |
| | | | 201,606 |
| | 151,911 |
| | 20,458 |
| | | | 172,369 |
|
Segment cost of operations (a) | 605,441 |
| | 115,940 |
| | | | 721,381 |
| | 566,920 |
| | 92,106 |
| | | | 659,026 |
|
Segment site rental gross margin | 1,013,513 |
| | 192,454 |
| | | | 1,205,967 |
| | 993,546 |
| | 123,690 |
| | | | 1,117,236 |
|
Segment network services and other gross margin | 122,819 |
| | 4,110 |
| | | | 126,929 |
| | 115,152 |
| | 5,378 |
| | | | 120,530 |
|
Segment general and administrative expenses (a) | 46,635 |
| | 36,355 |
| | 79,960 |
| | 162,950 |
| | 46,104 |
| | 31,240 |
| | 71,635 |
| | 148,979 |
|
Segment operating profit | 1,089,697 |
| | 160,209 |
| | (79,960 | ) | | 1,169,946 |
| | 1,062,594 |
| | 97,828 |
| | (71,635 | ) | | 1,088,787 |
|
Stock-based compensation expense | | | | | 41,777 |
| | 41,777 |
| | | | | | 52,703 |
| | 52,703 |
|
Depreciation, amortization and accretion | | | | | 584,164 |
| | 584,164 |
| | | | | | 553,901 |
| | 553,901 |
|
Interest expense and amortization of deferred financing costs | | | | | 276,256 |
| | 276,256 |
| | | | | | 255,740 |
| | 255,740 |
|
Other income (expenses) to reconcile to income (loss) from continuing operations before income taxes(b) | | | | | 27,590 |
| | 27,590 |
| | | | | | 84,789 |
| | 84,789 |
|
Income (loss) from continuing operations before income taxes | | | | | | | $ | 240,159 |
| | | | | | | | $ | 141,654 |
|
Capital expenditures | $ | 208,425 |
| | $ | 342,356 |
| | $ | 12,580 |
| | $ | 563,361 |
| | $ | 215,221 |
| | $ | 167,603 |
| | $ | 10,173 |
| | $ | 392,997 |
|
| |
(a) | Segment cost of operations exclude (1) stock-based compensation expense of $6.3 million and $12.7 million for the six months ended June 30, 2017 and 2016, respectively, and (2) prepaid lease purchase price adjustments of $10.1 million and $10.6 million for the six months ended June 30, 2017 and 2016, respectively. Segment general and administrative expenses exclude stock-based compensation expense of $35.5 million and $40.0 million for the six months ended June 30, 2017 and 2016, respectively. |
| |
(b) | See condensed consolidated statement of operations for further information. |
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in thousands, except per share amounts)
| |
11. | Supplemental Cash Flow Information |
|
| | | | | | | |
| Six Months Ended June 30, |
| 2017 | | 2016 |
Supplemental disclosure of cash flow information: | | | |
Interest paid | $ | 260,255 |
| | $ | 217,783 |
|
Income taxes paid | 10,372 |
| | 10,186 |
|
Supplemental disclosure of non-cash investing and financing activities: | | | |
Increase (decrease) in accounts payable for purchases of property and equipment | (7,825 | ) | | (10,197 | ) |
Purchase of property and equipment under capital leases and installment purchases | 17,933 |
| | 25,444 |
|
Proposed Lightower Acquisition
On July 18, 2017, the Company announced that it has entered into a definitive agreement ("Merger Agreement") to acquire LTS Group Holdings LLC ("Lightower") from Berkshire Partners, Pamlico Capital and other investors for approximately $7.1 billion in cash (subject to certain limited adjustments) ("Proposed Lightower Acquisition"). Lightower owns or has rights to approximately 32,000 route miles of fiber located primarily in top metro markets in the Northeast, including Boston, New York and Philadelphia. The Company expects to finance the Proposed Lightower Acquisition, including related fees and expenses, utilizing proceeds from (1) the July 2017 Common Stock Offering (as defined below), (2) the Mandatory Convertible Preferred Stock Offering (as defined below), and (3) the August 2017 Senior Notes Offering (as defined below). The Company expects the Proposed Lightower Acquisition to close by the end of 2017. Completion of the Proposed Lightower Acquisition is subject to customary closing conditions and does not require the approval of the Company's stockholders.
July 2017 Equity Financings
On July 26, 2017, the Company completed an offering of 40.15 million shares of common stock, including certain additional shares sold pursuant to the underwriters' option, which generated net proceeds of approximately $3.8 billion ("July 2017 Common Stock Offering"). The Company intends to use the net proceeds of the July 2017 Common Stock Offering to partially fund the Proposed Lightower Acquisition and pay related fees and expenses.
On July 26, 2017, the Company completed an offering of 1.65 million shares of the Company's 6.875% Mandatory Convertible Preferred Stock, Series A, par value $0.01 per share, at $1,000 per share ("Mandatory Convertible Preferred Stock"), including certain additional shares sold pursuant to the underwriters' option, which generated net proceeds of approximately $1.6 billion ("Mandatory Convertible Preferred Stock Offering"). The Company intends to use the net proceeds from the Mandatory Convertible Preferred Stock Offering to partially fund the Proposed Lightower Acquisition and pay related fees and expenses.
The holders of the Mandatory Convertible Preferred Stock are entitled to receive cumulative dividends, when and if declared by the Company's board of directors, at the rate of 6.875% on the liquidation preference of $1,000 per share. The dividends may be paid in cash or, subject to certain limitations, in shares of the Company's common stock or any combination of cash and shares of common stock on February 1, May 1, August 1 and November 1 of each year, commencing on November 1, 2017 and to, and including, August 1, 2020. The terms of the Mandatory Convertible Preferred Stock provide that, unless accumulated dividends have been paid or set aside for payment on all outstanding shares of Mandatory Convertible Preferred Stock for all past dividend periods, no dividends may be declared or paid on common stock.
Unless converted earlier, each outstanding share of the Mandatory Convertible Preferred Stock will automatically convert on August 1, 2020 into between 8.6806 and 10.4167 shares of the Company's common stock, depending on the applicable market value of the common stock and subject to certain anti-dilution adjustments. At any time prior to August 1, 2020, holders of the Mandatory Convertible Preferred Stock may elect to convert all or a portion of their shares into common stock at the minimum conversion rate of 8.6806, subject to certain anti-dilution adjustments.
The July 2017 Common Stock Offering and Mandatory Convertible Preferred Stock Offering are collectively referred to herein as "July 2017 Equity Financings."
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in thousands, except per share amounts)
August 2017 Senior Notes Offering
On August 1, 2017, the Company issued $750 million aggregate principal amount of 3.200% senior unsecured notes due 2024 ("3.2% Senior Notes") and $1.0 billion aggregate principal amount of 3.650% senior unsecured notes due 2027 ("3.65% Senior Notes") (collectively, "August 2017 Senior Notes Offering"). The Company intends to use the net proceeds of the August 2017 Senior Notes Offering to partially fund the Proposed Lightower Acquisition and pay related fees and expenses.
Common Stock Dividend
On August 3, 2017, the Company's board of directors declared a quarterly common stock cash dividend of $0.95 per share. The common stock dividend will be paid on September 29, 2017 to common stockholders of record as of September 15, 2017.
| |
ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following discussion should be read in conjunction with the response to Part I, Item 1 of this report and the consolidated financial statements of the Company including the related notes and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" ("MD&A") included in our 2016 Form 10-K. Capitalized terms used but not defined in this Item have the same meaning given to them in our 2016 Form 10-K. Unless this Form 10-Q indicates otherwise or the context otherwise requires, the terms "we," "our," "our company," "the company," or "us" as used in this Form 10-Q refer to Crown Castle International Corp., and its predecessor, as applicable, and their subsidiaries.
General Overview
Overview
We own, operate and lease shared wireless infrastructure that has been acquired or constructed over time and is geographically dispersed throughout the U.S., and which consists of (1) approximately 40,000 towers and (2) approximately 29,000 route miles of fiber primarily supporting small cell networks and fiber based solutions. Our towers have a significant presence in the top 100 basic trading areas ("BTAs"), and the majority of our fiber is located in major metropolitan areas. Site rental revenues represented 84% of our second quarter 2017 consolidated net revenues. Our Towers operating segment and Small Cells operating segment accounted for 83% and 17% of our second quarter 2017 site rental revenues, respectively. See note 10 to our condensed consolidated financial statements. The vast majority of our site rental revenues is of a recurring nature and was contracted for in a prior year.
Strategy
Our strategy is to create long-term stockholder value via a combination of (1) growing cash flows generated from our portfolio of wireless infrastructure, (2) returning a meaningful portion of our cash provided by operating activities to our stockholders in the form of dividends and (3) investing capital efficiently to grow cash flows and long-term dividends per share. We measure our efforts to create "long-term stockholder value" by the combined payment of dividends to stockholders and growth in our per share results. The key elements of our strategy are to:
| |
• | Grow cash flows from our wireless infrastructure. We seek to maximize our site rental cash flows by working with our customers to provide them quick access to our wireless infrastructure and entering into associated long-term leases. Tenant additions or modifications of existing tenant equipment (collectively, "tenant additions") enable our customers to expand coverage and capacity in order to meet increasing demand for wireless connectivity, while generating high incremental returns for our business. We believe our product offerings of towers and small cells provide a comprehensive solution to our customers' growing connectivity needs through our shared wireless infrastructure model, which is an efficient and cost effective way to serve our customers. We also believe that there will be considerable future demand for our wireless infrastructure based on the location of our wireless infrastructure and the rapid growth in wireless connectivity, which will lead to future growth in the wireless industry. |
| |
• | Return cash provided by operating activities to stockholders in the form of dividends. We believe that distributing a meaningful portion of our cash provided by operating activities appropriately provides stockholders with increased certainty for a portion of expected long-term stockholder value while still retaining sufficient flexibility to invest in our business and deliver growth. We believe this decision reflects the translation of the high-quality, long-term contractual cash flows of our business into stable capital returns to stockholders. |
| |
• | Invest capital efficiently to grow cash flows and long-term dividends per share. We seek to invest our available capital, including the net cash provided by our operating activities and external financing sources, in a manner that will increase long-term stockholder value on a risk-adjusted basis. Our historical investments have included the following (in no particular order): |
| |
◦ | purchases of shares of our common stock from time to time; |
| |
◦ | acquisitions or construction of towers, fiber and small cells; |
| |
◦ | acquisitions of land interests under towers; |
| |
◦ | improvements and structural enhancements to our existing wireless infrastructure; or |
| |
◦ | purchases, repayments or redemptions of our debt. |
Our strategy to create long-term stockholder value is based on our belief that additional demand for our wireless infrastructure will be created by the expected continued growth in the demand for wireless connectivity. We believe that such demand for our wireless infrastructure will continue, will result in growth of our cash flows due to tenant additions on our existing wireless infrastructure, and will create other growth opportunities for us, such as demand for new wireless infrastructure.
Business Fundamentals and Results
The following are certain highlights of our business fundamentals and results as of and for the six months ended June 30, 2017.
| |
• | We operate as a REIT for U.S. federal income tax purposes. |
| |
◦ | As a REIT, we are generally entitled to a deduction for dividends that we pay and therefore are not subject to U.S. federal corporate income tax on our taxable income that is distributed to our stockholders. |
| |
◦ | To qualify and be taxed as a REIT, we will generally be required to distribute at least 90% of our REIT taxable income, after the utilization of our NOLs (determined without regard to the dividends paid deduction and excluding net capital gain), each year to our stockholders. |
| |
◦ | See note 6 to our condensed consolidated financial statements for further discussion of our REIT status. |
| |
• | Potential growth resulting from wireless network expansion and new entrants caused by increasing demand for data and connectivity |
| |
◦ | We expect wireless carriers will continue their focus on improving network quality and expanding capacity by utilizing a combination of towers and small cells solutions. We believe our product offerings of towers and small cells provide a comprehensive wireless solution to our customers' growing wireless infrastructure needs. |
| |
◦ | We expect existing and potential new customer demand for our wireless infrastructure will result from (1) new technologies, (2) increased usage of wireless applications (including mobile entertainment, mobile internet usage, and machine-to-machine applications), (3) adoption of other emerging and embedded wireless devices (including smartphones, laptops, tablets, and other devices), (4) increasing smartphone penetration, (5) wireless carrier focus on expanding both network quality and capacity, including the use of both towers and small cells or (6) the availability of additional spectrum. |
| |
◦ | Tenant additions are achieved at a low incremental operating cost, delivering high incremental returns. |
| |
• | Substantially all of our wireless infrastructure can accommodate additional tenancy, either as currently constructed or with appropriate modifications. |
| |
◦ | U.S. wireless carriers continue to invest in their networks. |
| |
• | Site rental revenues under long-term tenant leases with contractual escalations |
| |
◦ | Initial terms of five to 15 years with multiple renewal periods at the option of the tenant of five to ten years each. |
| |
◦ | Weighted-average remaining term of approximately six years, exclusive of renewals at the tenant's option, currently representing approximately $19 billion of expected future cash inflows. |
| |
• | Revenues predominately from large wireless carriers |
| |
◦ | Approximately 86% of our site rental revenues were derived from AT&T, Sprint, T-Mobile, and Verizon Wireless. See also "Item 2. MD&A—General Overview—Outlook Highlights" presented below. |
| |
• | Majority of land interests under our towers under long-term control |
| |
◦ | Approximately 90% of our Towers site rental gross margin and more than 75% of our Towers site rental gross margin is derived from towers that reside on land that we own or control for greater than ten and 20 years, respectively. The aforementioned amounts include towers that reside on land interests that are owned, including fee interests and perpetual easements, which represent over one-third of our Towers site rental gross margin. |
| |
• | Minimal sustaining capital expenditure requirements |
| |
◦ | Sustaining capital expenditures represented less than 2% of net revenues. |
| |
• | Debt portfolio with long-dated maturities extended over multiple years, with the majority of such debt having a fixed rate (see "Item 3. Quantitative and Qualitative Disclosures About Market Risk" for a further discussion of our debt) |
| |
◦ | After giving effect to the August 2017 Senior Notes Offering, 82% of our debt is fixed rate. |
| |
◦ | Our debt service coverage and leverage ratios were comfortably within their respective financial maintenance covenants. |
| |
• | During 2017, we have completed the following debt and equity financing transactions. See notes 4, 9 and 12 to our condensed consolidated financial statements and "Item 2. MD&A—Liquidity and Capital Resources". |
| |
◦ | In February 2017, we issued the 4.0% Senior Notes and used the net proceeds to repay a portion of the borrowings under the 2016 Revolver. |
| |
◦ | In February 2017, we entered into an amendment to the Credit Facility to (1) incur additional term loans in an aggregate principal amount of $500 million and (2) extend the maturity of both the 2016 Term Loan A and the 2016 Revolver to January 2022. |
| |
◦ | In May 2017, we issued the 4.75% Senior Notes and used the net proceeds (1) to partially fund the Wilcon Acquisition and (2) to repay a portion of the borrowings under the 2016 Revolver. |
| |
◦ | During May 2017, we completed the May 2017 Equity Financing, which generated net proceeds of approximately $442 million, and used the net proceeds to partially fund the Wilcon Acquisition. |
| |
◦ | During July and August 2017, we completed the following financings, the collective proceeds of which we anticipate using to fund the Proposed Lightower Acquisition and pay related fees and expenses (see note 12): |
| |
◦ | the July 2017 Common Stock Offering, which generated net proceeds of approximately $3.8 billion; |
| |
◦ | the Mandatory Convertible Preferred Stock Offering, which generated net proceeds of approximately $1.6 billion; and |
| |
◦ | the August 2017 Senior Notes Offering, which generated net proceeds of approximately $1.7 billion. |
| |
• | Significant cash flows from operations |
| |
◦ | Net cash provided by operating activities was $934.1 million. |
| |
◦ | In addition to the positive impact of contractual escalators, we expect to grow our core business of providing access to our wireless infrastructure as a result of future anticipated additional demand for our wireless infrastructure. |
| |
• | Returning cash flows provided by operations to stockholders in the form of dividends |
| |
◦ | During each of March and June of 2017, we paid a common stock cash dividend of $0.95 per share, totaling approximately $696.0 million. We currently expect our anticipated common stock dividends over the next 12 months to be a cumulative amount of at least $3.80 per share, or an aggregate amount of approximately $1.5 billion. Over time, we expect to increase our dividend per share generally commensurate with our realized growth in cash flows. Any future dividends are subject to the approval of our board of directors. |
| |
• | Investing capital efficiently to grow long-term dividends per share |
| |
◦ | Discretionary capital expenditures were $527.9 million, including wireless infrastructure improvements in order to support additional site rentals, construction of wireless infrastructure and land purchases. |
| |
◦ | See note 3 to our condensed consolidated financial statements for a discussion of the FiberNet Acquisition and the Wilcon Acquisition and note 12 to our condensed consolidated financial statements for a discussion of the Proposed Lightower Acquisition, all of which we expect to leverage to support the construction of new small cells and fiber. |
Outlook Highlights
The following are certain highlights of our full year 2017 outlook that impact our business fundamentals described above.
| |
• | We expect that our full year 2017 site rental revenue growth will be impacted by (1) a healthy environment for tenant additions, as large wireless carriers upgrade and enhance their networks to meet the increasing need for wireless connectivity, (2) the FiberNet Acquisition and the Wilcon Acquisition (see note 3 to our condensed consolidated financial statements), and (3) anticipated non-renewals of tenant leases primarily resulting from our customers' decommissioning of the Acquired Networks. |
| |
• | We expect capital expenditures for 2017 to equal or exceed levels from 2016 with a continued increase in the construction of new small cells. We also expect sustaining capital expenditures to be approximately 2% of net revenues for full year 2017. |
| |
• | We expect the Proposed Lightower Acquisition to close by the end of 2017. |
Results of Operations
The following discussion of our results of operations should be read in conjunction with our condensed consolidated financial statements and our 2016 Form 10-K.
The following discussion of our results of operations is based on our condensed consolidated financial statements prepared in accordance with GAAP, which requires us to make estimates and judgments that affect the reported amounts (see "Item 2. MD&A—Accounting and Reporting Matters—Critical Accounting Policies and Estimates" and note 2 to our consolidated financial statements in our 2016 Form 10-K).
Our operating segments consist of (1) Towers and (2) Small Cells. See note 10 to our condensed consolidated financial statements for further discussion of our operating segments.
See "Item 2. MD&A—Accounting and Reporting Matters—Non-GAAP and Segment Financial Measures" for a discussion of our use of (1) segment site rental gross margin, (2) segment network services and other gross margin, (3) segment operating profit, including their respective definitions, and (4) Adjusted EBITDA, including its definition, and a reconciliation to net income (loss).
Highlights of the Company's results of operations for the three months ended June 30, 2017 and 2016 are depicted below.
|
| | | | | | | | |
($ in thousands) | | Three Months Ended June 30, | | | | |
| 2017 | | 2016 | | $ Change | | % Change |
Site rental revenues: | | | | | | | | |
Towers site rental revenues | | $717,645 | | $705,716 | | +$11,929 | | +2% |
Small Cells site rental revenues | | $151,161 | | $98,884 | | +$52,277 | | +53% |
Total site rental revenues | | $868,806 | | $804,600 | | +$64,206 | | +8% |
Segment site rental gross margin: | | | | | | | | |
Towers site rental gross margin(b) | | $506,441 | | $495,272 | | +$11,169 | | +2% |
Small Cells site rental gross margin(b) | | $99,300 | | $64,719 | | +$34,581 | | +53% |
Segment network services and other gross margin: | | | | | | | | |
Towers network services and other gross margin(b) | | $62,140 | | $60,131 | | +$2,009 | | |