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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________

FORM 10-Q
___________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
OR
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
____________________________________
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=13179490&doc=13
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)
____________________________________
 Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value
CCI
New York Stock Exchange
6.875% Mandatory Convertible Preferred Stock, Series A, $0.01 par value
CCI.PRA
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
 
Accelerated filer
 
 
Non-accelerated filer
 
Smaller reporting company
 
 
 
 
 
Emerging growth company
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
Number of shares of common stock outstanding at November 1, 2019: 415,768,468
 



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," "target," 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"), "Part I—Item 3. Quantitative and Qualitative Disclosures About Market Risk" and "Part II—Item 1A. Risk Factors" herein. Such forward-looking statements include (1) benefits and opportunities stemming from our strategy, strategic position, business model and capabilities, (2) the strength and growth potential of the U.S. market for shared communications infrastructure investment, (3) expectations regarding anticipated growth in the wireless industry, tenant additions, and demand for data, including growth in demand, (4) potential benefits of our communications infrastructure and expectations regarding demand therefore, including potential benefits and continuity of and factors driving such demand, (5) expectations regarding construction and acquisition of communications infrastructure, (6) the utilization of our net operating loss carryforwards ("NOLs"), (7) expectations regarding wireless carriers' focus on improving network quality and expanding capacity, (8) expectations regarding continuation of increase in usage of high-bandwidth applications by organizations, (9) expected use of net proceeds from issuances under the commercial paper program ("CP Program"), (10) assumed conversion of preferred stock and the impact therefrom, (11) our full year 2019 and 2020 outlook and the anticipated growth in our financial results, including future revenues and operating cash flows, and the expectations regarding the level of our 2019 and 2020 capital expenditures, as well as the factors impacting expected growth in financial results and the levels of capital expenditures, (12) expectations regarding our capital structure and the credit markets, our availability and cost of capital, capital allocation, our leverage ratio and interest coverage targets, our ability to service our debt and comply with debt covenants and the plans for and the benefits of any future refinancings, (13) the utility of certain financial measures, including non-GAAP financial measures, (14) 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, (15) adequacy, projected sources and uses of liquidity, (16) expected duration of our construction projects, (17) expectations related to the impact of tenant consolidation or ownership changes, including the potential combination of T-Mobile and Sprint, (18) expectations regarding non-renewals of tenant contracts and (19) 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.

1


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, 2018 ("2018 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.

Our filings with the SEC are available through the SEC website at www.sec.gov or through our investor relations website at investor.crowncastle.com. We use our investor relations website to disclose information about us that may be deemed to be material. We encourage investors, the media and others interested in us to visit our investor relations website from time to time to review up-to-date information or to sign up for e-mail alerts to be notified when new or updated information is posted on the site.
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)
 
September 30,
2019
 
December 31,
2018
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
182

 
$
277

Restricted cash
138

 
131

Receivables, net
667

 
501

Prepaid expenses(a)

99

 
172

Other current assets
167

 
148

Total current assets
1,253

 
1,229

Deferred site rental receivables
1,413

 
1,366

Property and equipment, net of accumulated depreciation of $9,394 and $8,566, respectively
14,416

 
13,676

Operating lease right-of-use assets(a)
6,112

 

Goodwill
10,078

 
10,078

Other intangible assets, net(a)

4,968

 
5,516

Long-term prepaid rent and other assets, net(a)

104

 
920

Total assets
$
38,344

 
$
32,785

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
368

 
$
313

Accrued interest
110

 
148

Deferred revenues
525

 
498

Other accrued liabilities(a)

335

 
351

Current maturities of debt and other obligations
100

 
107

Current portion of operating lease liabilities(a)
296

 

Total current liabilities
1,734

 
1,417

Debt and other long-term obligations
17,750

 
16,575

Operating lease liabilities(a)
5,480

 

Other long-term liabilities(a)

2,055

 
2,759

Total liabilities
27,019

 
20,751

Commitments and contingencies (note 8)
 
 
 
CCIC stockholders' equity:
 
 
 
Common stock, $0.01 par value; 600 shares authorized; shares issued and outstanding: September 30, 2019—416 and December 31, 2018—415
4

 
4

6.875% Mandatory Convertible Preferred Stock, Series A, $0.01 par value; 20 shares authorized; shares issued and outstanding: September 30, 2019—2 and December 31, 2018—2; aggregate liquidation value: September 30, 2019—$1,650 and December 31, 2018—$1,650

 

Additional paid-in capital
17,829

 
17,767

Accumulated other comprehensive income (loss)
(5
)
 
(5
)
Dividends/distributions in excess of earnings
(6,503
)
 
(5,732
)
Total equity
11,325

 
12,034

Total liabilities and equity
$
38,344

 
$
32,785

    
(a)
See "Recently Adopted Accounting Pronouncements" in note 2 to the condensed consolidated financial statements for a discussion of the recently adopted new lease standard.
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 September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Net revenues:
 
 
 
 
 
 
 
Site rental
$
1,260

 
$
1,184

 
$
3,718

 
$
3,507

Services and other
254

 
191

 
700

 
497

Net revenues
1,514

 
1,375

 
4,418

 
4,004

Operating expenses:
 
 
 
 
 
 
 
Costs of operations(a):
 
 
 
 
 
 
 
Site rental
369

 
355

 
1,095

 
1,057

Services and other
147

 
119

 
410

 
304

Selling, general and administrative
150

 
145

 
457

 
418

Asset write-down charges
2

 
8

 
13

 
18

Acquisition and integration costs
4

 
4

 
10

 
18

Depreciation, amortization and accretion
389

 
385

 
1,176

 
1,138

Total operating expenses
1,061

 
1,016

 
3,161

 
2,953

Operating income (loss)
453

 
359

 
1,257

 
1,051

Interest expense and amortization of deferred financing costs
(173
)
 
(160
)
 
(510
)
 
(478
)
Gains (losses) on retirement of long-term obligations

 
(32
)
 
(2
)
 
(106
)
Interest income
2

 
1

 
5

 
4

Other income (expense)
(5
)
 
1

 
(6
)
 

Income (loss) before income taxes
277

 
169

 
744

 
471

Benefit (provision) for income taxes
(5
)
 
(5
)
 
(15
)
 
(13
)
Net income (loss) attributable to CCIC stockholders
272

 
164

 
729

 
458

Dividends/distributions on preferred stock
(28
)
 
(28
)
 
(85
)
 
(85
)
Net income (loss) attributable to CCIC common stockholders
$
244

 
$
136

 
$
644

 
$
373

Net income (loss)
$
272

 
$
164

 
$
729

 
$
458

Other comprehensive income (loss):
 
 
 
 
 
 
 
Foreign currency translation adjustments

 

 

 
(1
)
Total other comprehensive income (loss)

 

 

 
(1
)
Comprehensive income (loss) attributable to CCIC stockholders
$
272

 
$
164

 
$
729

 
$
457

Net income (loss) attributable to CCIC common stockholders, per common share:
 
 
 
 
 
 
 
Net income (loss) attributable to CCIC common stockholders—basic
$
0.59

 
$
0.33

 
$
1.55

 
$
0.90

Net income (loss) attributable to CCIC common stockholders—diluted
$
0.58

 
$
0.33

 
$
1.54

 
$
0.90

Weighted-average common shares outstanding:
 
 
 
 
 
 
 
Basic
416
 
415

 
416
 
413
Diluted
418
 
416

 
418
 
414
    
(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)

 
Nine Months Ended September 30,
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Net income (loss)
$
729

 
$
458

Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
 
 
 
Depreciation, amortization and accretion
1,176

 
1,138

(Gains) losses on retirement of long-term obligations
2

 
106

Amortization of deferred financing costs and other non-cash interest
1

 
5

Stock-based compensation expense
91

 
79

Asset write-down charges
13

 
18

Deferred income tax (benefit) provision
2

 
2

Other non-cash adjustments, net
4

 
2

Changes in assets and liabilities, excluding the effects of acquisitions:
 
 
 
Increase (decrease) in accrued interest
(38
)
 
(31
)
Increase (decrease) in accounts payable
37

 
31

Increase (decrease) in other liabilities
102

 
144

Decrease (increase) in receivables
(166
)
 
(74
)
Decrease (increase) in other assets
(62
)
 
(103
)
Net cash provided by (used for) operating activities
1,891

 
1,775

Cash flows from investing activities:
 
 
 
Payments for acquisitions, net of cash acquired
(15
)
 
(26
)
Capital expenditures
(1,538
)
 
(1,241
)
Other investing activities, net
3

 
(14
)
Net cash provided by (used for) investing activities
(1,550
)
 
(1,281
)
Cash flows from financing activities:
 
 
 
Proceeds from issuance of long-term debt
1,895

 
2,743

Principal payments on debt and other long-term obligations
(59
)
 
(76
)
Purchases and redemptions of long-term debt
(12
)
 
(2,346
)
Borrowings under revolving credit facility
1,585

 
1,290

Payments under revolving credit facility
(2,270
)
 
(1,465
)
Payments for financing costs
(24
)
 
(33
)
Net proceeds from issuance of common stock

 
841

Purchases of common stock
(44
)
 
(34
)
Dividends/distributions paid on common stock
(1,415
)
 
(1,315
)
Dividends/distributions paid on preferred stock
(85
)
 
(85
)
Net cash provided by (used for) financing activities
(429
)
 
(480
)
Net increase (decrease) in cash, cash equivalents, and restricted cash
(88
)
 
14

Effect of exchange rate changes

 
(1
)
Cash, cash equivalents, and restricted cash at beginning of period
413

 
440

Cash, cash equivalents, and restricted cash at end of period
$
325

 
$
453





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, June 30, 2019
416

 
$
4

 
2

 
$

 
$
17,801

 
$
(5
)
 
$
(6,277
)
 
$
11,523

Stock-based compensation related activity, net of forfeitures

 

 

 

 
29

 

 

 
29

Purchases and retirement of common stock

 

 

 

 
(1
)
 

 

 
(1
)
Common stock dividends/distributions(a)

 

 

 

 

 

 
(470
)
 
(470
)
Preferred stock dividends/distributions(a)

 

 

 

 

 

 
(28
)
 
(28
)
Net income (loss)

 

 

 

 

 

 
272

 
272

Balance, September 30, 2019
416

 
$
4

 
2

 
$

 
$
17,829

 
$
(5
)
 
$
(6,503
)
 
$
11,325

    
(a)
See note 7 for information regarding common and preferred stock dividends declared per share.



 
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, June 30, 2018
415

 
$
4

 
2

 
$

 
$
17,711

 
$
(5
)
 
$
(5,144
)
 
$
12,566

Stock-based compensation related activity, net of forfeitures

 

 

 

 
32

 

 

 
32

Purchases and retirement of common stock

 

 

 

 
(1
)
 

 

 
(1
)
Net proceeds from issuance of common stock

 

 

 

 
1

 

 

 
1

Common stock dividends/distributions(a)

 

 

 

 

 

 
(439
)
 
(439
)
Preferred stock dividends/distributions(a)

 

 

 

 

 

 
(28
)
 
(28
)
Net income (loss)

 

 

 

 

 

 
164

 
164

Balance, September 30, 2018
415

 
$
4

 
2

 
$

 
$
17,743

 
$
(5
)
 
$
(5,447
)
 
$
12,295

    
(a)
See note 7 for information regarding common and preferred stock dividends declared per share.





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, December 31, 2018
415

 
$
4

 
2

 
$

 
$
17,767

 
$
(5
)
 
$
(5,732
)
 
$
12,034

Stock-based compensation related activity, net of forfeitures
1

 

 

 

 
106

 

 

 
106

Purchases and retirement of common stock

 

 

 

 
(44
)
 

 

 
(44
)
Common stock dividends/distributions(a)

 

 

 

 

 

 
(1,415
)
 
(1,415
)
Preferred stock dividends/distributions(a)

 

 

 

 

 

 
(85
)
 
(85
)
Net income (loss)

 

 

 

 

 

 
729

 
729

Balance, September 30, 2019
416

 
$
4

 
2

 
$

 
$
17,829

 
$
(5
)
 
$
(6,503
)
 
$
11,325

    
(a)
See note 7 for information regarding common and preferred stock dividends declared per share.



 
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, December 31, 2017
406

 
$
4

 
2

 
$

 
$
16,844

 
$
(4
)
 
$
(4,505
)
 
$
12,339

Stock-based compensation related activity, net of forfeitures
1

 

 

 

 
92

 

 

 
92

Purchases and retirement of common stock

 

 

 

 
(34
)
 

 

 
(34
)
Net proceeds from issuance of common stock
8

 

 

 

 
841

 

 

 
841

Other comprehensive income (loss)(b)

 

 

 

 

 
(1
)
 

 
(1
)
Common stock dividends/distributions(a)

 

 

 

 

 

 
(1,315
)
 
(1,315
)
Preferred stock dividends/distributions(a)

 

 

 

 

 

 
(85
)
 
(85
)
Net income (loss)

 

 

 

 

 

 
458

 
458

Balance, September 30, 2018
415

 
$
4

 
2

 
$

 
$
17,743

 
$
(5
)
 
$
(5,447
)
 
$
12,295

    
(a)
See note 7 for information regarding common and preferred stock dividends declared per share.
(b)
See the condensed consolidated 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 condensed consolidated financial statements is condensed from that which would appear in the annual consolidated financial statements; accordingly, the condensed consolidated financial statements included herein should be reviewed in conjunction with the consolidated financial statements for the fiscal year ended December 31, 2018, and related notes thereto, included in the 2018 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 2018 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 services primarily relating to the Company's towers and small cells, predominately consisting of (1) site development services primarily relating to existing or new tenant equipment installations, 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 vast majority of the Company's services relate to its Towers segment.
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.
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 September 30, 2019, the condensed consolidated results of operations for both the three and nine months ended September 30, 2019 and 2018, and the condensed consolidated cash flows for the nine months ended September 30, 2019 and 2018. 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.


8


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

2.
Summary of Significant Accounting Policies
Recently Adopted Accounting Pronouncements
Lease Accounting — Summary of Adoption Impact. Effective January 1, 2019, the Company adopted new guidance on the recognition, measurement, presentation and disclosure of leases (commonly referred to as "ASC 842" or the "new lease standard").
The new lease standard requires lessees to recognize a lease liability, initially measured at the present value of the lease payments for all leases, and a corresponding right-of-use ("ROU") asset. The accounting for lessors remained largely unchanged from previous guidance.
Due to the recognition of the lease liability and a corresponding ROU asset, the new lease standard had a material impact on the Company's condensed consolidated balance sheet. Additionally, certain amounts related to our lessee arrangements that were previously reported separately have been de-recognized and reclassified into "Operating lease right-of-use assets" on the Company's condensed consolidated balance sheet. These amounts include (1) the Company's liability related to straight-line expense, formerly referred to as "Deferred ground lease payable" and previously included in "Other accrued liabilities" and "Other long-term liabilities," (2) prepaid rent expense previously included in "Prepaid expenses" and "Long-term prepaid rent and other assets, net," (3) below market leases previously included in "Other intangible assets, net," and (4) above market leases previously included in "Other long-term liabilities."
Notwithstanding the material impact to the Company's condensed consolidated balance sheet, the Company's adoption of the new lease standard did not have a material impact on the Company's condensed consolidated statement of operations or statement of cash flows. Additionally, the adoption of this guidance had no impact on the Company's operating practices, cash flows, contractual arrangements, or debt agreements (including compliance with any applicable covenants).
Lease Accounting — General. The Company adopted the new lease standard using a modified retrospective approach as of the effective date (i.e., January 1, 2019), without adjusting the comparative periods. The Company's adoption of the new lease standard did not result in a cumulative-effect adjustment being recognized to the opening balance of retained earnings. The new lease standard provides a package of practical expedients, whereby companies can elect not to reassess (if applicable), (1) whether existing contracts contain leases under the new definition of a lease, (2) lease classification for expired or existing leases and (3) whether previously capitalized initial direct costs would qualify for capitalization under ASC 842. The Company elected the package of practical expedients upon adoption.
The Company evaluates whether a contract meets the definition of a lease whenever a contract grants a party the right to control the use of an identified asset for a period of time in exchange for consideration. To the extent the identified asset is able to be shared among multiple parties, the Company has determined that one party does not have control of the identified asset and the contract is not considered a lease. The Company accounts for contracts that do not meet the definition of a lease under other relevant accounting guidance (such as ASC 606 for revenue from contracts with customers).
Lease Accounting — Lessee. For its Tower segment, the Company's lessee arrangements primarily consist of ground leases for land under towers. Ground leases for land are specific to each site, generally contain an initial term of five to 10 years and are renewable (and cancelable after a notice period) at the Company's option. The Company also enters into term easements and ground leases in which it prepays the entire term. For its Fiber segment, the Company's lessee arrangements primarily include leases of fiber assets to support the Company's small cells and fiber solutions.
The majority of the Company's lease agreements have certain termination rights that provide for cancellation after a notice period and multiple renewal options at the Company's option. The Company includes renewal option periods in its calculation of the estimated lease term when it determines the options are reasonably certain to be exercised. When such renewal options are deemed to be reasonably certain, the estimated lease term determined under ASC 842 will be greater than the non-cancelable term of the contractual arrangement. Although certain renewal periods are included in the estimated lease term, the Company would have the ability to terminate or elect to not renew a particular lease if business conditions warrant such a decision.
The Company classifies its lessee arrangements at inception as either operating leases or finance leases. A lease is classified as a finance lease if at least one of the following criteria is met: (1) the lease transfers ownership of the underlying asset to the lessee, (2) the lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise, (3) the lease term is for a major part of the remaining economic life of the underlying asset, (4) the present value of the sum of the lease payments equals or exceeds substantially all of the fair value of the underlying asset, or (5) the underlying asset is of such a

9


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

specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. A lease is classified as an operating lease if none of the five criteria described above for finance lease classification is met.
ROU assets associated with operating leases are included in "Operating lease right-of-use assets" on the Company's condensed consolidated balance sheet. Current and long-term portions of lease liabilities related to operating leases are included in "Current portion of operating lease liabilities" and "Operating lease liabilities" on the Company's condensed consolidated balance sheet. ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's present value of its future lease payments. In assessing its leases and determining its lease liability at lease commencement or upon modification, the Company was not able to readily determine the rate implicit for its lessee arrangements, and thus has used its incremental borrowing rate on a collateralized basis to determine the present value of the lease payments. The Company's ROU assets are measured as the balance of the lease liability plus any prepaid or accrued lease payments and any unamortized initial direct costs. For both the Towers and Fiber segments, operating lease expenses are recognized on a ratable basis, regardless of whether the payment terms require the Company to make payments annually, quarterly, monthly, or for the entire term in advance. Certain of the Company's ground lease and fiber lease agreements contain fixed escalation clauses (such as fixed dollar or fixed percentage increases) or inflation-based escalation clauses (such as those tied to the change in CPI). If the payment terms include fixed escalator provisions, the effect of such increases is recognized on a straight-line basis. The Company calculates the straight-line expense over the contract's estimated lease term, including any renewal option periods that the Company deems reasonably certain to be exercised.
Lease agreements may also contain provisions for a contingent payment based on (1) the revenues derived from the communications infrastructure located on the leased asset, (2) the change in CPI or (3) the usage of the leased asset. The Company's contingent payments are considered variable lease payments and are (1) not included in the initial measurement of the ROU asset or lease liability due to the uncertainty of the payment amount and (2) recorded as expense in the period such contingencies are resolved.
ROU assets associated with finance leases are included in "Property and equipment, net" on the Company's condensed consolidated balance sheet. Lease liabilities associated with finance leases are included in "Current maturities of debt and other obligations" and "Debt and other long-term obligations" on the Company's condensed consolidated balance sheet. For both its Towers and Fiber segments, the Company measures the lease liability for finance leases using the effective interest method. The initial lease liability is increased to reflect interest on the liability and decreased to reflect payments made during the period. Interest on the lease liability is determined each period during the lease term as the amount that results in a constant periodic discount rate on the remaining balance of the liability. The Company measures ROU assets for finance leases on a ratable basis over the applicable lease term.
Lease Accounting — Lessor. The Company's lessor arrangements primarily include contracts for dedicated space (including dedicated fiber) on its shared communications infrastructure. The Company classifies its leases at inception as operating, direct financing or sales-type leases. A lease is classified as a sales-type lease if at least one of the following criteria is met: (1) the lease transfers ownership of the underlying asset to the lessee, (2) the lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise, (3) the lease term is for a major part of the remaining economic life of the underlying asset, (4) the present value of the sum of the lease payments equals or exceeds substantially all of the fair value of the underlying assets or (5) the underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. Furthermore, when none of the above criteria is met, a lease is classified as a direct financing lease if both of the following criteria are met: (1) the present value of the of the sum of the lease payments and any residual value guaranteed by the lessee, that is not already reflected in the lease payments, equals or exceeds the fair value of the underlying asset and (2) it is probable that the lessor will collect the lease payments plus any amount necessary to satisfy a residual value guarantee. A lease is classified as an operating lease if it does not qualify as a sales-type or direct financing lease. Currently, the Company classifies all of its lessor arrangements as operating leases.
Site rental revenues from the Company’s lessor arrangements are recognized on a straight-line, ratable basis over the fixed, non-cancelable term of the relevant contract, 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 change in CPI). If the payment terms call for fixed elements, such as fixed escalations, upfront payments, or rent-free periods, the rental revenue is recognized on a straight-line basis over the fixed, non-cancelable term of the agreement. When calculating straight-line site rental revenues, the Company considers all fixed elements of tenant contractual escalation provisions.

10


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

Certain of the Company's arrangements with tenants in its Fiber segment contain both lease and non-lease components. In such circumstances, the Company has determined (1) the timing and pattern of transfer for the lease and non-lease component are the same, and (2) the stand-alone lease component would be classified as an operating lease. As such, the Company has aggregated certain non-lease components with lease components and has determined that the lease components (generally dedicated fiber) represent the predominant component of the arrangement.
See notes 3 and 9 for further information.
Recent Accounting Pronouncements Not Yet Adopted
No new accounting pronouncements issued but not yet adopted are expected to have a material impact on the Company's condensed consolidated financial statements.

3.
Revenues
Site rental revenues
The Company generates site rental revenues from its core business by providing tenants 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, ratable basis over the fixed, non-cancelable term of the relevant contract, which generally ranges from five to 15 years for wireless tenants and three to 20 years related to the Company's fiber solutions tenants (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 (1) 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), (2) multiple renewal periods at the tenant's option, and (3) only limited termination rights at the applicable tenant's option through the current term. 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, even if such escalation provisions contain a variable element in addition to a minimum. The Company's assets related to straight-line site rental revenues include current amounts of $107 million included in "Other current assets" and non-current amounts of $1.4 billion included in "Deferred site rental receivables" as of September 30, 2019. 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.
Services and other revenues
As part of the Company’s effort to provide comprehensive communications infrastructure solutions, the Company offers certain services, primarily relating to its towers and small cells, predominately consisting of (1) site development services and (2) installation services. Upon contract commencement, the Company assesses its services to tenants and identifies performance obligations for each promise to provide a distinct service.
The Company may have multiple performance obligations for site development services, which primarily include: structural analysis, zoning, permitting and construction drawings. For each of the above performance obligations, service 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 tenant. 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. 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. Payments generally are due within 45 to 60 days and generally do not contain variable-consideration provisions. The Company has one performance obligation for installation services, which is satisfied at the time of the respective installation or augmentation.
Since performance obligations are typically satisfied prior to receiving payment from tenants, 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 services relates to the Company's Towers segment, and generally have a duration of one year or less.

11


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

Additional information on revenues
As of both January 1, 2019 and September 30, 2019, $2.3 billion of unrecognized revenue was reported in "Deferred revenues" and "Other long-term liabilities" on our condensed consolidated balance sheet. During the nine months ended September 30, 2019, approximately $320 million of the January 1, 2019 unrecognized revenue balance was recognized as revenue. During the nine months ended September 30, 2018, approximately $310 million of the January 1, 2018 unrecognized revenue balance was recognized as revenue.
The following table is a summary of the non-cancelable contracted amounts owed to the Company by tenants pursuant to site rental contracts in effect as of September 30, 2019.
 
 
Three Months Ending December 31,
 
Years Ending December 31,
 
 
 
 
 
 
2019
 
2020
 
2021
 
2022
 
2023
 
Thereafter
 
Total
Contracted amounts(a)
 
$
1,119

 
$
4,085

 
$
3,889

 
$
3,659

 
$
3,051

 
$
8,655

 
$
24,458


    
(a)
Based on the nature of the contract, site rental contracts are accounted for pursuant to relevant lease accounting (ASC 842) or revenue accounting (ASC 606) guidance. Excludes amounts related to 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 and note 9 for further discussion regarding the Company's lessor arrangements.


12


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

4.
Debt and Other Obligations
The table below sets forth the Company's debt and other obligations as of September 30, 2019.
 
Original
Issue Date
 
Contractual
Maturity
Date(a)
 
Balance as of
September 30, 2019
 
Balance as of
December 31, 2018
 
Stated Interest
Rate as of
September 30, 2019(a)
 
Secured Notes, Series 2009-1, Class A-1
July 2009
 
Aug. 2019
 
$

 
$
12

 
N/A

 
3.849% Secured Notes
Dec. 2012
 
Apr. 2023
 
995

 
994

 
3.9
%
 
Secured Notes, Series 2009-1, Class A-2
July 2009
 
Aug. 2029
 
69

 
70

 
9.0
%
 
Tower Revenue Notes, Series 2015-1
May 2015
 
May 2042
(b) 
298

 
298

 
3.2
%
 
Tower Revenue Notes, Series 2018-1
July 2018
 
July 2043
(b) 
248

 
247

 
3.7
%
 
Tower Revenue Notes, Series 2015-2
May 2015
 
May 2045
(b) 
694

 
693

 
3.7
%
 
Tower Revenue Notes, Series 2018-2
July 2018
 
July 2048
(b) 
742

 
742

 
4.2
%
 
Finance leases and other obligations
Various
 
Various
(c) 
233

 
227

 
Various
 
Total secured debt
 
 
 
 
$
3,279

 
3,283

 
 
 
2016 Revolver
Jan. 2016
 
June 2024
(h) 
$
390

(d) 
$
1,075

 
3.1
%
(e) 
2016 Term Loan A
Jan. 2016
 
June 2024
(h) 
2,325

 
2,354

 
3.2
%
(e) 
2019 Commercial Paper Notes
N/A
(g) 
N/A
(g) 

 

 
N/A
 
3.400% Senior Notes
Feb./May 2016
 
Feb. 2021
 
850

 
850

 
3.4
%
 
2.250% Senior Notes
Sept. 2016
 
Sept. 2021
 
698

 
697

 
2.3
%
 
4.875% Senior Notes
Apr. 2014
 
Apr. 2022
 
845

 
844

 
4.9
%
 
5.250% Senior Notes
Oct. 2012
 
Jan. 2023
 
1,643

 
1,641

 
5.3
%
 
3.150% Senior Notes
Jan. 2018
 
July 2023
 
744

 
742

 
3.2
%
 
3.200% Senior Notes
Aug. 2017
 
Sept. 2024
 
744

 
743

 
3.2
%
 
4.450% Senior Notes
Feb. 2016
 
Feb. 2026
 
893

 
892

 
4.5
%
 
3.700% Senior Notes
May 2016
 
June 2026
 
744

 
744

 
3.7
%
 
4.000% Senior Notes
Feb. 2017
 
Mar. 2027
 
495

 
494

 
4.0
%
 
3.650% Senior Notes
Aug. 2017
 
Sept. 2027
 
993

 
992

 
3.7
%
 
3.800% Senior Notes
Jan. 2018
 
Feb. 2028
 
989

 
988

 
3.8
%
 
4.300% Senior Notes
Feb. 2019
 
Feb. 2029
(f) 
592

 

 
4.3
%
 
3.100% Senior Notes
Aug. 2019
 
Nov. 2029
(i) 
543

 

 
3.1
%
 
4.750% Senior Notes
May 2017
 
May 2047
 
343

 
343

 
4.8
%
 
5.200% Senior Notes
Feb. 2019
 
Feb. 2049
(f) 
395

 

 
5.2
%
 
4.000% Senior Notes
Aug. 2019
 
Nov. 2049
(i) 
345

 

 
4.0
%
 
Total unsecured debt
 
 
 
 
$
14,571

 
$
13,399

 
 
 
Total debt and other obligations
 
 
 
 
17,850

 
16,682

 
 
 
Less: current maturities and short-term debt and other current obligations
 
 
 
 
100

 
107

 
 
 
Non-current portion of long-term debt and other long-term obligations
 
 
 
 
$
17,750

 
$
16,575

 
 
 
    
(a)
See the 2018 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)
If the respective series of Tower Revenue Notes are not paid in full on or prior to an applicable anticipated repayment 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 class of the Tower Revenue Notes, and additional interest (of an additional approximately 5% per annum) will accrue on the respective Tower Revenue Notes. As of September 30, 2019, the Tower Revenue Notes have principal amounts of $300 million, $250 million, $700 million and $750 million, with anticipated repayment dates in 2022, 2023, 2025 and 2028, respectively.
(c)
The Company's finance leases and other obligations relate to land, fiber, vehicles, and other assets and bear interest rates ranging up to 10% and mature in periods ranging from less than one year to approximately 30 years.
(d)
As of September 30, 2019, the undrawn availability under the 2016 Revolver was $4.6 billion.
(e)
Both the 2016 Revolver and senior unsecured term loan A facility ("2016 Term Loan A") bear interest at a rate per annum equal to LIBOR plus a credit spread ranging from 1.000% to 1.750%, based on the Company's senior unsecured debt rating. The Company pays a commitment fee ranging from 0.125% to 0.350%, based on the Company's senior unsecured debt rating, per annum on the undrawn available amount under the 2016 Revolver.
(f)
In February 2019, the Company issued $1.0 billion aggregate principal amount of senior unsecured notes ("February 2019 Senior Notes"), which consisted of (1) $600 million aggregate principal amount of 4.300% senior unsecured notes due February 2029 and (2) $400 million aggregate principal amount of

13


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

5.200% senior unsecured notes due February 2049. The Company used the net proceeds of the February 2019 Senior Notes offering to repay a portion of the outstanding borrowings under the 2016 Revolver.
(g)
In April 2019, the Company established an unsecured commercial paper program ("CP Program"), pursuant to which the Company may issue short-term, unsecured commercial paper notes. Notes under the CP Program may be issued, repaid and re-issued from time to time, with an aggregate principal amount of commercial paper notes ("2019 Commercial Paper Notes") outstanding under the CP Program at any time not to exceed $1.0 billion. The net proceeds of the 2019 Commercial Paper Notes are expected to be used for general corporate purposes. The maturities of the 2019 Commercial Paper Notes, when outstanding, may vary but may not exceed 397 days from the date of issue. The 2019 Commercial Paper Notes are issued under customary terms in the commercial paper market and are issued at a discount from par or, alternatively, can be issued at par and bear varying interest rates on a fixed or floating basis. As of September 30, 2019, there were no outstanding 2019 Commercial Paper Notes. At any point in time, the Company intends to maintain available commitments under its 2016 Revolver in an amount at least equal to the amount of 2019 Commercial Paper Notes outstanding. While any outstanding commercial paper issuances generally have short-term maturities, the Company classifies the outstanding issuances as long-term based on its ability and intent to refinance the outstanding issuances on a long-term basis.
(h)
In June 2019, 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 $5.0 billion, and (2) extend the maturity of the Credit Facility from June 2023 to June 2024.
(i)
In August 2019, the Company issued $900 million aggregate principal amount of senior unsecured notes ("August 2019 Senior Notes"), which consisted of (1) $550 million aggregate principal amount of 3.100% senior unsecured notes due November 2029 and (2) $350 million aggregate principal amount of 4.000% senior unsecured notes due November 2049. The Company used the net proceeds of the August 2019 Senior Notes offering to repay outstanding borrowings under the 2016 Revolver and CP Program.
Contractual Maturities
The following are the scheduled contractual maturities of the total debt and other long-term obligations of the Company outstanding as of September 30, 2019. 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.
 
Three Months Ending
December 31,
 
Years Ending December 31,
 
 
 
 
 
Unamortized Adjustments, Net
 
Total Debt and Other Obligations Outstanding
 
2019
 
2020
 
2021
 
2022
 
2023
 
Thereafter
 
Total Cash Obligations
 
 
Scheduled contractual maturities
$
28

 
$
99

 
$
1,674

 
$
998

 
$
3,603

 
$
11,566

 
$
17,968

 
$
(118
)
 
$
17,850



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 September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Interest expense on debt obligations
$
173

 
$
158

 
$
509

 
$
473

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

 
5

 
15

 
16

Other, net of capitalized interest
(5
)
 
(3
)
 
(14
)
 
(11
)
Total
$
173

 
$
160

 
$
510

 
$
478



5.
Fair Value Disclosures
 
Level in Fair Value Hierarchy
 
September 30, 2019
 
December 31, 2018
 
 
Carrying
 Amount
 
Fair
Value
 
Carrying
 Amount
 
Fair
Value
Assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
1
 
$
182

 
$
182

 
$
277

 
$
277

Restricted cash, current and non-current
1
 
143