NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share amounts)
The consolidated financial statements include the accounts of Crown Castle International Corp. and its predecessor, as applicable (together, "CCIC"), and their subsidiaries, collectively referred to herein as the "Company." All significant intercompany balances and transactions have been eliminated in consolidation. As used herein, the term "including," and any variation thereof, means "including without limitation." The use of the word "or" herein is not exclusive.
The Company owns, operates, and leases shared wireless infrastructure that is geographically dispersed throughout the United States and Puerto Rico ("U.S."), including: (1) towers and other structures, such as rooftops (collectively, "towers"), and (2) fiber primarily supporting small cell networks (collectively, "small cells" and, together with towers, "wireless infrastructure"). See note
3
for a discussion of the May 2015 sale of the Company's formerly
77.6%
owned subsidiary that operated towers in Australia (referred to as "CCAL").
The Company's core business is providing access, including space or capacity, to its shared wireless infrastructure via long-term contracts in various forms, including licenses, subleases and lease agreements (collectively, "leases").
Approximately
53%
of the Company's towers are leased or subleased or operated and managed under master leases, subleases, or 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. Additional information concerning these towers is as follows:
|
|
◦
|
Approximately
22%
of the Company's towers are leased or subleased or operated and managed under a master prepaid lease or other related agreements with AT&T for a weighted-average initial term of approximately
28
years, weighted on site rental gross margin. The Company has the option to purchase the leased and subleased towers from AT&T at the end of the respective lease or sublease terms for aggregate option payments of approximately
$4.2 billion
, which payments, if exercised, would be due between 2032 and 2048.
|
|
|
◦
|
Approximately
16%
of the Company's towers are leased or subleased or operated and managed for an initial period of
32
years (through May 2037) under master leases, subleases, or other agreements with Sprint. The Company has the option to purchase in 2037 all (but not less than all) of the leased and subleased Sprint towers from Sprint for approximately
$2.3 billion
.
|
|
|
◦
|
Approximately
15%
of the Company's towers are leased or subleased or operated and managed under a master prepaid lease or other related agreements with T-Mobile for a weighted-average initial term of approximately
28
years, weighted on site rental gross margin. The Company has the option to purchase the leased and subleased towers from T-Mobile at the end of the respective lease or sublease terms for aggregate option payments of approximately
$2.0 billion
, which payments, if exercised would be due between 2035 and 2049. In addition, through the T-Mobile Acquisition (as defined in note
4
), there are another approximately
1%
of the Company's towers subject to a lease and sublease or other related arrangements with AT&T. The Company has the option to purchase these towers that it does not otherwise already own at the end of their respective lease terms for aggregate option payments of up to approximately
$405 million
, which payments, if exercised, would be due between 2018 and 2032 (less than
$10 million
would be due before 2025).
|
As part of the Company's effort to provide comprehensive wireless infrastructure solutions, the Company also offers certain network services relating to its wireless infrastructure, consisting of (1) site development services relating to existing or new tenant equipment installations on its wireless infrastructure, including: site acquisition, architectural and engineering, or zoning and permitting (collectively, "site development services") and (2) tenant equipment installation or subsequent augmentations (collectively, "installation services").
The Company operates as a real estate investment trust ("REIT") for U.S. federal income tax purposes. In addition, the Company has certain taxable REIT subsidiaries ("TRSs"). See note
11
.
The preparation of financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
|
|
2.
|
Summary of Significant Accounting Policies
|
Restricted Cash
Restricted cash represents (1) the cash held in reserve by the indenture trustees pursuant to the indenture governing certain of the Company's debt instruments, (2) cash securing performance obligations such as letters of credit, as well as (3) any other cash whose use is limited by contractual provisions. The restriction of rental cash receipts is a critical feature of certain of the Company's debt instruments, due to the applicable indenture trustee's ability to utilize the restricted cash for the payment of (1) debt service costs, (2) ground rents, (3) real estate or personal property taxes, (4) insurance premiums related to towers, (5) other assessments by governmental authorities and potential environmental remediation costs, or (6) a portion of advance rents from tenants. The restricted cash in excess of required reserve balances is subsequently released to the Company in accordance with the terms of the indentures. The Company has classified the increases and decreases in restricted cash as (1) cash provided by financing activities for cash held by indenture trustees based on consideration of the terms of the related indebtedness, although the cash flows have aspects of both financing activities and operating activities, (2) cash provided by investing activities for cash securing performance obligations and restricted cash that is acquired in acquisitions, or (3) cash provided by operating activities for the other remaining restricted cash.
The following table is a summary of the impact of restricted cash on the statement of cash flows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
Net cash provided by (used from) operating activities
|
$
|
(4,547
|
)
|
|
$
|
3,974
|
|
|
$
|
6,148
|
|
Net cash provided by (used from) investing activities
|
$
|
10,541
|
|
|
$
|
(3,752
|
)
|
|
$
|
(44
|
)
|
Net cash provided by (used from) financing activities
|
$
|
(7,931
|
)
|
|
$
|
16,458
|
|
|
$
|
30,011
|
|
Receivables Allowance
An allowance for doubtful accounts is recorded as an offset to accounts receivable. The Company uses judgment in estimating this allowance and considers historical collections, current credit status, or contractual provisions. Additions to the allowance for doubtful accounts are charged either to "site rental costs of operations" or to "network services and other costs of operations," as appropriate; and deductions from the allowance are recorded when specific accounts receivable are written off as uncollectible.
Lease Accounting
General.
The Company classifies its leases at inception as either operating leases or capital leases. A lease is classified as a capital lease if at least one of the following criteria are met, subject to certain exceptions noted below: (1) the lease transfers ownership of the leased assets to the lessee, (2) there is a bargain purchase option, (3) the lease term is equal to 75% or more of the economic life of the leased assets, or (4) the present value of the minimum lease payments equals or exceeds 90% of the fair value of the leased assets.
Lessee.
Leases for land are evaluated for capital lease treatment if at least one of the first two criteria mentioned in the immediately preceding paragraph is present relating to the leased assets. When the Company, as lessee, classifies a lease as a capital lease, it records an asset in an amount equal to the present value of the minimum lease payments under the lease at the beginning of the lease term. Applicable operating leases are recognized on a straight-line basis as discussed under "costs of operations" below.
Lessor.
If the Company is the lessor of leased property that is part of a larger whole (including a portion of space on a tower) and for which fair value is not objectively determinable, then such a lease is accounted for as an operating lease. As applicable, operating leases are recognized on a straight-line basis as discussed under "Revenue Recognition."
See also "
Recent Accounting Pronouncements Not Yet Adopted
" below for further discussion.
Property and Equipment
Property and equipment is stated at cost, net of accumulated depreciation. Property and equipment includes land owned in fee and perpetual easements for land which have no definite life. When the Company purchases fee ownership or perpetual easements for the land previously subject to ground lease, the Company reduces the value recorded as land by the amount of any associated deferred ground lease payable or unamortized above-market leases. Depreciation is computed utilizing the straight-line method at rates based upon the estimated useful lives of the various classes of assets. Depreciation of wireless infrastructure
is computed with a useful life equal to the shorter of
20 years
or the term of the underlying ground lease (including optional renewal periods). Additions, renewals, and improvements are capitalized, while maintenance and repairs are expensed. Labor and interest costs incurred directly related to the construction of certain property and equipment are capitalized during the construction phase of projects. For the years ended
December 31, 2016
,
2015
, and
2014
, the Company had
$86.1 million
,
$36.7 million
and
$24.2 million
in capitalized labor costs, respectively. The carrying value of property and equipment is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.
Abandonments and write-offs of property and equipment are recorded to "asset write-downs charges" on the Company's consolidated statement of operations and comprehensive income (loss) and were
$26.9 million
,
$27.0 million
, and
$9.3 million
for the years ended
December 31, 2016
,
2015
, and
2014
, respectively.
Asset Retirement Obligations
Pursuant to its ground lease and easement agreements, the Company records obligations to perform asset retirement activities, including requirements to remove wireless infrastructure or remediate the land upon which the Company's wireless infrastructure resides. Asset retirement obligations are included in "other long-term liabilities" on the Company's consolidated balance sheet. The liability accretes as a result of the passage of time and the related accretion expense is included in "depreciation, amortization, and accretion" on the Company's consolidated statement of operations and comprehensive income (loss). The associated asset retirement costs are capitalized as an additional carrying amount of the related long-lived asset and depreciated over the useful life of such asset.
Goodwill
Goodwill represents the excess of the purchase price for an acquired business over the allocated value of the related net assets. The Company tests goodwill for impairment on an annual basis, regardless of whether adverse events or changes in circumstances have occurred. The annual test begins with goodwill and all intangible assets being allocated to applicable reporting units. The Company then performs a qualitative assessment to determine whether it is "more likely than not" that the fair value of the reporting units is less than its carrying amount. If it is concluded that it is "more likely than not" that the fair value of a reporting unit is less than its carrying amount, it is necessary to perform the two-step goodwill impairment test. The two-step goodwill impairment test begins with a comparison of the estimated fair value of the reporting unit and the carrying value of the reporting unit. The first step, commonly referred to as a "step-one impairment test," is a screen for potential impairment while the second step measures the amount of impairment if there is an indication from the first step that one exists. The Company's measurement of the fair value for goodwill is based on an estimate of discounted expected future cash flows of the reporting unit. The Company performed its most recent annual goodwill impairment test as of October 1,
2016
, which resulted in no impairments.
Intangible Assets
Intangible assets are included in "site rental contracts and customer relationships, net" and "other intangible assets, net" on the Company's consolidated balance sheet and predominately consist of the estimated fair value of the following items recorded in conjunction with acquisitions: (1) site rental contracts and customer relationships, (2) below-market leases for land interest under the acquired wireless infrastructure, or (3) other contractual rights such as trademarks. The site rental contracts and customer relationships intangible assets are comprised of (1) the current term of the existing leases, (2) the expected exercise of the renewal provisions contained within the existing leases, which automatically occur under contractual provisions, or (3) any associated relationships that are expected to generate value following the expiration of all renewal periods under existing leases.
The useful lives of intangible assets are estimated based on the period over which the intangible asset is expected to benefit the Company and gives consideration to the expected useful life of other assets to which the useful life may relate. Amortization expense for intangible assets is computed using the straight-line method over the estimated useful life of each of the intangible assets. The useful life of the site rental contracts and customer relationships intangible asset is limited by the maximum depreciable life of the wireless infrastructure (
20
years), as a result of the interdependency of the wireless infrastructure and site rental leases. In contrast, the site rental contracts and customer relationships are estimated to provide economic benefits for several decades because of the low rate of tenant cancellations and high rate of renewals experienced to date. Thus, while site rental contracts and customer relationships are valued based upon the fair value, which includes assumptions regarding both (1) tenants' exercise of optional renewals contained in the acquired leases and (2) renewals of the acquired leases past the contractual term including exercisable options, the site rental contracts and customer relationships are amortized over a period not to exceed
20 years
as a result of the useful life being limited by the depreciable life of the wireless infrastructure.
The carrying value of other intangible assets with finite useful lives will be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Company has a dual grouping
policy for purposes of determining the unit of account for testing impairment of the site rental contracts and customer relationships intangible assets. First, the Company pools the site rental contracts and customer relationships with the related wireless infrastructure assets into portfolio groups for purposes of determining the unit of account for impairment testing. Second and separately, the Company evaluates the site rental contracts and customer relationships by significant tenant or by tenant grouping for individually insignificant tenants, as appropriate. If the sum of the estimated future cash flows (undiscounted) expected to result from the use or eventual disposition of an asset is less than the carrying amount of the asset, an impairment loss is recognized. Measurement of an impairment loss is based on the fair value of the asset.
Deferred Credits
Deferred credits are included in “deferred revenues” and “other long-term liabilities” on the Company's consolidated balance sheet and consist of the estimated fair value of the following items recorded in conjunction with acquisitions: (1) below-market tenant leases for contractual interests with tenants on acquired wireless infrastructure, which are amortized to site rental revenues and (2) above-market leases for land interests under the Company's wireless infrastructure, which are amortized to site rental cost of operations.
Fair value for these deferred credits represents the difference between (1) the stated contractual payments to be made pursuant to the in-place lease and (2) management's estimate of fair market lease rates for each corresponding lease. Deferred credits are measured over a period equal to the estimated remaining economic lease term considering renewal provisions or economics associated with those renewal provisions, to the extent applicable. Deferred credits are amortized over their respected estimated lease terms at the time of acquisition.
Deferred Financing Costs
Third-party costs incurred to obtain financing, with the exception of costs incurred related to revolving lines of credit, are deferred and are included as a direct deduction from the carrying amount of the related debt liability in "debt and other long-term obligations" on the Company's consolidated balance sheet. Third party costs incurred to obtain financing through a revolving line of credit are deferred and are included in "long-term prepaid rent and other assets, net" on the Company's consolidated balance sheet. See also "
Recently Adopted Accounting Pronouncements
" below for further discussion.
Revenue Recognition
Site rental revenues are recognized on a monthly basis over the fixed, non-cancelable term of the relevant lease (generally ranging from
five
to
15
years), regardless of whether the payments from the tenant are received in equal monthly amounts. The Company's leases 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 ("CPI")). 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
$67.2 million
and
$31.1 million
included in "other current assets" and non-current amounts of
$1.3 billion
and
$1.3 billion
included in "deferred site rental receivables" for the years ended
December 31, 2016
and
2015
, respectively. Amounts billed or received prior to being earned are deferred and reflected in "deferred revenues" and "other long-term liabilities."
Network services revenues are recognized after completion of the applicable service. Nearly all of the installation services are billed on a cost-plus profit basis and site development services are billed on a fixed fee basis.
Sales taxes or value-added taxes collected from customers and remitted to governmental authorities are presented on a net basis.
See also "
Recent Accounting Pronouncements Not Yet Adopted
" below for further discussion.
Costs of Operations
In excess of
two-thirds
of the Company's site rental costs of operations expenses consist of ground lease expenses, and the remainder includes property taxes, repairs and maintenance expenses, employee compensation or related benefit costs, or utilities. Generally, the ground leases for land are specific to each site and are for an initial term of
five
years and are renewable for pre-determined periods. The Company also enters into term easements and ground leases in which it prepays the entire term in advance. Ground lease expense is recognized on a monthly basis, regardless of whether the lease agreement payment terms require the Company to make payments annually, quarterly, monthly, or for the entire term in advance. The Company's ground leases contain
fixed escalation clauses (such as fixed dollar or fixed percentage increases) or inflation-based escalation clauses (such as those tied to the CPI). If the payment terms include fixed escalation provisions, the effect of such increases is recognized on a straight-line basis. The Company calculates the straight-line ground lease expense using a time period that equals or exceeds the remaining depreciable life of the wireless infrastructure asset. Further, when a tenant has exercisable renewal options that would compel the Company to exercise existing ground lease renewal options, the Company has straight-lined the ground lease expense over a sufficient portion of such ground lease renewals to coincide with the final termination of the tenant's renewal options. The Company's non-current liability related to straight-line ground lease expense is included in "other long-term liabilities" on the Company's consolidated balance sheet. The Company's assets related to prepaid ground leases is included in "prepaid expenses" and "long-term prepaid rent and other assets, net" on the Company's consolidated balance sheet.
Network services and other costs of operations predominately consist of third party service providers such as contractors and professional service firms and, to a lesser extent, internal labor costs. As of
December 31, 2016
and
2015
, the Company had
$49.9 million
and
$55.3 million
, respectively, of work in process.
Acquisition and Integration Costs
All direct or incremental costs related to a business combination are expensed as incurred. Costs include severance, retention bonuses payable to employees of an acquired enterprise, temporary employees to assist with the integration of the acquired operations, or fees paid for services such as consulting, accounting, legal, or engineering reviews. These business combination costs are included in "acquisition and integration costs" on the Company's consolidated statement of operations and comprehensive income (loss). See note
4
for a discussion of our recent acquisitions. In addition, during 2013, the Company acquired rights to approximately 9,700 towers through the AT&T Acquisition.
Stock-Based Compensation
Restricted Stock Awards and Restricted Stock Units.
The Company records stock-based compensation expense only for those unvested restricted stock awards ("RSAs") and unvested restricted stock units ("RSUs") for which the requisite service is expected to be rendered. The cumulative effect of a change in the estimated number of RSAs and RSUs for which the requisite service is expected to be or has been rendered is recognized in the period of the change in the estimate. To the extent that the requisite service is rendered, compensation cost for accounting purposes is not reversed; rather, it is recognized regardless of whether or not the awards vest. A discussion of the Company's valuation techniques and related assumptions and estimates used to measure the Company's stock-based compensation is as follows:
Valuation.
The fair value of RSAs and RSUs without market conditions is determined based on the number of shares relating to such RSAs and RSUs and the quoted price of the Company's common stock at the date of grant. The Company estimates the fair value of RSAs and RSUs with market conditions granted using a Monte Carlo simulation. The Company's determination of the fair value of RSAs and RSUs with market conditions on the date of grant is affected by its common stock price as well as assumptions regarding a number of highly complex or subjective variables. The determination of fair value using a Monte Carlo simulation requires the input of subjective assumptions, and other reasonable assumptions could provide differing results.
Amortization Method.
The Company amortizes the fair value of all RSAs and RSUs on a straight-line basis for each separately vesting tranche of the award (graded vesting schedule) over the requisite service periods.
Expected Volatility.
The Company estimates the volatility of its common stock at the date of grant based on the historical volatility of its common stock.
Expected Dividend Rate.
The expected dividend rate at the date of grant is based on the then-current dividend yield.
Risk-Free Rate.
The Company bases the risk-free rate on the implied yield currently available on U.S. Treasury issues with an equivalent remaining term equal to the expected life of the award.
Forfeitures.
The Company uses historical data and management's judgment about the future employee turnover rates to estimate the number of shares for which the requisite service period will not be rendered.
Interest Expense and Amortization of Deferred Financing Costs
The components of interest expense and amortization of deferred financing costs are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
Interest expense on debt obligations
|
$
|
500,699
|
|
|
$
|
490,002
|
|
|
$
|
492,437
|
|
Amortization of deferred financing costs and adjustments on long-term debt, net
|
19,087
|
|
|
21,048
|
|
|
18,562
|
|
Amortization of interest rate swaps
|
—
|
|
|
18,725
|
|
|
63,148
|
|
Capitalized interest
|
(7,010
|
)
|
|
(4,805
|
)
|
|
(2,985
|
)
|
Other
|
2,256
|
|
|
2,158
|
|
|
2,129
|
|
Total
|
$
|
515,032
|
|
|
$
|
527,128
|
|
|
$
|
573,291
|
|
The Company amortizes deferred financing costs, discounts, premiums, and purchase price adjustments on long-term debt over the estimated term of the related borrowing using the effective interest yield method. Discounts or purchase price adjustments are generally presented as a direct reduction to the related debt obligation on the Company's consolidated balance sheet.
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 taxable income that is currently distributed to its stockholders. The Company also may be subject to certain federal, state, local, and foreign taxes on its income and assets, including (1) alternative minimum taxes, (2) taxes on any undistributed income, (3) taxes related to the TRSs, (4) certain state, local, or foreign income taxes, (5) franchise taxes, (6) property taxes, and (7) transfer taxes. In addition, the Company could in certain circumstances be required to pay an excise or penalty tax, which could be significant in amount, in order to utilize one or more relief provisions under the Internal Revenue Code of 1986, as amended ("Code"), to maintain qualification for taxation as a REIT.
In August 2014, the Company received a favorable private letter ruling from the Internal Revenue Service ("IRS"), which provides that the real property portion of the Company's small cells and the related rents qualify as real property and rents from real property, respectively, under the rules governing REITs. During the fourth quarter of 2015, the Company completed the necessary steps to include small cells that were previously included in one or more wholly-owned TRSs in the REIT effective January 2016. As a result, during the fourth quarter of 2015, the Company de-recognized the related net deferred tax liabilities. Effective January 4, 2016, the Company's small cells that were previously included in one or more TRSs were included in the REIT. See note
11
.
Additionally, the Company has included in TRSs certain other assets and operations. Those TRS assets and operations will continue to be subject, as applicable, to federal and state corporate income taxes or to foreign taxes in the jurisdictions in which such assets and operations are located. The Company's foreign assets and operations (including its tower operations in Puerto Rico) most likely will be subject to foreign income taxes in the jurisdictions in which such assets and operations are located, regardless of whether they are included in a TRS or not. The Company will be subject to a federal corporate level tax rate (currently 35%) on the gain recognized from the sale of assets occurring within a specified period (generally 5 years) after the REIT conversion up to the amount of the built in gain that existed on January 1, 2014, which is based upon the fair market value of those assets in excess of the Company's tax basis on January 1, 2014. This gain can be offset by any remaining federal net operating loss carryforwards ("NOLs").
For the Company's TRSs, the Company accounts for income taxes using an asset and liability approach, which requires the recognition of deferred income tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. Deferred income tax assets and liabilities are determined based on the temporary differences between the financial statement and tax bases of assets and liabilities using enacted tax rates. A valuation allowance is provided on deferred tax assets if it is determined that it is "more likely than not" that the asset will not be realized. The Company records a valuation allowance against deferred tax assets when it is "more likely than not" that some portion or all of the deferred tax asset will not be realized. The Company reviews the recoverability of deferred tax assets each quarter and based upon projections of future taxable income, reversing deferred tax liabilities or other known events that are expected to affect future taxable income, records a valuation allowance for assets that do not meet the "more likely than not" realization threshold. Valuation allowances may be reversed if related deferred tax assets are deemed realizable based upon changes in facts and circumstances that impact the recoverability of the asset.
The Company recognizes a tax position if it is "more likely than not" that it will be sustained upon examination. The tax position is measured at the largest amount that is greater than
50
percent likely of being realized upon ultimate settlement.
The Company reports penalties and tax-related interest expense as a component of the benefit (provision) for income taxes. As of
December 31, 2016
and
2015
, the Company has not recorded any penalties related to its income tax positions.
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. Diluted income (loss) attributable to CCIC common stockholders, per common share is computed by dividing net income (loss) attributable to CCIC common stockholders by the weighted-average number of common shares outstanding during the period plus any potential dilutive common share equivalents, including shares issuable (1) upon the vesting of RSAs and RSUs as determined under the treasury stock method and (2) upon conversion of the Company's 4.50% Mandatory Convertible Preferred Stock, Series A, par value $0.01 per share ("Convertible Preferred Stock"), as determined under the if-converted method.
A reconciliation of the numerators and denominators of the basic and diluted per share computations is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
Net income (loss) from continuing operations
|
$
|
356,973
|
|
|
$
|
525,286
|
|
|
$
|
346,314
|
|
Dividends on preferred stock
|
(32,991
|
)
|
|
(43,988
|
)
|
|
(43,988
|
)
|
Net income (loss) from continuing operations attributable to CCIC common stockholders for basic and diluted computations
|
$
|
323,982
|
|
|
$
|
481,298
|
|
|
$
|
302,326
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations, net of tax
|
—
|
|
|
999,049
|
|
|
52,460
|
|
Less: Net income (loss) attributable to the noncontrolling interest
|
—
|
|
|
3,343
|
|
|
8,261
|
|
Net income (loss) from discontinued operations attributable to CCIC common stockholders for basic and diluted computations
|
—
|
|
|
995,706
|
|
|
44,199
|
|
|
|
|
|
|
|
Weighted-average number of common shares outstanding (in thousands):
|
|
|
|
|
|
Basic weighted-average number of common stock outstanding
|
340,349
|
|
|
333,002
|
|
|
332,302
|
|
Effect of assumed dilution from potential common shares relating to RSAs and RSUs
|
530
|
|
|
1,060
|
|
|
963
|
|
Diluted weighted-average number of common shares outstanding
|
340,879
|
|
|
334,062
|
|
|
333,265
|
|
Net income (loss) attributable to CCIC common stockholders, per common share:
|
|
|
|
|
|
Income (loss) from continuing operations, basic
|
$
|
0.95
|
|
|
$
|
1.45
|
|
|
$
|
0.91
|
|
Income (loss) from discontinued operations, basic
|
$
|
—
|
|
|
$
|
2.99
|
|
|
$
|
0.13
|
|
Net income (loss) attributable to CCIC common stockholders, basic
|
$
|
0.95
|
|
|
$
|
4.44
|
|
|
$
|
1.04
|
|
Income (loss) from continuing operations, diluted
|
$
|
0.95
|
|
|
$
|
1.44
|
|
|
$
|
0.91
|
|
Income (loss) from discontinued operations, diluted
|
$
|
—
|
|
|
$
|
2.98
|
|
|
$
|
0.13
|
|
Net income (loss) attributable to CCIC common stockholders, diluted
|
$
|
0.95
|
|
|
$
|
4.42
|
|
|
$
|
1.04
|
|
For the years ended December 31,
2015
and 2014,
11.4 million
and
12.5 million
common share equivalents related to the Convertible Preferred Stock, respectively, were excluded from the dilutive common shares because the impact of such conversion would be anti-dilutive, based on the Company's common stock price as of the end of each such year. See notes
12
and
13
.
Fair Values
The Company's assets and liabilities recorded at fair value are categorized based upon a fair value hierarchy that ranks the quality and reliability of the information used to determine fair value. The three levels of the fair value hierarchy are (1) Level 1 — quoted prices (unadjusted) in active and accessible markets, (2) Level 2 — observable prices that are based on inputs not quoted in active markets but corroborated by market data, and (3) Level 3 — unobservable inputs and are not corroborated by market data. The Company evaluates fair value hierarchy level classifications quarterly, and transfers between levels are effective at the end of the quarterly period.
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 quotes (that is non-binding quotes) from brokers that require judgment to interpret market information including implied credit spreads for similar borrowings on recent trades or bid/ask prices or quotes from active markets if applicable. Foreign currency swaps are valued at settlement amounts using observable exchange rates and, if material, reflect an adjustment for the Company's and contract counterparty's credit risk. There were
no
changes since
December 31, 2015
in the Company's valuation techniques used to measure fair values. See note
10
for a further discussion of fair values.
Swaps
Interest Rate Swaps.
The Company had previously entered into interest rate swaps to manage or reduce its interest rate risk, including the use of (1) forward-starting interest rate swaps to hedge its exposure to variability in future cash flows attributable to changes in LIBOR on anticipated financings, including refinancings and potential future borrowings or (2) interest rate swaps to hedge the interest rate variability on a portion of the Company's floating rate debt. Derivative financial instruments were entered into for periods that matched the related underlying exposures. The Company can elect whether or not to designate derivative financial instruments as accounting hedges. The Company can also enter into derivative financial instruments that are not designated as accounting hedges. As of December 31, 2016, the Company does not have any interest rate swaps.
Derivatives were recognized on the consolidated balance sheet at fair value. If the derivative was designated as a cash flow hedge, the effective portion of the change in the fair value of the derivative was recorded as a separate component of stockholders' equity, captioned "accumulated other comprehensive income (loss)" on the Company's consolidated balance sheet, and recognized as increases or decreases to "interest expense and amortization of deferred financing costs" on the Company's consolidated statement of operations and comprehensive income (loss) when the hedged item affects earnings. If a hedge ceased to qualify for hedge accounting, any change in the fair value of the derivative since the date it ceased to qualify was recorded to "net gain (loss) on interest rate swaps." However, any amounts previously recorded to "accumulated other comprehensive income (loss)" would remain there until the original forecasted transaction affected earnings. In situations where it becomes probable that the hedged forecasted transaction will not occur, any gains or losses that have been recorded to "accumulated other comprehensive income (loss)" are immediately reclassified to earnings.
Foreign Currency Swaps.
During 2015, the Company entered into foreign currency swaps to manage and reduce its foreign currency risk related to its sale of CCAL (see note
3
). The derivatives were recognized on the consolidated balance sheet at fair value as of December 31, 2015. These swaps are not designated as accounting hedges and as such, the corresponding gain (loss) on the fair value adjustment is included as a component of "other income (expense)" on the Company's consolidated statement of operations and comprehensive income (loss). See note
9
. In January 2016, the previously outstanding swap related to the installment payment received from the Buyer (as defined in note
3
) was cash settled.
Recently Adopted Accounting Pronouncements
In April 2015, the FASB issued new guidance on the presentation of debt issuance costs. The guidance requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability, consistent with debt discounts and premiums. The guidance is effective for the Company on January 1, 2016 and requires retrospective application. The Company adopted this guidance on January 1, 2016 and has applied this guidance retrospectively. As a result, the Company reclassified
$99.3 million
of deferred financing costs from "long-term prepaid rent and other assets, net" to "debt and other long-term obligations" on the Company's consolidated balance sheet as of
December 31, 2015
.
In September 2015, the FASB issued new guidance which requires an acquirer to recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The Company adopted the guidance as of January 1, 2016 on a prospective basis. This standard did not have a material impact on the Company's consolidated financial statements upon adoption.
Recent Accounting Pronouncements Not Yet Adopted
In May 2014, the FASB released updated guidance regarding the recognition of revenue from contracts with customers, exclusive of those contracts within lease accounting. 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 is effective for the Company on January 1, 2018, following the FASB's July 2015 decision to defer the effective date of the standard by one year. This guidance is required to be applied, at
the Company's election, either (1) retrospectively to each prior reporting period presented, or (2) with the cumulative effect being recognized at the date of initial application. The Company has established a plan to assess the impact of the standard and continues to evaluate the guidance; however, the Company does not expect the guidance to have a material impact on its consolidated financial statements.
In February 2016, the FASB issued new guidance on the recognition, measurement, presentation and disclosure of leases. The new guidance requires lessees to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments for all leases with a term greater than 12 months. The accounting for lessors remains largely unchanged from existing guidance. This guidance is effective for the Company as of January 1, 2019 and is required to be applied using a modified retrospective approach for all leases existing at, or entered into after, the beginning of the earliest comparative period presented. Early adoption is permitted. The Company (1) has established a cross functional project plan to assess the impact of the standard, (2) expects this guidance to have a material impact on its consolidated balance sheet due to the addition of right-of-use assets and lease liabilities for all leases with a term greater than 12 months, and (3) continues to assess additional impacts to its consolidated financial statements, including the consolidated statement of operations.
In June 2016, the FASB issued new guidance on the recognition and measurement of expected credit losses for certain types of financial instruments, including accounts receivable. The new guidance requires entities to estimate the expected credit loss over the life of certain financial instruments at initial recognition of the financial instrument. The guidance is effective for the Company as of January 1, 2020. Early adoption is permitted. The Company does not expect this guidance to have a material impact on its consolidated financial statements.
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 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 between its statement of cash flows and its balance sheet. The guidance is effective for the Company on January 1, 2018, and is required to be applied retrospectively to each prior reporting period presented. The Company believes the impact of the new guidance will be limited to certain changes in presentation on the statement of cash flows.
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 guidance is effective for the Company as of January 1, 2018, and is required to be applied prospectively. Early adoption is permitted. The Company is currently evaluating the guidance, including the impact on its consolidated financial statements.
In January 2017, the FASB issued new guidance to simplify the accounting for goodwill impairment by removing the second step of the existing goodwill impairment test. As a result of the guidance, goodwill impairment, if any, will be measured during the step-one impairment test as the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. Additionally, the guidance does not change the option to complete a qualitative assessment prior to performing a step-one impairment test. The guidance is effective for the Company as of January 1, 2020. Early adoption is permitted. The Company is currently evaluating the impact of the guidance, including the impact on its consolidated financial statements.
|
|
3.
|
Discontinued Operations
|
On May 14, 2015, the Company entered into a definitive agreement to sell CCAL to a consortium of investors led by Macquarie Infrastructure and Real Assets (collectively, "Buyer"). On May 28, 2015, the Company completed the sale. At closing, the Company received net proceeds of approximately $
1.1 billion
after accounting for the Company's
77.6%
ownership interest, repayment of intercompany debt owed to the Company by CCAL and estimated transaction fees and expenses, exclusive of the impact of foreign currency swaps related to the CCAL sale (see note
9
).
As part of the sale of CCAL, in January 2016, the Company received an installment payment from the Buyer totaling approximately $
124 million
, inclusive of the impact of the related foreign currency swap (see note
9
).
During the second quarter 2015, the Company used net proceeds from the sale of CCAL to repay portions of outstanding borrowings under its previously outstanding 2012 Credit Facility. See note
8
.
The Company entered into foreign currency swaps to manage and reduce its foreign currency risk associated with the sale of CCAL. These swaps are not included in discontinued operations. See note
9
.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in thousands, except per share amounts)
CCAL has historically been a separate operating segment of the Company (see note
16
). The sale of the Company's CCAL operating segment is treated as discontinued operations for all periods presented pursuant to ASU 2014-08, which the Company adopted on January 1, 2015 (see note
2
). The sale of CCAL represents a strategic shift of the Company to focus on U.S. operations. The gain from disposal of CCAL is included in discontinued operations on the consolidated statement of operations. The tables below set forth the results of operations related to discontinued operations for the years ended December 31,
2015
and
2014
.
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2015
(b)(c)
|
|
2014
(b)
|
Total revenues
|
|
$
|
65,293
|
|
|
$
|
151,128
|
|
Total cost of operations
(a)
|
|
17,498
|
|
|
43,860
|
|
Depreciation, amortization, and accretion
|
|
10,168
|
|
|
27,283
|
|
Total other expenses
|
|
10,481
|
|
|
26,921
|
|
Pre-tax income from discontinued operations
|
|
27,146
|
|
|
53,064
|
|
Benefit (provision) from income taxes
|
|
(7,456
|
)
|
|
(604
|
)
|
Net income (loss) from discontinued operations
(d)
|
|
$
|
19,690
|
|
|
$
|
52,460
|
|
|
|
(a)
|
Exclusive of depreciation, amortization, and accretion shown separately.
|
|
|
(b)
|
No interest expense has been allocated to discontinued operations.
|
|
|
(c)
|
CCAL results are through May 28, 2015, which was the closing date of the Company's sale of CCAL.
|
|
|
(d)
|
Exclusive of the
gain (loss) from disposal of discontinued operations, net of tax, as presented on the consolidated statement of operations.
|
The Company recorded a gain on the sale of CCAL during the year ended December 31, 2015, which was comprised of the following items:
|
|
|
|
|
Cash received from sale of CCAL
(a)
|
$
|
1,139,369
|
|
Installment payment receivable due January 2016
(a)
|
117,384
|
|
Total proceeds from sale of CCAL
|
$
|
1,256,753
|
|
Adjusted for:
|
|
Net assets and liabilities related to discontinued operations
(b)(c)
|
258,575
|
|
Transaction fees and expenses
|
23,059
|
|
Foreign currency translation reclassification adjustments
(d)
|
(25,678
|
)
|
Pre-tax gain (loss) from disposal of discontinued operations
|
1,000,797
|
|
Income taxes related to the sale of CCAL
|
(21,438
|
)
|
Gain (loss) from disposal of discontinued operations
|
$
|
979,359
|
|
|
|
(a)
|
Exclusive of foreign currency swaps and based on exchange rates as of May 28, 2015, which was the closing date of the Company's sale of CCAL. See note
9
. The impact of fluctuations in the exchange rate subsequent to the closing date are reflected as a component of "other income (expense)" on the Company's consolidated statement of operations.
|
|
|
(b)
|
Represents net assets attributable to CCIC, net of the disposition of noncontrolling interest of $
23.5 million
.
|
|
|
(c)
|
Inclusive of $
11.1 million
of cash.
|
|
|
(d)
|
Represents foreign currency translation adjustments previously included in "accumulated other comprehensive income (loss)" on the consolidated balance sheet and reclassified to "net gain (loss) from disposal of discontinued operations, net of tax" on the consolidated statement of operations and comprehensive income (loss).
|
2014 Land Acquisitions
During 2014, the Company completed several acquisitions of portfolios of land interests under towers ("2014 Land Acquisitions"). These acquisitions were predominately comprised of an aggregate of
1,200
land interests for an aggregate purchase price of approximately
$354 million
, net of cash acquired.
2015 Sunesys Acquisition
During April 2015, the Company entered into a definitive agreement to acquire Quanta Fiber Networks, Inc. ("Sunesys") for approximately $
1.0 billion
in cash, subject to certain limited adjustments ("Sunesys Acquisition"). On August 4, 2015, the Company closed the Sunesys Acquisition. The results of operations from Sunesys have been included in the Company's consolidated statement of operations since the date of acquisition.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in thousands, except per share amounts)
Prior to the closing, Sunesys was a wholly owned subsidiary of Quanta Services, Inc. and a fiber services provider that owned or had rights to nearly
10,000
route miles of fiber in major metropolitan markets across the U.S., including Los Angeles, Philadelphia, Chicago, Atlanta, Silicon Valley, and northern New Jersey. Approximately
60%
of Sunesys' fiber route miles were located in the top 10 basic trading areas.
The Company utilized borrowings under the 2012 Revolver and cash on hand to fund the cash consideration of approximately $
1.0 billion
. See note
8
.
The final purchase price allocation for the Sunesys Acquisition is shown below.
|
|
|
|
|
Final Purchase Price Allocation
|
|
Current assets
|
$
|
15,306
|
|
Property and equipment
|
444,394
|
|
Goodwill
(a)
|
331,775
|
|
Other intangible assets, net
|
254,079
|
|
Current liabilities
|
(20,233
|
)
|
Other non-current liabilities
|
(37,356
|
)
|
Net assets acquired
(b)
|
$
|
987,965
|
|
|
|
(a)
|
The final purchase price allocation for the Sunesys Acquisition resulted in the recognition of goodwill based on the Company's expectation to leverage the Sunesys fiber footprint to support new small cell networks. The Sunesys fiber is complementary to the Company's existing fiber assets and is located where the Company expects to see wireless carrier network investments.
|
|
|
(b)
|
Assets acquired in the Sunesys Acquisition are included in the Company's REIT and as such, no deferred taxes were recorded in connection with the Sunesys Acquisition.
|
Net revenues and net income (loss) attributable to the Sunesys Acquisition are included in the Company's consolidated statements of operations and comprehensive income (loss), since the date the acquisition was completed. For the years ended December 31, 2016, and December 31, 2015, the Sunesys Acquisition contributed consolidated net revenues of
$112.6 million
and
$41.4 million
, respectively.
2016 TDC Acquisition
In April 2016, the Company acquired Tower Development Corporation ("TDC"), a portfolio of approximately
330
towers, for approximately
$461 million
in cash ("TDC Acquisition"). The Company funded the acquisition with cash on hand, cash from borrowings under the Company's senior unsecured credit facility ("2016 Revolver"), and cash from equity issuances under the ATM Program (see note
12
). As of
December 31, 2016
, the preliminary purchase price allocation was primarily comprised of customer relationships of approximately
$140 million
, property and equipment of approximately
$107 million
, and goodwill of approximately
$211 million
. The preliminary purchase price allocation, including the valuation of fixed assets and intangible assets, is based upon a preliminary valuation, which is subject to change as the Company obtains additional information.
See note
19
for discussion of the FiberNet Acquisition (as defined therein).
|
|
5.
|
Property and Equipment
|
The major classes of property and equipment are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Useful Lives
|
|
December 31,
|
|
|
2016
|
|
2015
(b)
|
Land
(a)
|
—
|
|
$
|
1,747,335
|
|
|
$
|
1,617,919
|
|
Buildings
|
40 years
|
|
110,641
|
|
|
86,760
|
|
Towers and small cells
|
1-20 years
|
|
13,825,394
|
|
|
12,993,115
|
|
Information technology assets and other
|
2-7 years
|
|
278,489
|
|
|
239,332
|
|
Construction in process
|
—
|
|
456,675
|
|
|
441,806
|
|
Total gross property and equipment
|
|
|
16,418,534
|
|
|
15,378,932
|
|
Less: accumulated depreciation
|
|
|
(6,613,219
|
)
|
|
(5,798,875
|
)
|
Total property and equipment, net
|
|
|
$
|
9,805,315
|
|
|
$
|
9,580,057
|
|
|
|
(a)
|
Includes land owned in fee and perpetual easements.
|
|
|
(b)
|
The above table reflects a revision from the Company’s 2015 Annual Report on Form 10-K relating to the classification of certain construction in process projects. In connection with this revision, the Company reclassified
$137.0 million
from construction in process to towers and small cells.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in thousands, except per share amounts)
Depreciation expense for the years ended
December 31, 2016
,
2015
and
2014
was
$832.7 million
,
$774.9 million
and
$733.6 million
, respectively. Capital leases and associated leasehold improvements related to gross property and equipment, and accumulated depreciation was
$4.4 billion
and
$1.4 billion
, respectively, as of
December 31, 2016
. See notes
1
and
2
, including discussion of the Company's prepaid master lease agreements.
|
|
6.
|
Goodwill and Intangible Assets
|
Goodwill
The changes in the carrying value of goodwill for the years ended
December 31, 2016
and
December 31, 2015
were as follows:
|
|
|
|
|
Balance as of December 31, 2014
|
$
|
5,196,485
|
|
Additions due to Sunesys Acquisition
(a)
|
325,696
|
|
Additions due to other acquisitions
|
41,542
|
|
Adjustments to purchase price allocations, net
|
(50,172
|
)
|
Balance as of December 31, 2015
|
$
|
5,513,551
|
|
Additions due to TDC Acquisition
(b)
|
210,905
|
|
Additions due to other acquisitions
|
28,486
|
|
Adjustments to purchase price allocations and other, net
|
4,734
|
|
Balance as of December 31, 2016
|
$
|
5,757,676
|
|
|
|
(a)
|
The purchase price allocation for the Sunesys Acquisition resulted in the recognition of goodwill
based on the Company's expectation to leverage the Sunesys fiber footprint to support new small cell networks. The Sunesys fiber is complementary to the Company's existing fiber assets and is located where the Company expects to see wireless carrier network investments.
See note
4
.
|
|
|
(b)
|
The preliminary purchase price allocation for the TDC Acquisition resulted in the recognition of goodwill in the towers segment because of the anticipated growth opportunity in the acquired tower portfolio. See note 4.
|
Intangibles
The following is a summary of the Company's intangible assets. See note
4
for further discussion of the Company's acquisitions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2016
|
|
As of December 31, 2015
|
|
Gross Carrying Value
|
|
Accumulated Amortization
|
|
Net Book Value
|
|
Gross Carrying Value
|
|
Accumulated Amortization
|
|
Net Book Value
|
Site rental contracts and customer relationships
|
$
|
5,146,301
|
|
|
$
|
(1,847,523
|
)
|
|
$
|
3,298,778
|
|
|
$
|
5,009,241
|
|
|
$
|
(1,588,061
|
)
|
|
$
|
3,421,180
|
|
Other intangible assets
|
497,091
|
|
|
(145,797
|
)
|
|
351,294
|
|
|
482,142
|
|
|
(123,407
|
)
|
|
358,735
|
|
Total
|
$
|
5,643,392
|
|
|
$
|
(1,993,320
|
)
|
|
$
|
3,650,072
|
|
|
$
|
5,491,383
|
|
|
$
|
(1,711,468
|
)
|
|
$
|
3,779,915
|
|
Amortization expense related to intangible assets is classified as follows on the Company's consolidated statement of operations and comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For Years Ended December 31,
|
Classification
|
2016
|
|
2015
|
|
2014
|
Depreciation, amortization and accretion
|
$
|
264,656
|
|
|
$
|
251,443
|
|
|
$
|
242,967
|
|
Site rental costs of operations
|
19,367
|
|
|
20,420
|
|
|
22,105
|
|
Total amortization expense
|
$
|
284,023
|
|
|
$
|
271,863
|
|
|
$
|
265,072
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in thousands, except per share amounts)
The estimated annual amortization expense related to intangible assets (inclusive of those recorded as an increase to "site rental costs of operations") for the years ended December 31,
2017
to
2021
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ending December 31,
|
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
Estimated annual amortization
|
$
|
285,556
|
|
|
$
|
285,109
|
|
|
$
|
284,615
|
|
|
$
|
284,219
|
|
|
$
|
283,534
|
|
Other long-term liabilities
The following is a summary of the components of "other long-term liabilities" as presented on the Company's consolidated balance sheet. See also note
2
.
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2016
|
|
2015
|
Deferred rental revenues
|
|
$
|
983,263
|
|
|
$
|
864,269
|
|
Deferred ground lease payable
|
|
517,281
|
|
|
467,411
|
|
Above market leases for land interests, net
|
|
224,126
|
|
|
242,893
|
|
Deferred credits, net
|
|
207,992
|
|
|
239,527
|
|
Asset retirement obligation (see note 14)
|
|
146,100
|
|
|
132,110
|
|
Deferred income tax liabilities
|
|
8,075
|
|
|
2,059
|
|
Other long-term liabilities
|
|
392
|
|
|
367
|
|
|
|
$
|
2,087,229
|
|
|
$
|
1,948,636
|
|
For the years ended
December 31, 2016
,
2015
, and
2014
, the Company recorded
$21.0 million
,
$22.5 million
, and
$24.2 million
, respectively, as a decrease to "site rental costs of operations" for the amortization of above-market leases for land interests under the Company's towers. The estimated amortization expense related to above-market leases for land interests under the Company's towers recorded to site rental costs of operations for the years ended December 31,
2017
to
2021
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ending December 31,
|
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
Above-market leases for land interests
|
$
|
19,695
|
|
|
$
|
18,995
|
|
|
$
|
18,272
|
|
|
$
|
17,301
|
|
|
$
|
16,132
|
|
For the years ended
December 31, 2016
,
2015
, and
2014
the Company recognized
$33.6 million
,
$32.8 million
, and
$29.5 million
, respectively, in "site rental revenues" related to the amortization of below market tenant leases. The following table summarizes the estimated annual amounts related to below-market tenant leases expected to be amortized into site rental revenues for the years ended December 31,
2017
to
2021
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ending December 31,
|
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
Below-market tenant leases
|
$
|
31,433
|
|
|
$
|
28,221
|
|
|
$
|
25,314
|
|
|
$
|
23,685
|
|
|
$
|
21,405
|
|
Other accrued liabilities
Other accrued liabilities included accrued payroll and other accrued compensation of $
100.9 million
and $
78.7 million
, respectively, as of
December 31, 2016
and
2015
.
|
|
8.
|
Debt and Other Obligations
|
See note 19 for a discussion of the Company's 2017 financing activities, including: (1) the issuance of the 2017 February Senior Notes and the utilization of such proceeds and (2) the completion of the amendment to the senior unsecured credit facility("2016 Credit Facility") and utilization of the proceeds therefrom.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in thousands, except per share amounts)
The table below sets forth the Company's debt and other obligations as of
December 31, 2016
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Original
Issue Date
|
|
Contractual
Maturity
Date
|
|
Outstanding Balance as of December 31,
|
|
Stated
Interest Rate
as of
December 31,
|
|
|
|
|
2016
|
|
2015
|
|
2016
|
(a)
|
Bank debt – variable rate:
|
|
|
|
|
|
|
|
|
|
|
2016 Revolver
|
Jan. 2016
|
|
Jan. 2021
|
|
$
|
—
|
|
(b)
|
$
|
—
|
|
|
N/A
|
|
(c)
|
2016 Term Loan A
|
Jan. 2016
|
|
Jan. 2021
|
|
1,954,173
|
|
|
—
|
|
|
1.9
|
%
|
(c)
|
2012 Revolver
|
Jan. 2012
|
|
Jan. 2019
|
|
—
|
|
|
1,125,000
|
|
|
2.2
|
%
|
|
Tranche A Term Loans
|
Jan. 2012
|
|
Jan. 2019
|
|
—
|
|
|
627,846
|
|
|
2.2
|
%
|
|
Tranche B Term Loans
|
Jan. 2012
|
|
Jan. 2021
|
|
—
|
|
|
2,219,602
|
|
|
3.0
|
%
|
|
Total bank debt
|
|
|
|
|
1,954,173
|
|
|
3,972,448
|
|
|
|
|
Securitized debt – fixed rate:
|
|
|
|
|
|
|
|
|
|
|
Secured Notes, Series 2009-1, Class A-1
|
Jul. 2009
|
|
Aug. 2019
|
(d)
|
51,416
|
|
|
70,219
|
|
|
6.3
|
%
|
|
Secured Notes, Series 2009-1, Class A-2
|
Jul. 2009
|
|
Aug. 2029
|
(d)
|
68,737
|
|
|
68,658
|
|
|
9.0
|
%
|
|
Tower Revenue Notes, Series 2010-2
|
Jan. 2010
|
|
Jan. 2037
|
|
—
|
|
|
349,171
|
|
|
N/A
|
|
|
Tower Revenue Notes, Series 2010-3
|
Jan. 2010
|
|
Jan. 2040
|
(e)(f)
|
1,244,237
|
|
|
1,242,368
|
|
|
6.1
|
%
|
|
Tower Revenue Notes, Series 2010-5
|
Aug. 2010
|
|
Aug. 2037
|
|
—
|
|
|
298,774
|
|
|
N/A
|
|
|
Tower Revenue Notes, Series 2010-6
|
Aug. 2010
|
|
Aug. 2040
|
(e)(f)
|
993,557
|
|
|
991,749
|
|
|
4.9
|
%
|
|
Tower Revenue Notes, Series 2015-1
|
May 2015
|
|
May 2042
|
(e)(f)
|
296,573
|
|
|
295,937
|
|
|
3.2
|
%
|
|
Tower Revenue Notes, Series 2015-2
|
May 2015
|
|
May 2045
|
(e)(f)
|
691,285
|
|
|
690,247
|
|
|
3.7
|
%
|
|
Total securitized debt
|
|
|
|
|
3,345,805
|
|
|
4,007,123
|
|
|
|
|
Bonds – fixed rate:
|
|
|
|
|
|
|
|
|
|
|
5.250% Senior Notes
|
Oct. 2012
|
|
Jan. 2023
|
|
1,637,099
|
|
|
1,634,989
|
|
|
5.3
|
%
|
|
2.381% Secured Notes
|
Dec. 2012
|
|
Dec. 2017
|
|
—
|
|
|
497,160
|
|
|
N/A
|
|
|
3.849% Secured Notes
|
Dec. 2012
|
|
Apr. 2023
|
|
991,279
|
|
|
989,895
|
|
|
3.8
|
%
|
|
4.875% Senior Notes
|
Apr. 2014
|
|
Apr. 2022
|
|
840,322
|
|
|
838,579
|
|
|
4.9
|
%
|
|
3.400% Senior Notes
|
Feb./May 2016
|
|
Feb. 2021
|
|
849,698
|
|
|
—
|
|
|
3.4
|
%
|
|
4.450% Senior Notes
|
Feb. 2016
|
|
Feb. 2026
|
|
890,118
|
|
|
—
|
|
|
4.5
|
%
|
|
3.700% Senior Notes
|
May 2016
|
|
June 2026
|
|
741,908
|
|
|
—
|
|
|
3.7
|
%
|
|
2.250% Senior Notes
|
Sept. 2016
|
|
Sept. 2021
|
|
693,893
|
|
|
—
|
|
|
2.3
|
%
|
|
Total bonds
|
|
|
|
|
6,644,317
|
|
|
3,960,623
|
|
|
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
Capital leases and other obligations
|
Various
|
|
Various
|
(g)
|
226,847
|
|
|
209,765
|
|
|
Various
|
|
|
Total debt and other obligations
|
|
|
|
|
12,171,142
|
|
|
12,149,959
|
|
|
|
|
Less: current maturities and short-term debt and other current obligations
|
|
|
|
|
101,749
|
|
|
106,219
|
|
|
|
|
Non-current portion of long-term debt and other long-term obligations
|
|
|
|
|
$
|
12,069,393
|
|
|
$
|
12,043,740
|
|
|
|
|
|
|
(a)
|
Represents the weighted-average stated interest rate.
|
|
|
(b)
|
As of
December 31, 2016
, the undrawn availability under the 2016 Revolver was
$2.5 billion
.
|
|
|
(c)
|
The 2016 Revolver and senior unsecured term loan A ("2016 Term Loan A") bear interest at a rate per annum equal to LIBOR plus a credit spread ranging from
1.125%
to
2.000%
, based on the Company's senior unsecured debt rating. The Company pays a commitment fee of approximately
0.200%
per annum on the undrawn available amount under the 2016 Revolver.
|
|
|
(d)
|
The Secured Notes, Series 2009-1, Class A-1 and Secured Notes, Series 2009-1, Class A-2 are collectively referred to herein as "2009 Securitized Notes."
|
|
|
(e)
|
The Tower Revenue Notes, Series 2010-3 ("January 2010 Tower Revenue Notes"), Tower Revenue Notes, Series 2010-6 ("August 2010 Tower Revenue Notes") and Tower Revenue Notes, Series 2015-1 and 2015-2 ("May 2015 Tower Revenue Notes") are collectively referred to herein as "Tower Revenue Notes."
|
|
|
(f)
|
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. The Tower Revenue Notes have principal amounts of
$2.3 billion
,
$300.0 million
and
$700.0 million
, with anticipated repayment dates in 2020, 2022 and 2025, respectively.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in thousands, except per share amounts)
|
|
(g)
|
The Company's capital 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.
|
The credit agreement governing the Company's 2016 Credit Facility contains financial maintenance covenants. The Company is currently in compliance with these financial maintenance covenants, and based upon current expectations, the Company believes it will continue to comply with its financial maintenance covenants. In addition, certain of the Company's debt agreements also contain restrictive covenants that place restrictions on CCIC or its subsidiaries and may limit the Company's ability to, among other things, incur additional debt and liens, purchase the Company's securities, make capital expenditures, dispose of assets, undertake transactions with affiliates, make other investments, pay dividends or distribute excess cash flow.
Bank Debt
In January 2016, the Company completed the 2016 Credit Facility, which was originally comprised of (1) a
$2.5 billion
2016 Revolver maturing in January 2021, (2) a
$2.0 billion
2016 Term Loan A maturing in January 2021 and (3)
$1.0 billion
Senior Unsecured 364-Day Revolving Credit Facility ("364-Day Facility") maturing in January 2017. The Company used the net proceeds from the 2016 Credit Facility (1) to repay the previously outstanding 2012 Credit Facility and (2) for general corporate purposes. In February 2016, the Company used a portion of the net proceeds from the February 2016 Senior Notes (as defined below) offering to repay in full all outstanding borrowings under the previously outstanding 364-Day Facility.
Securitized Debt
The Tower Revenue Notes and the 2009 Securitized Notes (collectively, "Securitized Debt") are obligations of special purpose entities and their direct and indirect subsidiaries (each an "issuer"), all of which are wholly-owned, indirect subsidiaries of CCIC. The Tower Revenue Notes and 2009 Securitized Notes are governed by separate indentures. The January 2010 Tower Revenue Notes, August 2010 Tower Revenue Notes, and May 2015 Tower Revenue Notes are governed by one indenture and consist of multiple series of notes, each with its own anticipated repayment date.
The net proceeds of the January 2010 Tower Revenue Notes and August 2010 Tower Revenue Notes were primarily used to repay the portion of the 2005 Tower Revenue Notes and 2006 Tower Revenue Notes not previously purchased. In April 2014, the Company utilized a portion of the net proceeds from the 4.875% Senior Notes (as defined below) offering to repay
$300.0 million
of the January 2010 Tower Revenue Notes with an anticipated repayment date of January 2015.
The net proceeds of the May 2015 Tower Revenue Notes, together with proceeds received from our sale of CCAL, were primarily used to (1) to repay
$250.0 million
aggregate principal amount of August 2010 Tower Revenue Notes with an anticipated repayment date of August 2015, (2) to repay all of the previously outstanding WCP Securitized Notes, (3) to repay portions of outstanding borrowings under its 2012 Credit Facility, and (4) to pay related fees and expenses.
The Securitized Debt is paid solely from the cash flows generated by the operation of the towers held directly and indirectly by the issuers of the respective Securitized Debt. The Securitized Debt is secured by, among other things, (1) a security interest in substantially all of the applicable issuers' assignable personal property, (2) a pledge of the equity interests in each applicable issuer, and (3) a security interest in the applicable issuers' leases with tenants to lease tower space (space licenses) . The governing instruments of two indirect subsidiaries ("Crown Atlantic" and "Crown GT") of the issuers of the Tower Revenue Notes generally prevent them from issuing debt and granting liens on their assets without the approval of a subsidiary of Verizon Communications. Consequently, while distributions paid by Crown Atlantic and Crown GT will service the Tower Revenue Notes, the Tower Revenue Notes are not obligations of, nor are the Tower Revenue Notes secured by the cash flows or any other assets of, Crown Atlantic and Crown GT. As of
December 31, 2016
, the Securitized Debt was collateralized with personal property and equipment with an aggregate net book value of approximately
$1.2 billion
, exclusive of Crown Atlantic and Crown GT personal property and equipment.
The excess cash flows from the issuers of the Securitized Debt, after the payment of principal, interest, reserves, expenses, and management fees are distributed to the Company in accordance with the terms of the indentures. If the Debt Service Coverage Ratio ("DSCR") (as defined in the applicable governing loan agreement) as of the end of any calendar quarter falls to a certain level, then all excess cash flow of the issuers of the applicable debt instrument will be deposited into a reserve account instead of being released to the Company. The funds in the reserve account will not be released to the Company until the DSCR exceeds a certain level for two consecutive calendar quarters. If the DSCR falls below a certain level as of the end of any calendar quarter, then all cash on deposit in the reserve account along with future excess cash flows of the issuers will be applied to prepay the debt with applicable prepayment consideration.
The Company may repay the Tower Revenue Notes or the 2009 Securitized Notes in whole or in part at any time after the second anniversary of the applicable issuance date, provided such prepayment is accompanied by any applicable prepayment
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in thousands, except per share amounts)
consideration. The Securitized Debt has covenants and restrictions customary for rated securitizations, including provisions prohibiting the issuers from incurring additional indebtedness or further encumbering their assets.
Bonds—Senior Notes.
In February 2016, the Company issued
$1.5 billion
aggregate principal amount of senior unsecured notes ("February 2016 Senior Notes"), which consist of (1)
$600.0 million
aggregate principal amount of 3.400% senior notes with a final maturity date of February 2021 and (2)
$900.0 million
aggregate principal amount of 4.450% senior notes with a final maturity date of February 2026. The Company used net proceeds from the February 2016 Senior Notes offering, together with cash on hand, to (1) repay in full all outstanding borrowings under the previously outstanding 364-Day Facility and (2) repay
$500.0 million
of outstanding borrowings under the 2016 Revolver.
In May 2016, the Company issued
$1.0 billion
aggregate principal amount of senior unsecured notes ("May 2016 Senior Notes"), which consist of (1)
$250.0 million
aggregate principal amount of additional 3.400% senior notes that were issued pursuant to the same indenture as the 3.400% senior notes issued in the February 2016 Senior Notes offering with a final maturity date of February 2021 and (2)
$750.0 million
aggregate principal amount of 3.700% senior notes with a final maturity date of June 2026. The Company used net proceeds from the May 2016 Senior Notes offering to repay in full the Tower Revenue Notes, Series 2010-2 and Series 2010-5, each issued by certain of its subsidiaries, and to repay a portion of the outstanding borrowings under the 2016 Revolver.
In September 2016, the Company issued
$700.0 million
aggregate principal amount of 2.250% senior unsecured notes ("September 2016 Senior Notes") with a final maturity date of September 2021. The Company used net proceeds from the September 2016 Senior Notes offering to (1) repay in full the 2.381% Secured Notes (as defined below) issued by certain of its subsidiaries and (2) repay a portion of the outstanding borrowings under the 2016 Revolver.
In April 2014, CCIC issued $
850.0 million
of senior unsecured notes due in April 2022 ("4.875% Senior Notes"). The net proceeds from the offering were approximately $
839 million
, after the deduction of associated fees. The Company utilized the net proceeds from the 4.875% Senior Notes offering (1) to repay
$300.0 million
of the January 2010 Tower Revenue Notes with an anticipated repayment date of January 2015 and (2) to redeem all of the previously outstanding 7.125% Senior Notes.
The 5.250% senior unsecured notes due 2023 ("5.250% Senior Notes") are general obligations of CCIC, which rank equally with all existing and future senior debt of CCIC. The Senior Notes are effectively subordinated to all liabilities (including trade payables) of each subsidiary of CCIC and rank pari passu with the other respective high yield bonds of CCIC. The Company used the net proceeds from the 5.250% Senior Notes offering to partially fund the T-Mobile Acquisition.
The February 2016 Senior Notes, May 2016 Senior Notes, September 2016 Senior Notes, 4.875% Senior Notes and 5.250% Senior Notes (collectively, "Senior Notes") are senior unsecured obligations of the Company and rank equally with all of the Company's existing and future senior unsecured indebtedness, including obligations under the 2016 Credit Facility, and senior to all of the Company's future subordinated indebtedness. The Senior Notes are structurally subordinated to all existing and future liabilities and obligations of the Company's subsidiaries. The Company's subsidiaries are not guarantors of the Senior Notes.
CCIC may redeem any of the Senior Notes in whole or in part at any time at a price equal to 100% of the principal amount to be redeemed, plus a make whole premium, and accrued and unpaid interest if any.
Bonds—Secured Notes
. The 2012 Secured Notes originally consisted of
$500 million
aggregate principal amount of 2.381% secured notes due 2017 ("2.381% Secured Notes") and
$1.0 billion
aggregate principal amount of 3.849% secured notes due 2023. The 2012 Secured Notes were issued and are guaranteed by the same subsidiaries of CCIC that had previously issued and guaranteed the 7.75% Secured Notes. The 2012 Secured Notes are secured by a pledge of the equity interests of such subsidiaries. The 2012 Secured Notes are not guaranteed by and are not obligations of CCIC or any of its subsidiaries other than the issuers and guarantors of the 2012 Secured Notes. The 2012 Secured Notes will be paid solely from the cash flows generated from operations of the towers held directly and indirectly by the issuers and the guarantors of such notes. The Company used the net proceeds from the issuance of the 2012 Secured Notes to repurchase and redeem the previously outstanding 7.75% Secured Notes and a portion of the previously outstanding 9% Senior Notes. The 2012 Secured Notes may be redeemed at any time at a price equal to 100% of the principal amount, plus a make whole premium, and accrued and unpaid interest, if any.
Previously Outstanding Indebtedness
Securitized Debt.
See above for a discussion of (1) the April 2014 repayment of
$300.0 million
of the January 2010 Tower Revenue Notes with an anticipated repayment date of January 2015, (2) the May 2015 repayment of
$250.0 million
of the August 2010 Tower Revenue Notes with an anticipated repayment date of August 2015, (3) the repayment of all of the previously outstanding
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in thousands, except per share amounts)
WCP Securitized Notes and (4) the May 2016 repayment of $350 million and $300 million of the January 2010 Tower Revenue Notes and August 2010 Tower Revenue Notes with anticipated repayment dates of January 2017 and August 2017, respectively.
Bonds—Senior Notes.
In May 2014, CCIC redeemed approximately $
500.0 million
aggregate principal amount of its 7.125% Senior Notes at a price equal to
100%
of the principal amount of the 7.125% senior notes redeemed, plus a make-whole premium, and accrued and unpaid interest. The Company utilized a portion of the net proceeds from the 4.875% Senior Notes offering, together with cash on hand, to redeem such previously outstanding 7.125% Senior Notes.
Bonds—Secured Notes.
In September 2016, the Company repaid $500 million aggregate principal amount of the 2.381% Secured Notes issued by certain of its subsidiaries. The Company utilized a portion of the net proceeds from the September 2016 Senior Notes offering to repay the previously outstanding 2.381% Secured Notes.
Contractual Maturities
The following are the scheduled contractual maturities of the total debt or other long-term obligations outstanding at
December 31, 2016
. 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. If the Tower Revenue Notes are not paid in full on or prior to their respective anticipated repayment dates, as applicable, then the 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 Tower Revenue Notes. See also note 19.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ending December 31,
|
|
|
|
|
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
Thereafter
|
|
Total Cash Obligations
|
|
Unamortized Adjustments, Net
|
|
Total Debt and Other Obligations Outstanding
|
Scheduled contractual maturities
|
$
|
101,749
|
|
|
$
|
135,908
|
|
|
$
|
139,444
|
|
|
$
|
203,054
|
|
|
$
|
3,125,189
|
|
|
$
|
8,556,333
|
|
|
$
|
12,261,677
|
|
|
$
|
(90,535
|
)
|
|
$
|
12,171,142
|
|
Debt Purchases and Redemptions
The following is a summary of the purchases and redemptions of debt during the years ended
December 31, 2016
,
2015
, and
2014
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ending December 31, 2016
|
|
Principal Amount
|
|
Cash Paid
(a)
|
|
Gains (losses)
(b)
|
2012 Revolver
|
—
|
|
|
—
|
|
|
(1,930
|
)
|
Tranche A Term Loans
|
629,375
|
|
|
629,375
|
|
|
(1,498
|
)
|
Tranche B Term Loans
|
2,247,015
|
|
|
2,247,015
|
|
|
(27,122
|
)
|
Tower Revenue Notes, Series 2010-2
|
350,000
|
|
|
352,796
|
|
|
(3,338
|
)
|
Tower Revenue Notes, Series 2010-5
|
300,000
|
|
|
307,176
|
|
|
(8,129
|
)
|
2.381% Secured Notes
|
500,000
|
|
|
508,472
|
|
|
(10,274
|
)
|
Total
|
$
|
4,026,390
|
|
|
$
|
4,044,834
|
|
|
$
|
(52,291
|
)
|
|
|
(a)
|
Exclusive of accrued interest.
|
|
|
(b)
|
Inclusive of $
33.8 million
related to the write off of deferred financing costs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ending December 31, 2015
|
|
Principal Amount
|
|
Cash Paid
(a)
|
|
Gains (losses)
(b)
|
August 2010 Tower Revenue Notes
|
250,000
|
|
|
250,000
|
|
|
(159
|
)
|
WCP Securitized Notes
|
252,830
|
|
|
252,830
|
|
|
2,105
|
|
Tranche B Term Loans
|
564,137
|
|
|
564,137
|
|
|
(6,127
|
)
|
Other
|
2,394
|
|
|
2,370
|
|
|
24
|
|
Total
|
$
|
1,069,361
|
|
|
$
|
1,069,337
|
|
|
$
|
(4,157
|
)
|
|
|
(a)
|
Exclusive of accrued interest.
|
|
|
(b)
|
Inclusive of
$4.2 million
related to the net write off of deferred financing costs, premiums and discounts.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ending December 31, 2014
|
|
Principal Amount
|
|
Cash Paid
(a)
|
|
Gains (losses)
(b)
|
January 2010 Tower Revenue Notes
|
300,000
|
|
|
302,990
|
|
|
(3,740
|
)
|
7.125% Senior Notes
|
500,000
|
|
|
533,909
|
|
|
(40,889
|
)
|
Total
|
$
|
800,000
|
|
|
$
|
836,899
|
|
|
$
|
(44,629
|
)
|
|
|
(a)
|
Exclusive of accrued interest.
|
|
|
(b)
|
The losses predominately relate to cash losses, including make whole payments and are inclusive of
$7.7 million
related to the write off of deferred financing costs and discounts.
|
Foreign Currency Swaps
During May 2015, the Company entered into two previously outstanding foreign currency swaps to manage and reduce its foreign currency risk related to its sale of CCAL (see note
3
). The Company does not enter into foreign currency swaps for speculative or trading purposes. The foreign currency swaps were originally comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Item Swapped
|
|
Notional
Amount
|
|
Forward Rate
|
|
Start Date
|
|
End Date
|
|
Pay Amount
|
|
Receive Amount
|
|
Fair Value at
December 31, 2016
|
|
May 2015 cash receipt from sale of CCAL
|
|
A$1,400,000
|
|
0.8072
|
|
May 2015
|
|
June 2015
|
|
Australian Dollar
|
|
US Dollar
|
|
N/A
|
(a)
|
Installment payment from Buyer
|
|
A$155,000
|
|
0.79835
|
|
May 2015
|
|
January 2016
|
|
Australian Dollar
|
|
US Dollar
|
|
N/A
|
(b)
|
|
|
(a)
|
In conjunction with closing the CCAL sale on May 28, 2015, the Company cash settled the swap with a notional value of Australian dollar $
1.4 billion
and recorded a gain on foreign currency swaps of $
54.5 million
, which is included as a component of "other income (expense)" on the Company's consolidated statement of operations.
|
|
|
(b)
|
As of
December 31, 2015
, the Company marked-to-market the swap with a notional value of Australian dollar $
155 million
and recorded (1) an asset within "other current assets" on the Company's consolidated balance sheet and (2) a corresponding gain on foreign currency swaps
, which is included as a component of "other income (expense)"
on the Company's consolidated statement of operations.
In January 2016, the previously outstanding swap related to the installment payment received from the Buyer was settled.
|
In total, the Company recorded a gain on foreign currency swaps of $
65.2 million
for the year ended
December 31, 2015
, respectively. This gain is included as a component of "other income (expense)" on the Company's consolidated statement of operations.
|
|
10.
|
Fair Value Disclosures
|
The following table shows the estimated fair values of the Company's financial instruments, along with the carrying amounts of the related assets (liabilities). See also note
2
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level in Fair Value Hierarchy
|
|
December 31, 2016
|
|
December 31, 2015
|
|
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
Assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
1
|
|
$
|
567,599
|
|
|
$
|
567,599
|
|
|
$
|
178,810
|
|
|
$
|
178,810
|
|
Restricted cash
|
1
|
|
129,547
|
|
|
129,547
|
|
|
135,731
|
|
|
135,731
|
|
Foreign currency swaps
|
2
|
|
—
|
|
|
—
|
|
|
10,479
|
|
|
10,479
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Debt and other obligations
|
2
|
|
$
|
12,171,142
|
|
|
$
|
12,660,013
|
|
|
$
|
12,149,959
|
|
|
$
|
12,555,143
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in thousands, except per share amounts)
Income (loss) from continuing operations before income taxes by geographic area is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
Domestic
|
$
|
349,041
|
|
|
$
|
461,293
|
|
|
$
|
341,070
|
|
Foreign
(a)
|
24,813
|
|
|
12,536
|
|
|
(6,000
|
)
|
|
$
|
373,854
|
|
|
$
|
473,829
|
|
|
$
|
335,070
|
|
|
|
(a)
|
Inclusive of income (loss) before income taxes from Puerto Rico.
|
The benefit (provision) for income taxes consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
Current:
|
|
|
|
|
|
Federal
|
$
|
(227
|
)
|
|
$
|
495
|
|
|
$
|
213
|
|
Foreign
|
(6,820
|
)
|
|
(5,675
|
)
|
|
(6,413
|
)
|
State
|
(1,231
|
)
|
|
(3,981
|
)
|
|
(4,415
|
)
|
Total current
|
(8,278
|
)
|
|
(9,161
|
)
|
|
(10,615
|
)
|
Deferred:
|
|
|
|
|
|
Federal
|
(7,968
|
)
|
|
44,716
|
|
|
23,070
|
|
Foreign
|
(601
|
)
|
|
(1,048
|
)
|
|
(819
|
)
|
State
|
(34
|
)
|
|
16,950
|
|
|
(392
|
)
|
Total deferred
|
(8,603
|
)
|
|
60,618
|
|
|
21,859
|
|
Total tax benefit (provision)
|
$
|
(16,881
|
)
|
|
$
|
51,457
|
|
|
$
|
11,244
|
|
A reconciliation between the benefit (provision) for income taxes and the amount computed by applying the federal statutory income tax rate to the income (loss) before income taxes is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
Benefit (provision) for income taxes at statutory rate
|
$
|
(130,849
|
)
|
|
$
|
(165,840
|
)
|
|
$
|
(117,274
|
)
|
Tax effect of foreign income (losses)
|
1,215
|
|
|
(527
|
)
|
|
(4,296
|
)
|
Tax adjustment related to REIT operations
|
121,092
|
|
|
186,649
|
|
|
132,951
|
|
Tax adjustment related to the inclusion of small cells in the REIT
(a)
|
—
|
|
|
33,759
|
|
|
—
|
|
Expenses for which no federal tax benefit was recognized
|
(43
|
)
|
|
(414
|
)
|
|
(463
|
)
|
Valuation allowances
|
(21
|
)
|
|
3,000
|
|
|
9,000
|
|
State tax (provision) benefit, net of federal
|
(1,085
|
)
|
|
1,210
|
|
|
(3,136
|
)
|
Foreign tax
|
(7,421
|
)
|
|
(6,723
|
)
|
|
(7,232
|
)
|
Other
|
231
|
|
|
343
|
|
|
1,694
|
|
|
$
|
(16,881
|
)
|
|
$
|
51,457
|
|
|
$
|
11,244
|
|
|
|
(a)
|
During the fourth quarter of 2015, the Company de-recognized the net deferred tax liabilities related to the Company's small cells previously included in one or more TRSs in conjunction with the inclusion of small cells in the REIT in January 2016.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in thousands, except per share amounts)
The components of the net deferred income tax assets and liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2016
|
|
2015
|
Deferred income tax liabilities:
|
|
|
|
Property and equipment
|
$
|
3,945
|
|
|
$
|
334
|
|
Deferred site rental receivable
|
6,192
|
|
|
5,742
|
|
Intangible assets
|
—
|
|
|
—
|
|
Total deferred income tax liabilities
|
10,137
|
|
|
6,076
|
|
Deferred income tax assets:
|
|
|
|
Intangible assets
|
22,377
|
|
|
40,654
|
|
Net operating loss carryforwards
|
21,143
|
|
|
7,891
|
|
Deferred ground lease payable
|
1,646
|
|
|
1,312
|
|
Accrued liabilities
|
5,511
|
|
|
4,183
|
|
Receivables allowance
|
383
|
|
|
196
|
|
Other
|
1,726
|
|
|
1,252
|
|
Valuation allowances
|
(6,627
|
)
|
|
(1,994
|
)
|
Total deferred income tax assets, net
|
46,159
|
|
|
53,494
|
|
Net deferred income tax asset (liabilities)
|
$
|
36,022
|
|
|
$
|
47,418
|
|
The Company operates as a REIT for U.S. federal income tax purposes. During the fourth quarter of 2015, the Company completed the necessary steps to include its small cells that were previously included in one or more TRSs in the REIT. As a result, during the fourth quarter of 2015, the Company de-recognized the net deferred tax liabilities in conjunction with the inclusion of small cells in the REIT, which resulted in a net non-cash income tax benefit of
$33.8 million
. Effective January 4, 2016, the Company's small cells that were previously included in one or more TRSs are included in the REIT.
The components of the net deferred income tax assets (liabilities) are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
December 31, 2015
|
Classification
|
Gross
|
|
Valuation
Allowance
|
|
Net
|
|
Gross
|
|
Valuation
Allowance
|
|
Net
|
Federal
|
$
|
42,948
|
|
|
$
|
(21
|
)
|
|
$
|
42,927
|
|
|
$
|
48,273
|
|
|
$
|
—
|
|
|
$
|
48,273
|
|
State
|
1,170
|
|
|
—
|
|
|
1,170
|
|
|
1,203
|
|
|
—
|
|
|
1,203
|
|
Foreign
|
(1,469
|
)
|
|
(6,606
|
)
|
|
(8,075
|
)
|
|
(64
|
)
|
|
(1,994
|
)
|
|
(2,058
|
)
|
Total
|
$
|
42,649
|
|
|
$
|
(6,627
|
)
|
|
$
|
36,022
|
|
|
$
|
49,412
|
|
|
$
|
(1,994
|
)
|
|
$
|
47,418
|
|
At
December 31, 2016
, the Company had U.S. federal and state NOLs of approximately
$1.3 billion
and
$0.6 billion
, respectively, which are available to offset future taxable income. These amounts include approximately
$237 million
of losses related to stock-based compensation. The Company also has foreign NOLs of
$54.1 million
. If not utilized, the Company's U.S. federal NOLs expire starting in
2024
and ending in
2036
, the state NOLs expire starting in
2017
and ending in
2036
, and the foreign NOLs expire starting in
2017
and ending in
2024
. The utilization of the NOLs is subject to certain limitations. The Company's U.S. federal and state income tax returns generally remain open to examination by taxing authorities until three years after the applicable NOLs have been used or expired. The remaining valuation allowance relates to certain foreign net deferred tax assets (primarily NOLs).
As of
December 31, 2016
, the total amount of unrecognized tax benefits that would impact the effective tax rate, if recognized, was
$3.1 million
. The aggregate changes in the balance of unrecognized tax benefits are as follows:
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2016
|
|
2015
|
Balance at beginning of year
|
$
|
6,770
|
|
|
$
|
8,333
|
|
Additions based on prior year tax positions
|
116
|
|
|
212
|
|
Reductions as a result of the lapse of statute limitations
|
(3,806
|
)
|
|
(1,775
|
)
|
Balance at end of year
|
$
|
3,080
|
|
|
$
|
6,770
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in thousands, except per share amounts)
From time to time, the Company is subject to examinations by various tax authorities in jurisdictions in which the Company has business operations. At this time, the Company is not subject to an IRS examination. The Australian Taxation Office is conducting an audit of the tax consequences for Australian tax purposes of the Company’s sale of CCAL. The Company regularly assesses the likelihood of additional assessments in each of the tax jurisdictions. The Company believes it has adequately provided for uncertain tax positions and does not believe assessments, if any, arising from current or future examination or audits will have a material effect on the Company's financial statements.
As of December 31, 2016
, the Company's deferred tax assets are included in "long-term prepaid rent and other assets, net" and the Company's deferred tax liabilities are included in "other long-term liabilities" on the Company's consolidated balance sheet. See note
2
for a discussion of recently adopted guidance on the presentation of deferred tax assets and deferred tax liabilities.
"At-The-Market" Stock Offering Program
In August 2015, the Company established an "at-the-market" stock offering program ("ATM Program") through which it may, from time to time, issue and sell shares of its common stock having an aggregate cumulative gross sales price of up to
$500.0 million
to or through sales agents. Sales, if any, under the ATM Program may be made by means of ordinary brokers' transactions on the New York Stock Exchange or otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices or, subject to specific instructions of the Company, at negotiated prices. The Company intends to use the net proceeds from any sales under the ATM Program for general corporate purposes, which may include the funding of future acquisitions or investments and the repayment or repurchase of any outstanding indebtedness. During the year ended
December 31, 2016
,
3.8 million
shares of common stock were sold under the ATM Program, generating net proceeds of
$323.8 million
after giving effect to sales agent commissions of
$3.3 million
. The net proceeds from the sales under the ATM Program were used, in part, to fund the TDC Acquisition.
Convertible Preferred Stock Conversion
In October and November 2016, all of the approximately
9.8 million
shares of the Company's previously outstanding Convertible Preferred Stock converted to approximately
11.6 million
shares of the Company's common stock at a conversion rate (based on the applicable market value of the common stock and subject to certain anti-dilutive adjustments) of
1.1880
common shares per each share of Convertible Preferred Stock.
November 2016 Equity Financing
In November 2016, the Company completed an equity offering of approximately
11.4 million
shares of common stock, which generated net proceeds of approximately
$1.0 billion
("November 2016 Equity Financing"). The Company utilized proceeds from such offering to partially fund the FiberNet Acquisition (as defined in note 19) in January 2017 (see note
19
).
Declaration and Payment of Dividends
During the year ended
December 31, 2016
, the following dividends were declared or paid:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Type
|
|
Declaration Date
|
|
Record Date
|
|
Payment Date
|
|
Dividends Per Share
|
|
Aggregate
Payment
Amount
(In millions)
|
|
Common Stock
|
|
February 18, 2016
|
|
March 18, 2016
|
|
March 31, 2016
|
|
$
|
0.885
|
|
|
$
|
300.0
|
|
(a)
|
Common Stock
|
|
May 20, 2016
|
|
June 17, 2016
|
|
June 30, 2016
|
|
$
|
0.885
|
|
|
$
|
300.8
|
|
(a)
|
Common Stock
|
|
August 2, 2016
|
|
September 16, 2016
|
|
September 30, 2016
|
|
$
|
0.885
|
|
|
$
|
300.3
|
|
(a)
|
Common Stock
|
|
October 18, 2016
|
|
December 16, 2016
|
|
December 30, 2016
|
|
$
|
0.95
|
|
|
$
|
344.5
|
|
(a)
|
Convertible Preferred Stock
|
|
December 16, 2015
|
|
January 16, 2016
|
|
February 1, 2016
|
|
$
|
1.125
|
|
|
$
|
11.0
|
|
|
Convertible Preferred Stock
|
|
March 22, 2016
|
|
April 15, 2016
|
|
May 2, 2016
|
|
$
|
1.125
|
|
|
$
|
11.0
|
|
|
Convertible Preferred Stock
|
|
June 28, 2016
|
|
July 15, 2016
|
|
August 1, 2016
|
|
$
|
1.125
|
|
|
$
|
11.0
|
|
|
Convertible Preferred Stock
|
|
September 17, 2016
|
|
October 15, 2016
|
|
November 1, 2016
|
|
$
|
1.125
|
|
|
$
|
11.0
|
|
|
|
|
(a)
|
Inclusive of dividends accrued for holders of unvested RSUs and payments of previously accrued dividends for holders of RSUs that have vested during the year ended
December 31, 2016
.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in thousands, except per share amounts)
See note
19
for further discussion of common stock dividends.
Tax Treatment of Dividends
The following table summarizes, for income tax purposes, the nature of dividends paid during 2016 on the Company's common stock and Convertible Preferred Stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Type
|
|
Payment Date
|
|
Dividends Per Share
|
|
Ordinary Taxable Dividend Per Share
|
|
Qualified Taxable Dividend Per Share
(a)
|
|
Long-Term Capital Gain Distribution Per Share
|
|
Non-Taxable Distribution (per share)
|
Common Stock
|
|
March 31, 2016
|
|
$
|
0.885
|
|
|
$
|
0.725
|
|
|
$
|
0.019
|
|
|
$
|
0.076
|
|
|
$
|
0.084
|
|
Common Stock
|
|
June 30, 2016
|
|
$
|
0.885
|
|
|
$
|
0.725
|
|
|
$
|
0.019
|
|
|
$
|
0.076
|
|
|
$
|
0.084
|
|
Common Stock
|
|
September 30, 2016
|
|
$
|
0.885
|
|
|
$
|
0.725
|
|
|
$
|
0.019
|
|
|
$
|
0.076
|
|
|
$
|
0.084
|
|
Common Stock
|
|
December 30, 2016
|
|
$
|
0.950
|
|
|
$
|
0.779
|
|
|
$
|
0.021
|
|
|
$
|
0.081
|
|
|
$
|
0.090
|
|
Convertible Preferred Stock
|
|
February 1, 2016
|
|
$
|
1.125
|
|
|
$
|
1.029
|
|
|
$
|
0.025
|
|
|
$
|
0.096
|
|
|
$
|
—
|
|
Convertible Preferred Stock
|
|
May 2, 2016
|
|
$
|
1.125
|
|
|
$
|
1.029
|
|
|
$
|
0.025
|
|
|
$
|
0.096
|
|
|
$
|
—
|
|
Convertible Preferred Stock
|
|
August 1, 2016
|
|
$
|
1.125
|
|
|
$
|
1.029
|
|
|
$
|
0.025
|
|
|
$
|
0.096
|
|
|
$
|
—
|
|
Convertible Preferred Stock
|
|
November 1, 2016
|
|
$
|
1.125
|
|
|
$
|
1.029
|
|
|
$
|
0.025
|
|
|
$
|
0.096
|
|
|
$
|
—
|
|
|
|
(a)
|
Qualified taxable dividend amounts are included in ordinary taxable dividend amounts.
|
Alternative minimum tax adjustments are to be apportioned between a REIT and its shareholders under Code Section 59(d). Although regulations have not yet been issued under that provision, based on regulations issued pursuant to a similar provision of prior law and the legislative history of the current provision, it appears that such alternative minimum tax adjustments are to be apportioned to a REIT's shareholders to the extent that the REIT distributes its regular taxable income. All of the Company's alternative minimum tax adjustments are being apportioned to the Company's shareholders.
The Company has determined that none of the distributions to the Company's shareholders for the tax year ended
December 31, 2016
consists of an alternative minimum tax adjustment.
Purchases of the Company's Common Stock
For the years ended
December 31, 2016
,
2015
, and
2014
, the Company purchased
0.3 million
,
0.3 million
, and
0.3 million
shares of common stock, respectively, utilizing
$24.9 million
,
$29.7 million
, and
$21.8 million
in cash, respectively.
|
|
13.
|
Stock-based Compensation
|
Stock Compensation Plans
Pursuant to stockholder approved plans, the Company has and is permitted to grant stock-based awards to certain employees, consultants or non-employee directors of the Company and its subsidiaries or affiliates. As of
December 31, 2016
, the Company has
12.0 million
shares available for future issuance pursuant to its 2013 Long-Term Incentive Plan ("LTI Plan"). Of these shares remaining available for future issuance, approximately
2.7 million
may be issued pursuant to outstanding RSUs granted under the LTI Plan.
Restricted Stock Awards and Restricted Stock Units
During the year ended December 31, 2014, in conjunction with the adoption of the LTI Plan, the Company began issuing RSUs to certain executives and employees; each RSU represents a contingent right to receive one share of common stock subject to satisfaction of the applicable vesting terms. The RSAs and RSUs granted to certain executives and employees include (1) annual performance awards that often include provisions for forfeiture by the employee if certain market performance of the Company's common stock is not achieved, (2) new hire or promotional awards that generally contain only service conditions, or (3) other awards related to specific business initiatives or compensation objectives including retention and merger integration. Generally, such awards vest over periods of approximately
three
years.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in thousands, except per share amounts)
The following is a summary of the RSA and RSU activity during the year ended
December 31, 2016
.
|
|
|
|
|
|
|
|
RSAs
|
|
RSUs
|
|
(In thousands)
|
|
(In thousands)
|
Outstanding at the beginning of year
|
663
|
|
|
1,777
|
|
Granted
|
—
|
|
|
1,285
|
|
Vested
|
(500
|
)
|
|
(328
|
)
|
Forfeited
|
(163
|
)
|
|
(57
|
)
|
Outstanding at end of year
|
—
|
|
|
2,677
|
|
The Company granted approximately
1.3 million
RSUs to the Company's executives and certain other employees for the year ended
December 31, 2016
. The Company granted approximately
1.0 million
shares of RSUs to the Company's executives and certain other employees for each of the years ended December 31,
2015
and
2014
. The weighted-average grant-date fair value per share of the grants for the years ended
December 31, 2016
,
2015
, and
2014
was
$68.53
,
$69.96
, and
$57.78
per share, respectively. The weighted-average requisite service period for the RSUs granted during
2016
was approximately
2.5
years.
The approximately
1.3 million
RSUs granted during the year ended
December 31, 2016
, were comprised of (1) approximately
0.6 million
RSUs that time vest over a three-year period, and (2) approximately
0.7 million
RSUs to the Company's executives and certain other employees which may vest on the third anniversary of the grant date based upon the Company's total shareholder returns (defined as share price appreciation plus the value of dividends paid during the performance period) compared to that of selected peer companies. Certain RSA and RSU agreements contain provisions that result in forfeiture by the employee of any unvested shares in the event that the Company's common stock does not achieve certain price targets. To the extent that the requisite service is rendered, compensation cost for accounting purposes is not reversed; rather, it is recognized regardless of whether or not the market performance target is achieved.
The following table summarizes the assumptions used in the Monte Carlo simulation to determine the grant-date fair value for the awards granted during the years ended
December 31, 2016
,
2015
, and
2014
, respectively, with market conditions.
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
Risk-free rate
|
0.9
|
%
|
|
1.0
|
%
|
|
0.7
|
%
|
Expected volatility
|
19
|
%
|
|
19
|
%
|
|
22
|
%
|
Expected dividend rate
|
4.24
|
%
|
|
4.21
|
%
|
|
1.93
|
%
|
The Company recognized aggregate stock-based compensation expense related to RSAs and RSUs of
$76.3 million
,
$57.1 million
, and
$45.8 million
for the years ended
December 31, 2016
,
2015
, and
2014
, respectively. The aggregate unrecognized compensation (net of estimated forfeitures) related to RSAs and RSUs at
December 31, 2016
is
$62.5 million
and is estimated to be recognized over a weighted-average period of less than
one year
.
The following table is a summary of the awards vested during the three years ended
December 31, 2016
.
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
Total Shares
Vested
|
|
Fair Value on
Vesting Date
|
|
|
(In thousands
of shares)
|
|
|
2016
|
|
828
|
|
|
$
|
71,325
|
|
2015
|
|
946
|
|
|
83,244
|
|
2014
|
|
842
|
|
|
62,686
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in thousands, except per share amounts)
Stock-based Compensation
The following table discloses the components of stock-based compensation expense.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
Stock-based compensation expense:
|
|
|
|
|
|
Site rental costs of operations
|
$
|
14,371
|
|
|
$
|
8,969
|
|
|
$
|
6,565
|
|
Network services and other costs of operations
|
7,717
|
|
|
5,370
|
|
|
4,889
|
|
General and administrative expenses
|
74,450
|
|
|
52,809
|
|
|
44,977
|
|
Total stock-based compensation
|
$
|
96,538
|
|
|
$
|
67,148
|
|
|
$
|
56,431
|
|
|
|
14.
|
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. See note
15
for a discussion of the operating lease commitments. In addition, see note
1
for a discussion of the Company's option to purchase approximately
53%
of its towers at the end of their respective lease terms. The Company has no obligation to exercise such purchase options.
Asset Retirement Obligations
Pursuant to its ground lease and easement agreements, the Company has the obligation to perform certain asset retirement activities, including requirements upon lease or easement termination to remove wireless infrastructure or remediate the land upon which its wireless infrastructure resides. Accretion expense related to liabilities for retirement obligations amounted to
$11.3 million
,
$9.9 million
, and
$9.2 million
for the years ended
December 31, 2016
,
2015
, and
2014
, respectively. As of
December 31, 2016
and
2015
, liabilities for retirement obligations were
$146.1 million
and
$132.1 million
, respectively, representing the net present value of the estimated expected future cash outlay. As of
December 31, 2016
, the estimated undiscounted future cash outlay for asset retirement obligations was approximately
$1.2 billion
. See note
2
.
Tenant Leases
The following table is a summary of the rental cash payments owed to the Company, as a lessor, by tenants pursuant to contractual agreements in effect as of
December 31, 2016
. Generally, the Company's leases with its tenants provide for (1) annual escalations, (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. As of
December 31, 2016
, the weighted-average remaining term of tenant leases is approximately
six
years, exclusive of renewals at the tenant's option. The tenants' rental payments included in the table below are through the current terms with a maximum current term of
20
years and do not assume exercise of tenant renewal options.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ending December 31,
|
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
Thereafter
|
|
Total
|
Tenant leases
|
$
|
2,990,915
|
|
|
$
|
2,921,032
|
|
|
$
|
2,829,987
|
|
|
$
|
2,642,677
|
|
|
$
|
2,530,603
|
|
|
$
|
5,249,189
|
|
|
$
|
19,164,403
|
|
Operating Leases
The following table is a summary of rental cash payments owed by the Company, as lessee, to landlords pursuant to contractual agreements in effect as of
December 31, 2016
. The Company is obligated under non-cancelable operating leases for land interests under
77%
of its towers. The majority of these lease agreements have (1) certain termination rights that provide for cancellation after a notice period, (2) multiple renewal options at the Company's option, and (3) annual escalations. Lease agreements may also contain provisions for a contingent payment based on revenues or the gross margin derived from the wireless infrastructure located on the leased land interest. Approximately
75%
and approximately
90%
of the Company's towers site rental gross margins for the year ended
December 31, 2016
are derived from towers where the land interest under the tower is owned or leased with final expiration dates of greater than
20
years and
ten
years, respectively, inclusive of renewals at the Company's option. The operating lease payments included in the table below include payments for certain renewal periods at the Company's option up to the estimated wireless infrastructure useful life of
20 years
and an estimate of contingent payments based on revenues and gross margins derived from existing tenant leases.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ending December 31,
|
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
Thereafter
|
|
Total
|
Operating leases
|
$
|
573,708
|
|
|
$
|
577,578
|
|
|
$
|
581,588
|
|
|
$
|
579,193
|
|
|
$
|
579,585
|
|
|
$
|
7,741,651
|
|
|
$
|
10,633,303
|
|
Rental expense from operating leases was
$677.9 million
,
$657.1 million
, and
$645.3 million
, respectively, for the years ended
December 31, 2016
,
2015
, and
2014
. The rental expense was inclusive of contingent payments based on revenues or gross margin derived from the wireless infrastructure located on the leased land interests of
$96.9 million
,
$91.8 million
, and
$88.3 million
, respectively, for the years ended
December 31, 2016
,
2015
, and
2014
.
|
|
16.
|
Operating Segments and Concentrations of Credit Risk
|
Operating Segments
During the first quarter of 2016, the Company changed its operating segments to consist of (1) towers and (2) small cells. This change was a result of growth in small cells from a combination of organic growth, capital expenditures, and acquisitions, as well as the continued progression of the integration of Sunesys, which led to changes in how the Company's chief operating decision maker ("CODM") reviews financial information.
The Company's operating segment change aligns with how the CODM views and evaluates the Company's operations, including how the CODM allocates capital and assesses segment performance. The Company has recast its prior period presentation to conform to its current reporting presentation.
The towers segment provides access, including space or capacity, to the Company's approximately
40,000
towers geographically dispersed throughout the U.S. The tower segment also reflects certain network services relating to the Company's towers, consisting of site development services and installation services. The small cells segment provides access, including space or capacity, to the Company's approximately 17,000 route miles of fiber primarily supporting small cell networks. To a lesser extent, the small cells segment also offers fiber based solutions.
The measurement of profit or loss used by the CODM to evaluate the results of operations of its operating segments are (1) segment site rental gross margin, (2) segment network services and other gross margin, and (3) segment operating profit. The Company defines segment site rental gross margin as segment site rental revenues less segment site rental cost of operations, which excludes stock-based compensation expense and prepaid lease purchase price adjustments recorded in consolidated cost of operations. The Company defines segment network services and other gross margin as segment network services and other revenues less segment network services and other cost of operations, which excludes stock-based compensation expense recorded in consolidated cost of operations. The Company defines segment operating profit as segment site rental gross margin plus segment network services and other gross margin, less general and administrative expenses attributable to the respective segment.
Costs that are directly attributable to towers and small cells are assigned to those respective segments. The "Other" column (1) represents amounts excluded from specific segments, such as restructuring charges (credits), asset write-down charges, acquisition and integration costs, depreciation, amortization and accretion, amortization of prepaid lease purchase price adjustments, interest expense and amortization of deferred financing costs, gains (losses) on retirement of long-term obligations, net gain (loss) on interest rate swaps, gains (losses) on foreign currency swaps, impairment of available-for-sale securities, interest income, other income (expense), cumulative effect of a change in accounting principle, income (loss) from discontinued operations, and stock-based compensation expense, and (2) reconciles segment operating profit to income (loss) before income taxes, as the amounts are not utilized in assessing each segment’s performance. The "Other" total assets balance includes corporate assets such as cash and cash equivalents which have not been allocated to specific segments. There are no significant revenues resulting from transactions between the Company's operating segments.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ending December 31, 2016
|
|
Towers
|
|
Small Cells
|
|
Other
|
|
Consolidated
Total
|
Segment site rental revenues
|
$
|
2,830,708
|
|
|
$
|
402,599
|
|
|
|
|
$
|
3,233,307
|
|
Segment network services and other revenues
|
603,689
|
|
|
84,229
|
|
|
|
|
687,918
|
|
Segment revenues
|
3,434,397
|
|
|
486,828
|
|
|
|
|
3,921,225
|
|
Segment site rental cost of operations
|
840,209
|
|
|
147,459
|
|
|
|
|
987,668
|
|
Segment network services and other cost of operations
|
344,595
|
|
|
64,859
|
|
|
|
|
409,454
|
|
Segment cost of operations
(a)
|
1,184,804
|
|
|
212,318
|
|
|
|
|
1,397,122
|
|
Segment site rental gross margin
|
1,990,499
|
|
|
255,140
|
|
|
|
|
2,245,639
|
|
Segment network services and other gross margin
|
259,094
|
|
|
19,370
|
|
|
|
|
278,464
|
|
Segment general and administrative expenses
(a)
|
92,903
|
|
|
60,676
|
|
|
143,001
|
|
|
296,580
|
|
Segment operating profit
|
2,156,690
|
|
|
213,834
|
|
|
(143,001
|
)
|
|
2,227,523
|
|
Stock-based compensation expense
|
|
|
|
|
96,538
|
|
|
96,538
|
|
Depreciation, amortization and accretion
|
|
|
|
|
1,108,551
|
|
|
1,108,551
|
|
Interest expense and amortization of deferred financing costs
|
|
|
|
|
515,032
|
|
|
515,032
|
|
Other income (expenses) to reconcile to income (loss) from continuing operations before income taxes
(b)
|
|
|
|
|
133,548
|
|
|
133,548
|
|
Income (loss) from continuing operations before income taxes
|
|
|
|
|
|
|
$
|
373,854
|
|
Capital expenditures
|
$
|
429,526
|
|
|
$
|
409,710
|
|
|
$
|
34,647
|
|
|
$
|
873,883
|
|
Total assets (at period end)
|
$
|
18,394,572
|
|
|
$
|
3,440,600
|
|
|
$
|
839,920
|
|
|
$
|
22,675,092
|
|
Total goodwill (at period end)
|
$
|
5,114,639
|
|
|
$
|
643,037
|
|
|
$
|
—
|
|
|
$
|
5,757,676
|
|
|
|
(a)
|
Segment cost of operations exclude (1) stock-based compensation expense of
$22.1 million
for the year ended
December 31, 2016
and (2) prepaid lease purchase price adjustments of
$21.3 million
for the year ended
December 31, 2016
. Segment general and administrative expenses exclude stock-based compensation expense of
$74.5 million
for the year ended
December 31, 2016
.
|
|
|
(b)
|
See consolidated statement of operations for further information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ending December 31, 2015
|
|
Towers
|
|
Small Cells
|
|
Other
|
|
Consolidated
Total
|
Segment site rental revenues
|
$
|
2,734,045
|
|
|
$
|
284,368
|
|
|
|
|
$
|
3,018,413
|
|
Segment network services and other revenues
|
591,655
|
|
|
53,783
|
|
|
|
|
645,438
|
|
Segment revenues
|
3,325,700
|
|
|
338,151
|
|
|
|
|
3,663,851
|
|
Segment site rental cost of operations
|
827,175
|
|
|
107,195
|
|
|
|
|
934,370
|
|
Segment network services and other cost of operations
|
309,025
|
|
|
43,162
|
|
|
|
|
352,187
|
|
Segment cost of operations
(a)
|
1,136,200
|
|
|
150,357
|
|
|
|
|
1,286,557
|
|
Segment site rental gross margin
|
1,906,870
|
|
|
177,173
|
|
|
|
|
2,084,043
|
|
Segment network services and other gross margin
|
282,630
|
|
|
10,621
|
|
|
|
|
293,251
|
|
Segment general and administrative expenses
(a)
|
91,899
|
|
|
38,379
|
|
|
127,833
|
|
|
258,111
|
|
Segment operating profit
|
2,097,601
|
|
|
149,415
|
|
|
(127,833
|
)
|
|
2,119,183
|
|
Stock-based compensation expense
|
|
|
|
|
67,148
|
|
|
67,148
|
|
Depreciation, amortization and accretion
|
|
|
|
|
1,036,178
|
|
|
1,036,178
|
|
Interest expense and amortization of deferred financing costs
|
|
|
|
|
527,128
|
|
|
527,128
|
|
Other income (expenses) to reconcile to income (loss) from continuing operations before income taxes
(b)
|
|
|
|
|
14,900
|
|
|
14,900
|
|
Income (loss) from continuing operations before income taxes
|
|
|
|
|
|
|
$
|
473,829
|
|
Capital expenditures
|
$
|
564,753
|
|
|
$
|
314,882
|
|
|
$
|
29,257
|
|
|
$
|
908,892
|
|
Total assets (at period end)
|
$
|
17,974,847
|
|
|
$
|
3,511,956
|
|
|
$
|
450,163
|
|
|
$
|
21,936,966
|
|
Total goodwill (at period end)
|
$
|
4,863,847
|
|
|
$
|
649,704
|
|
|
$
|
—
|
|
|
$
|
5,513,551
|
|
|
|
(a)
|
Segment cost of operations exclude (1) stock-based compensation expense of
$14.3 million
for the year ended
December 31, 2015
and (2) prepaid lease purchase price adjustments of
$20.5 million
for the year ended
December 31, 2015
. Segment general and administrative expenses exclude stock-based compensation expense of
$52.8 million
for the year ended
December 31, 2015
.
|
|
|
(b)
|
See consolidated statement of operations for further information.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ending December 31, 2014
|
|
Towers
|
|
Small Cells
|
|
Other
|
|
Consolidated
Total
|
Segment site rental revenues
|
$
|
2,677,932
|
|
|
$
|
188,681
|
|
|
|
|
$
|
2,866,613
|
|
Segment network services and other revenues
|
631,787
|
|
|
40,356
|
|
|
|
|
672,143
|
|
Segment revenues
|
3,309,719
|
|
|
229,037
|
|
|
|
|
3,538,756
|
|
Segment site rental cost of operations
|
814,332
|
|
|
65,282
|
|
|
|
|
879,614
|
|
Segment network services and other cost of operations
|
359,901
|
|
|
35,663
|
|
|
|
|
395,564
|
|
Segment cost of operations
(a)
|
1,174,233
|
|
|
100,945
|
|
|
|
|
1,275,178
|
|
Segment site rental gross margin
|
1,863,600
|
|
|
123,399
|
|
|
|
|
1,986,999
|
|
Segment network services and other gross margin
|
271,886
|
|
|
4,693
|
|
|
|
|
276,579
|
|
Segment general and administrative expenses
(a)
|
78,523
|
|
|
25,869
|
|
|
107,929
|
|
|
212,321
|
|
Segment operating profit
|
2,056,963
|
|
|
102,223
|
|
|
(107,929
|
)
|
|
2,051,257
|
|
Stock-based compensation expense
|
|
|
|
|
56,432
|
|
|
56,432
|
|
Depreciation, amortization and accretion
|
|
|
|
|
985,781
|
|
|
985,781
|
|
Interest expense and amortization of deferred financing costs
|
|
|
|
|
573,291
|
|
|
573,291
|
|
Other income (expenses) to reconcile to income (loss) from continuing operations before income taxes
(b)
|
|
|
|
|
100,683
|
|
|
100,683
|
|
Income (loss) from continuing operations before income taxes
|
|
|
|
|
|
|
$
|
335,070
|
|
|
|
(a)
|
Segment cost of operations exclude (1) stock-based compensation expense of
$11.5 million
for the year ended
December 31, 2014
and (2) prepaid lease purchase price adjustments of
$20.0 million
for the year ended
December 31, 2014
. Segment general and administrative expenses exclude stock-based compensation expense of
$44.9 million
for the year ended
December 31, 2014
.
|
|
|
(b)
|
See consolidated statement of operations for further information.
|
Major Customers
The following table summarizes the percentage of the consolidated revenues for those customers accounting for more than 10% of the consolidated revenues.
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
AT&T
|
27
|
%
|
|
27
|
%
|
|
26
|
%
|
T-Mobile
|
23
|
%
|
|
22
|
%
|
|
21
|
%
|
Verizon Wireless
|
22
|
%
|
|
21
|
%
|
|
18
|
%
|
Sprint
|
16
|
%
|
|
19
|
%
|
|
25
|
%
|
Total
|
88
|
%
|
|
89
|
%
|
|
90
|
%
|
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash and cash equivalents, restricted cash and trade receivables. The Company mitigates its risk with respect to cash and cash equivalents by maintaining such deposits at high credit quality financial institutions and monitoring the credit ratings of those institutions. The Company's restricted cash is predominately held and directed by a trustee (see note
2
).
The Company derives the largest portion of its revenues from customers in the wireless industry. The Company also has a concentration in its volume of business with AT&T, T-Mobile, Verizon Wireless, and Sprint or their agents that accounts for a significant portion of the Company's revenues, receivables, and deferred site rental receivables. The Company mitigates its concentrations of credit risk with respect to trade receivables by actively monitoring the creditworthiness of its tenants, the use of tenant leases with contractually determinable payment terms, or proactive management of past due balances.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in thousands, except per share amounts)
|
|
17.
|
Supplemental Cash Flow Information
|
The following table is a summary of the supplemental cash flow information during the years ended
December 31, 2016
,
2015
and
2014
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
Interest paid
|
$
|
470,655
|
|
|
$
|
489,970
|
|
|
$
|
491,076
|
|
Income taxes paid
|
13,821
|
|
|
28,771
|
|
|
18,770
|
|
Supplemental disclosure of non-cash investing and financing activities:
|
|
|
|
|
|
Increase (decrease) in accounts payable for purchases of property and equipment
|
17,922
|
|
|
(7,042
|
)
|
|
11,407
|
|
Purchase of property and equipment under capital leases and installment land purchases
|
52,322
|
|
|
60,270
|
|
|
43,609
|
|
Installment payment receivable for sale of CCAL (see note 3)
|
—
|
|
|
117,384
|
|
|
—
|
|
|
|
18.
|
Quarterly Financial Information (Unaudited)
|
Summary quarterly financial information for the years ended
December 31, 2016
and
2015
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
2016:
|
|
|
|
|
|
|
|
Net revenues
|
$
|
934,384
|
|
|
$
|
962,409
|
|
|
$
|
992,016
|
|
|
$
|
1,032,416
|
|
Operating income (loss)
|
211,739
|
|
|
231,185
|
|
|
244,254
|
|
|
262,038
|
|
Gains (losses) on retirement of long-term obligations
|
(30,550
|
)
|
|
(11,467
|
)
|
|
(10,274
|
)
|
|
—
|
|
Benefit (provision) for income taxes
|
(3,872
|
)
|
|
(3,884
|
)
|
|
(5,041
|
)
|
|
(4,084
|
)
|
Net income (loss) attributable to CCIC stockholders
|
47,840
|
|
|
86,058
|
|
|
98,366
|
|
|
124,709
|
|
Net income (loss) attributable to CCIC common stockholders, per common share:
|
|
|
|
|
|
|
|
Basic
|
$
|
0.11
|
|
|
$
|
0.22
|
|
|
$
|
0.26
|
|
|
$
|
0.36
|
|
Diluted
|
$
|
0.11
|
|
|
$
|
0.22
|
|
|
$
|
0.26
|
|
|
$
|
0.36
|
|
|
Three Months Ended
|
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
2015:
|
|
|
|
|
|
|
|
Net revenues
|
$
|
900,471
|
|
|
$
|
899,437
|
|
|
$
|
918,107
|
|
|
$
|
945,836
|
|
Operating income (loss)
|
244,911
|
|
|
240,731
|
|
|
230,802
|
|
|
229,736
|
|
Gains (losses) on retirement of long-term obligations
|
24
|
|
|
(4,181
|
)
|
|
—
|
|
|
—
|
|
Benefit (provision) for income taxes
(a)
|
1,435
|
|
|
4,144
|
|
|
3,801
|
|
|
42,077
|
|
Net income (loss) attributable to CCIC stockholders
|
122,791
|
|
|
1,153,360
|
|
|
103,779
|
|
|
141,062
|
|
Net income (loss) attributable to CCIC common stockholders, per common share:
|
|
|
|
|
|
|
|
Basic
|
$
|
0.34
|
|
|
$
|
3.43
|
|
|
$
|
0.28
|
|
|
$
|
0.39
|
|
Diluted
|
$
|
0.34
|
|
|
$
|
3.42
|
|
|
$
|
0.28
|
|
|
$
|
0.39
|
|
|
|
(a)
|
Inclusive of the tax adjustment of
$33.8 million
in conjunction with the inclusion of small cells in the REIT in January 2016 . See also notes
11
and
19
.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in thousands, except per share amounts)
FiberNet Acquisition
On November 1, 2016, the Company announced a definitive agreement to acquire FPL FiberNet Holdings, LLC and certain other subsidiaries of NextEra Energy, Inc. (collectively, "FiberNet") for approximately
$1.5 billion
in cash, subject to certain limited adjustments ("FiberNet Acquisition"). FiberNet is a fiber services provider in Florida and Texas that owns or has rights to approximately
11,500
route miles of fiber installed and under construction, inclusive of approximately
6,000
route miles in top metro markets. On
January 17, 2017
, the Company closed on the FiberNet Acquisition which was financed using proceeds from its November 2016 Equity Financing and borrowings under the 2016 Revolver. Upon finalization of the valuation, the Company expects that the purchase price will be predominately comprised of property and equipment, site rental contracts and customer relationships, and goodwill.
February 2017 Senior Notes
On
February 2, 2017
the Company issued
$500 million
aggregate principal amount of
4.000%
senior unsecured notes with a final maturity date of
March 2027
("February 2017 Senior Notes").
The Company used the net proceeds from the February 2017 Senior Notes offering to repay a portion of the borrowings under the 2016 Revolver.
Credit Facility Amendment
On
February 13, 2017
, the Company entered into an amendment to the Credit Facility to (1) incur additional term loans in an aggregate principal amount of
$500 million
, and (2) extend the maturity of both the 2016 Term Loan A and the 2016 Revolver to
January 21, 2022
.
Common Stock Dividend
On
February 17, 2017
, the Company declared a quarterly common stock dividend of
$0.95
per share, which was approved by the Company's board of directors. The common stock dividend will be paid on
March 31, 2017
to common stockholders of record as of
March 17, 2017
.