Document
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________
 
FORM 10-Q
____________________________________
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2018
OR
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
____________________________________
cclogoa03.jpg
CROWN CASTLE INTERNATIONAL CORP.
(Exact name of registrant as specified in its charter)
 
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.
 
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 3, 2018: 414,839,956
 


CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES

INDEX
 
 
 
Page
 
ITEM 1.
 
 
 
 
 
 
 
 
 
 
 
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," "continue" and 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, and demand for data and our communications infrastructure, (2) expectations regarding our communications infrastructure and the potential benefits that may be derived therefrom, (3) expectations regarding non-renewals of tenant contracts, (4) availability and adequacy of cash flows and liquidity for, or plans regarding, future discretionary investments, including capital expenditures, (5) potential benefits of our discretionary investments, including acquisitions, (6) our full year 2018 outlook and the anticipated growth in our financial results, including future revenues and operating cash flows, (7) expectations regarding construction of small cells and fiber, (8) expectations regarding our capital structure and the credit markets, our availability and cost of capital, our leverage ratio and interest coverage targets, and our ability to service our debt and comply with debt covenants and the plans for and the benefits of any future refinancings, (9) expectations regarding loss on retirement of debt, (10) 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, (11) the utilization of our net operating loss carryforwards ("NOLs"), (12) expectations related to the impact of customer consolidation or ownership changes, including the potential combination of T-Mobile and Sprint and (13) our dividend policy and the timing, amount, growth or tax characterization of any dividends. All future dividends are subject to declaration by our board of directors.
Such forward-looking statements should, therefore, be considered in light of various risks, uncertainties and assumptions, including prevailing market conditions, risk factors described in "Part II—Item 1A. Risk Factors" herein and "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 ("2017 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.

1

Interpretation
As used herein, the term "including," and any variation thereof, means "including without limitation." The use of the word "or" herein is not exclusive. 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 (organized in 1995), as applicable, each a Delaware corporation (together, "CCIC"), and their subsidiaries. Additionally, unless the context suggests otherwise, references to "U.S." are to the United States of America and Puerto Rico, collectively.


2

PART I—FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS

CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
(Amounts in millions, except par values)
 
June 30,
2018
 
December 31,
2017
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
206

 
$
314

Restricted cash
125

 
121

Receivables, net
455

 
398

Prepaid expenses
197

 
162

Other current assets
181

 
139

Total current assets
1,164

 
1,134

Deferred site rental receivables
1,303

 
1,300

Property and equipment, net of accumulated depreciation of $8,023 and $7,500, respectively
13,218

 
12,933

Goodwill
10,075

 
10,021

Other intangible assets, net
5,729

 
5,962

Long-term prepaid rent and other assets, net
885

 
879

Total assets
$
32,374

 
$
32,229

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
272

 
$
249

Accrued interest
154

 
132

Deferred revenues
476

 
457

Other accrued liabilities
272

 
339

Current maturities of debt and other obligations
112

 
115

Total current liabilities
1,286

 
1,292

Debt and other long-term obligations
15,844

 
16,044

Other long-term liabilities
2,678

 
2,554

Total liabilities
19,808

 
19,890

Commitments and contingencies (note 9)

 

CCIC stockholders' equity:
 
 
 
Common stock, $0.01 par value; 600 shares authorized; shares issued and outstanding: June 30, 2018—415 and December 31, 2017—406
4

 
4

6.875% Mandatory Convertible Preferred Stock, Series A, $0.01 par value; 20 shares authorized; shares issued and outstanding: June 30, 2018—2 and December 31, 2017—2; aggregate liquidation value: June 30, 2018—$1,650 and December 31, 2017—$1,650
—

 
—

Additional paid-in capital
17,711

 
16,844

Accumulated other comprehensive income (loss)
(5
)
 
(4
)
Dividends/distributions in excess of earnings
(5,144
)
 
(4,505
)
Total equity
12,566

 
12,339

Total liabilities and equity
$
32,374

 
$
32,229

 
See notes to condensed consolidated financial statements.

3
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS) (Unaudited)
(Amounts in millions, except per share amounts)


 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Net revenues:
 
 
 
 
 
 
 
Site rental
$
1,169

 
$
869

 
$
2,323

 
$
1,726

Network services and other
161

 
169

 
307

 
328

Net revenues
1,330

 
1,038

 
2,630

 
2,054

Operating expenses:
 
 
 
 
 
 
 
Costs of operations(a):
 
 
 
 
 
 
 
Site rental
355

 
269

 
702

 
534

Network services and other
99

 
104

 
185

 
203

General and administrative
138

 
98

 
273

 
199

Asset write-down charges
6

 
4

 
9

 
5

Acquisition and integration costs
8

 
8

 
14

 
14

Depreciation, amortization and accretion
379

 
296

 
753

 
584

Total operating expenses
985

 
779

 
1,936

 
1,539

Operating income (loss)
345

 
259

 
694

 
515

Interest expense and amortization of deferred financing costs
(158
)
 
(142
)
 
(318
)
 
(276
)
Gains (losses) on retirement of long-term obligations
(3
)
 
—

 
(74
)
 
(4
)
Interest income
1

 
1

 
2

 
1

Other income (expense)
—

 
(1
)
 
(1
)
 
4

Income (loss) before income taxes
185

 
117

 
303

 
240

Benefit (provision) for income taxes
(5
)
 
(5
)
 
(9
)
 
(9
)
Net income (loss) attributable to CCIC stockholders
180


112


294


231

Dividends on preferred stock
(28
)
 
—

 
(57
)
 
—

Net income (loss) attributable to CCIC common stockholders
$
152

 
$
112

 
$
237

 
$
231

Net income (loss)
$
180

 
$
112

 
$
294

 
$
231

Other comprehensive income (loss):
 
 
 
 
 
 
 
Foreign currency translation adjustments
(1
)
 
1

 
(1
)
 
1

Total other comprehensive income (loss)
(1
)
 
1

 
(1
)
 
1

Comprehensive income (loss) attributable to CCIC stockholders
$
179

 
$
113

 
$
293

 
$
232

Net income (loss) attributable to CCIC common stockholders, per common share:
 
 
 
 
 
 
 
Net income (loss) attributable to CCIC common stockholders—basic
$
0.37

 
$
0.31

 
$
0.58

 
$
0.64

Net income (loss) attributable to CCIC common stockholders—diluted
$
0.36

 
$
0.31

 
$
0.57

 
$
0.64

Weighted-average common shares outstanding:
 
 
 
 
 
 
 
Basic
415
 
364

 
412
 
363
Diluted
416
 
366

 
413
 
364
Dividends/distributions declared per share of common stock
$
1.05

 
$
0.95

 
$
2.10

 
$
1.90

________________
(a)
Exclusive of depreciation, amortization and accretion shown separately.

See notes to condensed consolidated financial statements.

4
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(In millions of dollars)

 
Six Months Ended June 30,
 
 
2018
(a)
2017
(a)
Cash flows from operating activities:
 
 
 
 
Net income (loss)
$
294

 
$
231

 
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
 
 
 
 
Depreciation, amortization and accretion
753

 
584

 
(Gains) losses on retirement of long-term obligations
74

 
4

 
Amortization of deferred financing costs and other non-cash interest
4

 
5

 
Stock-based compensation expense
47

 
45

 
Asset write-down charges
9

 
5

 
Deferred income tax (benefit) provision
1

 
—

 
Other non-cash adjustments, net
1

 
(3
)
 
Changes in assets and liabilities, excluding the effects of acquisitions:
 
 
 
 
Increase (decrease) in accrued interest
22

 
11

 
Increase (decrease) in accounts payable
3

 
(17
)
 
Increase (decrease) in deferred revenues, deferred ground lease payables, other accrued liabilities and other liabilities
53

 
23

 
Decrease (increase) in receivables
(59
)
 
91

 
Decrease (increase) in prepaid expenses, deferred site rental receivables, long-term prepaid rent and other assets
(91
)
 
(48
)
 
Net cash provided by (used for) operating activities
1,111

 
931

 
Cash flows from investing activities:
 
 
 
 
Payments for acquisitions, net of cash acquired
(18
)
 
(2,104
)
 
Capital expenditures
(763
)
 
(563
)
 
Other investing activities, net
3

 
(8
)
 
Net cash provided by (used for) investing activities
(778
)
 
(2,675
)
 
Cash flows from financing activities:
 
 
 
 
Proceeds from issuance of long-term debt
1,743

 
1,345

 
Principal payments on debt and other long-term obligations
(47
)
 
(60
)
 
Purchases and redemptions of long-term debt
(1,318
)
 
—

 
Borrowings under revolving credit facility
485

 
1,755

 
Payments under revolving credit facility
(1,150
)
 
(1,405
)
 
Payments for financing costs
(20
)
 
(11
)
 
Net proceeds from issuance of common stock
841

 
464

 
Purchases of common stock
(34
)
 
(23
)
 
Dividends/distributions paid on common stock
(879
)
 
(696
)
 
Dividends paid on preferred stock
(57
)
 
—

 
Net cash provided by (used for) financing activities
(436
)
 
1,369

 
Net increase (decrease) in cash, cash equivalents, and restricted cash
(103
)
 
(375
)
 
Discontinued operations:
 
 
 
 
Net cash provided by (used for) operating activities


 
—

 
Net cash provided by (used for) investing activities


 
—

 
Net increase (decrease) in cash and cash equivalents and restricted cash—discontinued operations
—


—

 
Effect of exchange rate changes
(1
)
 
1

 
Cash, cash equivalents, and restricted cash at beginning of period(a)
440

 
697

 
Cash, cash equivalents, and restricted cash at end of period(a)
$
336

 
$
323

 
    
(a)
See "Recently Adopted Accounting Pronouncements" in note 2 to the condensed consolidated financial statements for a discussion of recently adopted restricted cash guidance, which impacted certain presentations on the condensed consolidated statement of cash flows.


See notes to condensed consolidated financial statements.

5

CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
(Amounts in millions) (Unaudited)


 
Common Stock
 
6.875% 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, 2018
415

 
$
4

 
2

 
—

 
$
17,690

 
$
(4
)
 
$
(4,858
)
 
$
12,832

Stock-based compensation related activity, net of forfeitures
—

 
—

 
—

 
—

 
24

 
—

 
—

 
24

Purchases and retirement of common stock
—

 
—

 
—

 
—

 
(1
)
 
—

 
—

 
(1
)
Net proceeds from issuance of common stock
—

 
—

 
—

 
—

 
(2
)
 
—

 
—

 
(2
)
Other comprehensive income (loss)(a)
—

 
—

 
—

 
—

 
—

 
(1
)
 
—

 
(1
)
Common stock dividends/distributions
—

 
—

 
—

 
—

 
—

 
—

 
(438
)
 
(438
)
Preferred stock dividends
—

 
—

 
—

 
—

 
—

 
—

 
(28
)
 
(28
)
Net income (loss)
—

 
—

 
—

 
—

 
—

 
—

 
180

 
180

Balance, June 30, 2018
415

 
$
4

 
2

 
$
—

 
$
17,711

 
$
(5
)
 
$
(5,144
)
 
$
12,566

    
(a)
See the condensed statement of operations and other comprehensive income (loss) for the components of "other comprehensive income (loss)."
 
Common Stock
 
6.875% 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, 2017
361

 
$
4

 
—

 
—

 
$
10,968

 
$
(6
)
 
$
(3,603
)
 
$
7,363

Stock-based compensation related activity, net of forfeitures
—

 
—

 
—

 
—

 
23

 
—

 
—

 
23

Purchases and retirement of common stock
—

 
—

 
—

 
—

 
(1
)
 
—

 
—

 
(1
)
Net proceeds from issuance of common stock
5

 
—

 
—

 
—

 
442

 
—

 
—

 
442

Other comprehensive income (loss)(a)
—

 
—

 
—

 
—

 
—

 
1

 
—

 
1

Common stock dividends/distributions
—

 
—

 
—

 
—

 
—

 
—

 
(350
)
 
(350
)
Net income (loss)
—

 
—

 
—

 
—

 
—

 
—

 
112

 
112

Balance, June 30, 2017
366

 
$
4

 
—

 
$
—

 
$
11,432

 
$
(5
)
 
$
(3,841
)
 
$
7,590

    
(a)
See the condensed statement of operations and other comprehensive income (loss) for the components of "other comprehensive income (loss)."







6

CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
(Amounts in millions) (Unaudited)



 
Common Stock
 
6.875% 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, 2018
406

 
$
4

 
2

 
—

 
$
16,844

 
$
(4
)
 
$
(4,505
)
 
$
12,339

Stock-based compensation related activity, net of forfeitures
1

 
—

 
—

 
—

 
60

 
—

 
—

 
60

Purchases and retirement of common stock
—

 
—

 
—

 
—

 
(34
)
 
—

 
—

 
(34
)
Net proceeds from issuance of common stock
8

 
—

 
—

 
—

 
841

 
—

 
—

 
841

Other comprehensive income (loss)(a)
—

 
—

 
—

 
—

 
—

 
(1
)
 
—

 
(1
)
Common stock dividends/distributions
—

 
—

 
—

 
—

 
—

 
—

 
(876
)
 
(876
)
Preferred stock dividends
—

 
—

 
—

 
—

 
—

 
—

 
(57
)
 
(57
)
Net income (loss)
—

 
—

 
—

 
—

 
—

 
—

 
294

 
294

Balance, June 30, 2018
415

 
$
4

 
2

 
$
—

 
$
17,711

 
$
(5
)
 
$
(5,144
)
 
$
12,566

    
(a)
See the condensed statement of operations and other comprehensive income (loss) for the components of "other comprehensive income (loss)."


 
Common Stock
 
6.875% 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
361

 
$
4

 
—

 
—

 
$
10,938

 
$
(6
)
 
$
(3,379
)
 
$
7,557

Stock-based compensation related activity, net of forfeitures
1

 
—

 
—

 
—

 
53

 
—

 
—

 
53

Purchases and retirement of common stock
—

 
—

 
—

 
—

 
(23
)
 
—

 
—

 
(23
)
Net proceeds from issuance of common stock
4

 
—

 
—

 
—

 
464

 
—

 
—

 
464

Other comprehensive income (loss)(a)
—

 
—

 
—

 
—

 
—

 
1

 
—

 
1

Common stock dividends/distributions
—

 
—

 
—

 
—

 
—

 
—

 
(693
)
 
(693
)
Net income (loss)
—

 
—

 
—

 
—

 
—

 
—

 
231

 
231

Balance, June 30, 2017
366

 
$
4

 
—

 
$
—

 
$
11,432

 
$
(5
)
 
$
(3,841
)
 
$
7,590

    
(a)
See the condensed statement of operations and other comprehensive income (loss) for the components of "other comprehensive income (loss)."

7

CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited
(Tabular dollars in millions, except per share amounts)


1.
General
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, 2017, and related notes thereto, included in the 2017 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 2017 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. Unless the context suggests otherwise, references to "U.S." are to the United States of America and Puerto Rico, collectively.
The Company owns, operates and leases shared communications infrastructure that is geographically dispersed throughout the U.S., including (1) towers and other structures, such as rooftops (collectively, "towers"), and (2) fiber primarily supporting small cell networks ("small cells") and fiber solutions. The Company's towers, fiber and small cells assets are collectively referred to herein as "communications infrastructure," and the Company's customers on its communications infrastructure are referred to herein as "tenants."
The Company's core business is providing access, including space or capacity, to its shared communications infrastructure via long-term contracts in various forms, including lease, license, sublease and service agreements (collectively, "contracts").
The Company's operating segments consist of (1) Towers and (2) Fiber. See note 11.
As part of the Company's effort to provide comprehensive communications infrastructure solutions, the Company offers certain network services relating to its communications infrastructure, consisting of (1) site development services primarily relating to existing or new tenant equipment installations on its towers and small cells, including: site acquisition, architectural and engineering, or zoning and permitting (collectively, "site development services") and (2) tenant equipment installation or subsequent augmentations (collectively, "installation services").
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 7.
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, 2018, and the consolidated results of operations and the consolidated cash flows for the six months ended June 30, 2018 and 2017. 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.
The Company has changed its presentation from thousands to millions and, as a result, any necessary rounding adjustments have been made to prior year disclosed amounts.

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 2017 Form 10-K, other than as updated by certain recent accounting pronouncements described below.

8

CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in millions, except per share amounts)

Recently Adopted Accounting Pronouncements
In May 2014, the FASB released updated guidance regarding the recognition of revenue from contracts with customers not otherwise addressed by specific guidance (commonly referred to as "ASC 606" or "the revenue recognition standard"). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  To achieve that core principle, an entity should apply the following steps: (1) identify the contracts with the customer; (2) identify the performance obligations in the contract; (3) determine the contract price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation.  This guidance was effective for the Company on January 1, 2018.  This guidance was required to be applied, at the Company's election, either (1) retrospectively to each prior reporting period presented or (2) under the modified retrospective method, with the cumulative effect being recognized at the date of initial application.
Given the nature of the Company’s contracts with customers, the Company’s pattern of revenue recognition is not impacted by the adoption of the revenue recognition standard. The Company adopted the revenue recognition standard under the modified retrospective method, and the Company's adoption of the revenue recognition standard did not result in any adjustment to the balance of dividends/distributions in excess of earnings as of January 1, 2018.
See note 4 for further discussion regarding the Company’s revenues.
In November 2016, the FASB issued new guidance which requires an entity's statement of cash flows to explain the change in restricted cash and restricted cash equivalents in addition to the change in cash and cash equivalents. This new guidance also requires an entity that includes cash, cash equivalents, restricted cash and restricted cash equivalents on multiple lines on its balance sheet to present a reconciliation of those line items between its statement of cash flows and its balance sheet. The Company adopted this guidance retrospectively, on January 1, 2018, and the impact of the new guidance is limited to certain changes in presentation on the condensed consolidated statement of cash flows and certain disclosures. See note 12.
In January 2017, the FASB issued new guidance which clarifies the definition of a business in order to assist companies in evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The Company adopted the guidance on January 1, 2018, and the adoption of this guidance did not have a material impact on its condensed consolidated financial statements.
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. This guidance is required to be applied, at the Company's election, either using a (1) modified retrospective approach for all leases existing at, or entered into after, the beginning of the earliest comparative period presented, or (2) cumulative-effect approach for all leases existing at, or entered into, after the effective date. The Company expects to apply the guidance using the cumulative-effect approach, thereby applying the new guidance at the effective date, without adjusting the comparative periods and, if necessary, recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Although early adoption is permitted, the Company will not adopt the new guidance prior to January 1, 2019.
With regard to the application of this guidance to the Towers segment, the Company expects that (1) its Towers lessee arrangements will continue to be classified as operating leases under the new guidance; (2) this guidance will have a material impact on its condensed consolidated balance sheet due to the addition of right-of-use assets and lease liabilities for lessee arrangements (which primarily consist of ground leases under the Company's towers); and (3) there will not be a material impact to its condensed consolidated statement of operations and condensed consolidated statement of cash flows. The Company is in the process of updating certain of its existing information technology systems to integrate the new guidance requirement with respect to its Tower segment. With regard to the application of this guidance to the Fiber segment, 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 condensed consolidated balance sheet due to the addition of right-of-use assets and lease liabilities for lessee arrangements (which primarily consist of fiber-related leases); and (3) continues to assess additional impacts to its condensed consolidated financial statements, including the condensed consolidated statement of operations and the condensed consolidated statement of cash flows.

9

CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in millions, except per share amounts)


3.
Acquisitions
Lightower Acquisition
On July 18, 2017, the Company announced that it had entered into a definitive 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 ("Lightower Acquisition"). Lightower owned or had rights to approximately 32,000 route miles of fiber located primarily in top metro markets in the Northeast, including Boston, New York and Philadelphia. On November 1, 2017, the Company closed the Lightower Acquisition.
The preliminary purchase price allocation for the Lightower 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
$
99

Property and equipment
2,194

Goodwill(a)
3,168

Other intangible assets, net(b)
2,177

Other non-current assets
30

Current liabilities
(174
)
Other non-current liabilities
(342
)
Net assets acquired(c)
$
7,152

    
(a)
The preliminary purchase price allocation for the Lightower Acquisition resulted in the recognition of goodwill based on:
•
the Company's expectation to leverage the Lightower fiber footprint to support new small cells and fiber solutions,
•
the complementary nature of the Lightower fiber to the Company's existing fiber assets and its location 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 demand for data, and
•
other intangibles not qualified for separate recognition, including the assembled workforce.
(b)
Predominately comprised of site rental contracts and customer relationships.
(c)
The vast majority of the assets have been included in the Company's REIT. As such, no deferred taxes were recorded in connection with the Lightower Acquisition.

4.
Revenues
Site rental revenues
The Company generates site rental revenues from its core business by providing customers with access, including space or capacity, to its shared communications infrastructure via long-term contracts in various forms, including lease, license, sublease and service agreements. Providing such access over the length of the contract term represents the Company’s sole performance obligation under its site rental contracts.
Site rental revenues from the Company’s contracts are recognized on a straight-line, monthly basis over the fixed, non-cancelable term of the relevant contract, which generally ranges from five to 15 years for wireless customers and three to 20 years related to the Company's fiber solutions (including from organizations with high-bandwidth and multi-location demands), regardless of whether the payments from the tenant are received in equal monthly amounts during the life of a contract. Certain of the Company's contracts contain fixed escalation clauses (such as fixed-dollar or fixed-percentage increases) or inflation-based escalation clauses (such as those tied to the consumer price index). If the payment terms call for fixed escalations, upfront payments, or rent-free periods, the revenue is recognized on a straight-line basis over the fixed, non-cancelable term of the agreement. When calculating straight-line rental revenues, the Company considers all fixed elements of tenant contractual escalation provisions. The Company's assets related to straight-line site rental revenues include current amounts of $121 million included in "other current assets" and non-current amounts of $1.3 billion included in "deferred site rental receivables" for the period ended June 30, 2018. Amounts billed or received prior to being earned are deferred and reflected in "deferred revenues" and "other long-term liabilities." Amounts to which the Company has an unconditional right to payment, which are related to both satisfied or partially satisfied performance obligations, are recorded within "receivables, net" on the Company's condensed consolidated balance sheet.

10

CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in millions, except per share amounts)

Network services and other revenues
As part of the Company’s effort to provide comprehensive communications infrastructure solutions, the Company offers certain network services, primarily relating to its towers and small cells, predominately consisting of (1) site development services and (2) installation services.
Under network service agreements, the Company may have multiple performance obligations for site development services, which primarily include: structural analysis, zoning, permitting and construction drawings. Upon contract commencement, the Company assesses services to customers and identifies performance obligations for each promise to provide a distinct service. The volume and mix of site development services may vary among contracts, and may include a combination of some or all of the above performance obligations. For each of the above performance obligations, network services revenues are recognized at completion of the applicable performance obligation, which represents the point at which the Company believes it has transferred goods or services to the customer. The revenue recognized is based on an allocation of the transaction price among the performance obligations in a respective contract based on estimated standalone selling price. Payments generally are due within 45 days and generally do not contain variable-consideration provisions. Since performance obligations are typically satisfied prior to receiving payment from customers, the unconditional right to payment is recorded within "receivables, net" on the Company’s condensed consolidated balance sheet. The Company has one performance obligation for installation services, which is satisfied at the time of the respective installation or augmentation. This single performance obligation is typically completed in advance of receipt of payment from customers, and therefore the unconditional right to payment is recorded within “receivables, net” on the Company’s condensed consolidated balance sheet.
The vast majority of the Company’s network services relates to the Company’s Towers operating segment, and generally have a duration of one year or less.
Additional information on revenues
As of January 1, 2018 and June 30, 2018, $2.1 billion and $2.2 billion of unrecognized revenue, respectively, was reported in "deferred revenues" and "other non-current liabilities" on our condensed consolidated balance sheet. During the six months ended June 30, 2018, approximately $200 million of the January 1, 2018 unrecognized revenue balance was recognized as revenue.
The following table is a summary of the contracted amounts owed to the Company by customers pursuant to site rental contracts in effect as of June 30, 2018.
 
 
Six months ending December 31,
 
Years ending December 31,
 
 
 
 
 
 
2018
 
2019
 
2020
 
2021
 
2022
 
Thereafter
 
Total
Contracted amounts(a)
 
$
2,039

 
$
3,829

 
$
3,552

 
$
3,279

 
$
3,054

 
$
6,928

 
$
22,681

    
(a)
Excludes amounts related to network services, as those contracts generally have a duration of one year or less.
See note 11 for further information regarding the Company's operating segments.


11

CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in millions, except per share amounts)

5.
Debt and Other Obligations
 
Original
Issue Date
 
Contractual
Maturity
Date (a)
 
Balance as of
June 30, 2018
 
Balance as of
December 31, 2017
 
Stated Interest
Rate as of
June 30, 2018(a)
 
Bank debt - variable rate:
 
 
 
 
 
 
 
 
 
 
2016 Revolver
Jan. 2016
 
Jun. 2023
(e) 
$
315

(b)(d)(e) 
$
980

 
3.4
%
(e) 
2016 Term Loan A
Jan. 2016
 
Jun. 2023
(e) 
2,383

 
2,397

 
3.3
%
(e) 
Total bank debt
 
 
 
 
2,698

 
3,377

 
 
 
Securitized debt - fixed rate:
 
 
 
 
 
 
 
 
 
 
Secured Notes, Series 2009-1, Class A-1
July 2009
 
Aug. 2019
 
22

 
32

 
6.3
%
 
Secured Notes, Series 2009-1, Class A-2
July 2009
 
Aug. 2029
 
70

 
70

 
9.0
%
 
Tower Revenue Notes, Series 2010-3
Jan. 2010
 
Jan. 2040
(c) 
—

(d) 
1,246

 
N/A

 
Tower Revenue Notes, Series 2010-6
Aug. 2010
 
Aug. 2040
(c) (f) 
996

 
995

 
4.9
%
 
Tower Revenue Notes, Series 2015-1
May 2015
 
May 2042
(c) 
298

 
297

 
3.2
%
 
Tower Revenue Notes, Series 2015-2
May 2015
 
May 2045
(c) 
693

 
692

 
3.7
%
 
Total securitized debt
 
 
 
 
2,079

 
3,332

 
 
 
Bonds - fixed rate:
 
 
 
 
 
 
 
 
 
 
5.250% Senior Notes
Oct. 2012
 
Jan. 2023
 
1,640

 
1,639

 
5.3
%
 
3.849% Secured Notes
Dec. 2012
 
Apr. 2023
 
993

 
993

 
3.9
%
 
4.875% Senior Notes
Apr. 2014
 
Apr. 2022
 
843

 
842

 
4.9
%
 
3.400% Senior Notes
Feb./May 2016
 
Feb. 2021
 
850

 
850

 
3.4
%
 
4.450% Senior Notes
Feb. 2016
 
Feb. 2026
 
892

 
891

 
4.5
%
 
3.700% Senior Notes
May 2016
 
June 2026
 
743

 
743

 
3.7
%
 
2.250% Senior Notes
Sept. 2016
 
Sept. 2021
 
696

 
695

 
2.3
%
 
4.000% Senior Notes
Feb. 2017
 
Mar. 2027
 
494

 
494

 
4.0
%
 
4.750% Senior Notes
May 2017
 
May 2047
 
343

 
343

 
4.8
%
 
3.200% Senior Notes
Aug. 2017
 
Sept. 2024
 
742

 
742

 
3.2
%
 
3.650% Senior Notes
Aug. 2017
 
Sept. 2027
 
991

 
991

 
3.7
%
 
3.150% Senior Notes
Jan. 2018
 
Jul. 2023
 
742

(d) 
—

 
3.2
%
 
3.800% Senior Notes
Jan. 2018
 
Feb. 2028
 
988

(d) 
—

 
3.8
%
 
Total bonds
 
 
 
 
10,957

 
9,223

 
 
 
Other:
 
 
 
 
 
 
 
 
 
 
Capital leases and other obligations
Various
 
Various
 
222

 
227

 
Various

 
Total debt and other obligations
 
 
 
 
15,956

 
16,159

 
 
 
Less: current maturities and short-term debt and other current obligations
 
 
 
 
112

 
115

 
 
 
Non-current portion of long-term debt and other long-term obligations
 
 
 
 
$
15,844

 
$
16,044

 
 
 
    
(a)
See the 2017 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, 2018, the undrawn availability under the 2016 Revolver was $3.9 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 2017 Form 10-K for additional information regarding these provisions.
(d)
In January 2018, the Company issued $750 million aggregate principal amount of 3.150% senior unsecured notes due July 2023 ("3.15% Senior Notes") and $1.0 billion aggregate principal amount of 3.800% senior unsecured notes due February 2028 ("3.80% Senior Notes") (collectively, "January 2018 Senior Notes Offering"). The Company used the net proceeds of the January 2018 Senior Notes Offering to repay (1) in full the January 2010 Tower Revenue Notes and (2) a portion of the outstanding borrowings under the 2016 Revolver.
(e)
In June 2018, the Company entered into an amendment to the Credit Facility to (1) increase commitments on the 2016 Revolver by $750 million,for total 2016 Revolver commitments of $4.25 billion, and (2) extend the maturity of the Credit Facility from August 2022 to June 2023. Additionally, pursuant to this amendment and with regards to the Credit Facility, the Company is obligated to pay (1) interest at a rate per annum equal to LIBOR plus a credit spread ranging from 1.00% to 1.75%, and (2) commitment fees ranging from 0.125% and 0.35%, each of which is based on the Company's senior unsecured debt rating.
(f)
See note 13 for more information regarding the Company's July 2018 Tower Revenue Notes (as defined in note 13).


12

CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in millions, 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, 2018. 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
 
2018
 
2019
 
2020
 
2021
 
2022
 
Thereafter
 
Total Cash Obligations
 
 
Scheduled contractual maturities
$
56

 
$
105

 
$
137

 
$
1,699

 
$
1,085

 
$
12,984

 
$
16,066

 
$
(110
)
 
$
15,956

Purchases and Redemptions of Long-Term Debt
The following is a summary of purchases and redemptions of long-term debt during the six months ended June 30, 2018.
 
Principal Amount
 
Cash Paid(a)
 
Gains (Losses)
 
January 2010 Tower Revenue Notes
$
1,250

 
$
1,318

 
$
(71
)
(b) 
2016 Term Loan A
$
—

 
$
—

 
$
(3
)
(b) 
Total
$
1,250

 
$
1,318

 
$
(74
)
 
    
(a)
Exclusive of accrued interest.
(b)
Inclusive of the write off of respective deferred financing costs.

See note 13.
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,
 
2018
 
2017
 
2018
 
2017
Interest expense on debt obligations
$
157

 
$
139

 
$
314

 
$
271

Amortization of deferred financing costs and adjustments on long-term debt
5

 
5

 
11

 
9

Other, net of capitalized interest
(4
)
 
(2
)
 
(7
)
 
(4
)
Total
$
158

 
$
142

 
$
318

 
$
276


6.
Fair Value Disclosures
 
Level in Fair Value Hierarchy
 
June 30, 2018
 
December 31, 2017
 
 
Carrying
 Amount
 
Fair
Value
 
Carrying
 Amount
 
Fair
Value
Assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
1
 
$
206

 
$
206

 
$
314

 
$
314

Restricted cash, current and non-current
1
 
130

 
130

 
126

 
126

Liabilities:
 
 
 
 
 
 
 
 
 
Total debt and other obligations
2
 
15,956

 
15,911

 
16,159

 
16,644

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, 2017 in the Company's valuation techniques used to measure fair values.


13

CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in millions, except per share amounts)

7.
Income Taxes
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) taxes on any undistributed income, (2) taxes related to the TRSs, (3) franchise taxes, (4) property taxes, and (5) 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, to maintain qualification for taxation as a REIT.
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) are 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, 2018 and 2017, 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.

8.
Per Share Information
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. For the three and six months ended June 30, 2018, 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 upon (1) the vesting of restricted stock units as determined under the treasury stock method and (2) conversion of the Company's 6.875% Mandatory Convertible Preferred Stock (as defined in note 10), as determined under the if-converted method. For the three and six months ended June 30, 2017, 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 upon the vesting of restricted stock units as determined under the treasury stock method.
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Net income (loss) attributable to CCIC stockholders
$
180

 
$
112

 
$
294

 
$
231

Dividends on preferred stock
(28
)
 
—

 
(57
)
 
—

Net income (loss) attributable to CCIC common stockholders for basic and diluted computations
$
152

 
$
112

 
$
237

 
$
231

 
 
 
 
 
 
 
 
Weighted-average number of common shares outstanding (in millions):
 
 
 
 
 
 
 
Basic weighted-average number of common stock outstanding
415

 
364

 
412

 
363

Effect of assumed dilution from potential issuance of common shares relating to restricted stock units
1

 
2

 
1

 
1

Diluted weighted-average number of common shares outstanding
416

 
366

 
413

 
364

 
 
 
 
 
 
 
 
Net income (loss) attributable to CCIC common stockholders, per common share:
 
 
 
 
 
 
 
Basic
$
0.37

 
$
0.31

 
$
0.58

 
$
0.64

Diluted
$
0.36

 
$
0.31

 
$
0.57

 
$
0.64

During the six months ended June 30, 2018, the Company granted one million restricted stock units. For both the three and six months ended June 30, 2018, 16 million common share equivalents related to the 6.875% 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 June 30, 2018.

14

CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in millions, except per share amounts)


9.
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.

10.
Equity
Declaration and Payment of Dividends
During the six months ended June 30, 2018, the following dividends were declared or paid:
Equity Type
 
Declaration Date
 
Record Date
 
Payment Date
 
Dividends Per Share
 
Aggregate
Payment
Amount
 
Common Stock
 
February 21, 2018
 
March 16, 2018
 
March 30, 2018
 
$
1.05

 
$
439

(a) 
Common Stock
 
May 17, 2018
 
June 15, 2018
 
June 29, 2018
 
$
1.05

 
$
438

(a) 
6.875% Mandatory Convertible Preferred Stock
 
December 15, 2017
 
January 15, 2018
 
February 1, 2018
 
$
17.1875

 
$
28

 
6.875% Mandatory Convertible Preferred Stock
 
March 19, 2018
 
April 15, 2018
 
May 1, 2018
 
$
17.1875

 
$
28

 
6.875% Mandatory Convertible Preferred Stock
 
June 22, 2018
 
July 15, 2018
 
August 1, 2018
 
$
17.1875

 
$
28

 
    
(a)
Inclusive of dividends accrued for holders of unvested restricted stock units, which will be paid when and if the restricted stock units vest.
See note 13.
Purchases of the Company's Common Stock
For the six months ended June 30, 2018, the Company purchased 0.3 million shares of its common stock utilizing $34 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 units.
2015 "At the Market" Stock Offering Program
The Company previously maintained an "at the market" stock offering program ("2015 ATM Program") through which it had the right to issue and sell shares of its common stock having an aggregate gross sales price of up to $500 million to or through sales agents. The Company sold shares of its common stock under the 2015 ATM Program generating aggregate gross proceeds of approximately $350 million. The Company terminated its previously outstanding 2015 ATM Program in March 2018 with shares of its common stock having an aggregate offering price of approximately $150 million remaining unsold.
2018 "At the Market" Stock Offering Program
In April 2018, the Company established a new "at the market" stock offering program ("2018 ATM Program") through which it may issue and sell shares of its common stock having an aggregate gross sales price of up to $750 million. Sales under the 2018 ATM Program may be made by means of ordinary brokers' transactions on the NYSE or otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices or, subject to our specific instructions, at negotiated prices. The Company intends to use the net proceeds from any sales under the 2018 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. The Company has not sold any shares of common stock under the 2018 ATM Program.

15

CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in millions, except per share amounts)

March 2018 Equity Financing
In March 2018, the Company completed an offering of 8 million shares of its common stock, which generated net proceeds of $841 million ("March 2018 Equity Financing"). The Company used the net proceeds from the March 2018 Equity Financing for general corporate purposes, including repayment of outstanding indebtedness.

11.
Operating Segments
The Company's operating segments are (1) Towers and (2) Fiber. 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 Fiber segment provides access, including space or capacity, to the Company's approximately 60,000 route miles of fiber primarily supporting small cell networks and fiber solutions.
The measurements 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. All of these measurements of profit or loss are exclusive of depreciation, amortization and accretion, which are shown separately.
Costs that are directly attributable to Towers and Fiber are assigned to those respective segments. The "Other" column (1) represents amounts excluded from specific segments, such as 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, interest income, other income (expense), 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.



16

CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in millions, except per share amounts)


 
Three Months Ended June 30, 2018
 
Three Months Ended June 30, 2017
 
Towers
 
Fiber
 
Other
 
Consolidated
Total
 
Towers
 
Fiber
 
Other
 
Consolidated
Total
Segment site rental revenues
$
771

 
$
398

 
 
 
$
1,169

 
$
718

 
$
151

 
 
 
$
869

Segment network services and other revenues
158

 
3

 
 
 
161

 
158

 
11

 
 
 
169

Segment revenues
929

 
401

 
 
 
1,330

 
876

 
162

 
 
 
1,038

Segment site rental cost of operations
216

 
130

 
 
 
346

 
211

 
52

 
 
 
263

Segment network services and other cost of operations
94

 
3

 
 
 
97

 
96

 
8

 
 
 
104

Segment cost of operations(a)(b)
310

 
133

 
 
 
443

 
307

 
60

 
 
 
367

Segment site rental gross margin
555

 
268

 
 
 
823

 
507

 
99

 
 
 
606

Segment network services and other gross margin
64

 
—

 
 
 
64

 
62

 
3

 
 
 
65

Segment general and administrative expenses(b)
27

 
44

 
 
 
71

 
23

 
19

 
 
 
42

Segment operating profit (loss)
592

 
224

 

 
816

 
546

 
83

 

 
629

Other general and administrative expenses(b)
 
 
 
 
$
47

 
47

 
 
 
 
 
$
41

 
41

Stock-based compensation expense
 
 
 
 
26

 
26

 
 
 
 
 
17

 
17

Depreciation, amortization and accretion
 
 
 
 
379

 
379

 
 
 
 
 
296

 
296

Interest expense and amortization of deferred financing costs
 
 
 
 
158

 
158

 
 
 
 
 
142

 
142

Other income (expenses) to reconcile to income (loss) before income taxes(c)
 
 
 
 
21

 
21

 
 
 
 
 
16

 
16

Income (loss) before income taxes
 
 
 
 
 
 
$
185

 
 
 
 
 
 
 
$
117

Capital expenditures
$
98

 
$
289

 
$
6

 
$
393

 
$
107

 
$
188

 
$
6

 
$
301

Total assets (at period end)
$
17,780

 
$
14,100

 
$
494

 
$
32,374

 
$
18,208

 
$
5,811

 
$
465

 
$
24,484

    
(a)
Exclusive of depreciation, amortization and accretion shown separately.
(b)
Segment cost of operations excludes (1) stock-based compensation expense of $6 million and $2 million for the three months ended June 30, 2018 and 2017, respectively, and (2) prepaid lease purchase price adjustments of $5 million for both of the three months ended June 30, 2018 and 2017. General and administrative expenses exclude stock-based compensation expense of $20 million and $15 million for the three months ended June 30, 2018 and 2017, respectively.
(c)
See condensed consolidated statement of operations for further information.















17

CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in millions, except per share amounts)


 
Six Months Ended June 30, 2018
 
Six Months Ended June 30, 2017
 
Towers
 
Fiber
 
Other
 
Consolidated
Total
 
Towers
 
Fiber
 
Other
 
Consolidated
Total
Segment site rental revenues
$
1,536

 
$
787

 
 
 
$
2,323

 
$
1,434

 
$
292

 
 
 
$
1,726

Segment network services and other revenues
300

 
7

 
 
 
307

 
308

 
20

 
 
 
328

Segment revenues
1,836

 
794

 
 
 
2,630

 
1,742

 
312

 
 
 
2,054

Segment site rental cost of operations
427

 
256

 
 
 
683

 
420

 
99

 
 
 
519

Segment network services and other cost of operations
176

 
5

 
 
 
181

 
185

 
17

 
 
 
202

Segment cost of operations(a)(b)
603

 
261

 
 
 
864

 
605

 
116

 
 
 
721

Segment site rental gross margin
1,109

 
531

 
 
 
1,640

 
1,014

 
193

 
 
 
1,207

Segment network services and other gross margin
124

 
2

 
 
 
126

 
123

 
3

 
 
 
126

Segment general and administrative expenses(b)
53

 
87

 
 
 
140

 
47

 
36

 
 
 
83

Segment operating profit (loss)
1,180

 
446

 
 
 
1,626

 
1,090

 
160

 
 
 
1,250

Other general and administrative expenses(b)
 
 
 
 
$
94

 
94

 
 
 
 
 
$
80

 
80

Stock-based compensation expense
 
 
 
 
52

 
52

 
 
 
 
 
42

 
42

Depreciation, amortization and accretion
 
 
 
 
753

 
753

 
 
 
 
 
584

 
584

Interest expense and amortization of deferred financing costs
 
 
 
 
318

 
318

 
 
 
 
 
276

 
276

Other income (expenses) to reconcile to income (loss) before income taxes(c)
 
 
 
 
106

 
106

 
 
 
 
 
28

 
28

Income (loss) before income taxes
 
 
 
 
 
 
$
303

 
 
 
 
 
 
 
$
240

Capital expenditures
$
195

 
$
552

 
$
16

 
$
763

 
$
208

 
$
342

 
$
13

 
$
563

    
(a)
Exclusive of depreciation, amortization and accretion shown separately.
(b)
Segment cost of operations excludes (1) stock-based compensation expense of $13 million and $6 million for the six months ended June 30, 2018 and 2017, respectively, and (2) prepaid lease purchase price adjustments of $10 million for both of the six months ended June 30, 2018 and 2017. General and administrative expenses exclude stock-based compensation expense of $39 million and $36 million for the six months ended June 30, 2018 and 2017, respectively.
(c)
See condensed consolidated statement of operations for further information.


18

CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in millions, except per share amounts)

12.
Supplemental Cash Flow Information
 
Six Months Ended June 30,
 
2018
 
2017
Supplemental disclosure of cash flow information:
 
 
 
Interest paid
$
292

 
$
260

Income taxes paid
12

 
10

Supplemental disclosure of non-cash investing and financing activities:
 
 
 
Increase (decrease) in accounts payable for purchases of property and equipment
22

 
(8
)
Purchase of property and equipment under capital leases and installment purchases</