NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in millions, except per share amounts)
1. Basis of Presentation
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. Unless the context suggests otherwise, references to "U.S." are to the United States of America and Puerto Rico, collectively.
The Company owns, operates and leases shared communications infrastructure that is geographically dispersed throughout the U.S., including (1) towers and other structures, such as rooftops (collectively, "towers"), and (2) fiber primarily supporting small cell networks ("small cells") and fiber solutions. The Company's towers, fiber and small cells assets are collectively referred to herein as "communications infrastructure," and the Company's customers on its communications infrastructure are referred to herein as "tenants."
The Company's core business is providing access, including space or capacity, to its shared communications infrastructure via long-term contracts in various forms, including lease, license, sublease and service agreements (collectively, "tenant contracts").
The Company's operating segments consist of (1) Towers and (2) Fiber. See note 14.
Approximately 53% of the Company's towers are leased or subleased or operated and managed under master leases, subleases, and other agreements with AT&T and T-Mobile, including agreements assumed by T-Mobile following its merger with Sprint, completed on April 1, 2020. 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:
◦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 Towers 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 such option is exercised, would be due between 2032 and 2048.
◦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 T-Mobile (which T-Mobile assumed in connection with its merger with Sprint). The Company has the option to purchase in 2037 all (but not less than all) of such leased and subleased towers from T-Mobile for approximately $2.3 billion.
◦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 Towers 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 such option is exercised, would be due between 2035 and 2049. In addition, through the acquisition of the rights to approximately 7,100 towers ("T-Mobile Acquisition"), there are another 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 such option is exercised, would be due prior to 2032 (less than $10 million would be due before 2025).
As part of the Company's effort to provide comprehensive communications infrastructure solutions, as an ancillary business, the Company also offers certain services primarily relating to its Towers segment, predominately consisting of (1) site development services primarily relating to existing or new tenant equipment installations, including: site acquisition, architectural and engineering, or zoning and permitting (collectively, "site development services") and (2) tenant equipment installation or subsequent augmentations (collectively, "installation services").
The Company operates as a REIT for U.S. federal income tax purposes. In addition, the Company has certain taxable REIT subsidiaries ("TRSs"). See note 9.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in millions, except per share amounts)
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
2. Summary of Significant Accounting Policies
The following is a discussion of the Company's significant accounting policies in effect for the year ended December 31, 2020.
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. See note 16 for a reconciliation of cash, cash equivalents and restricted cash.
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 "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
Effective January 1, 2019, the Company adopted new guidance on the recognition, measurement, presentation and disclosure of leases (commonly referred to as "ASC 842" or the "new lease standard") using a modified retrospective approach as of the effective date without adjusting the comparative periods.
General. The Company evaluates whether a contract meets the definition of a lease whenever a contract grants a party the right to control the use of an identified asset for a period of time in exchange for consideration. To the extent the identified asset is able to be shared among multiple parties, the Company has determined that one party does not have control of the identified asset and the contract is not considered a lease. The Company accounts for contracts that do not meet the definition of a lease under other relevant accounting guidance (such as ASC 606 for revenue from contracts with customers).
Lessee. For its Tower segment, the Company's lessee arrangements primarily consist of ground leases for land under towers. Ground leases for land are specific to each site, generally contain an initial term of five to 10 years and are renewable (and cancelable after a notice period) at the Company's option. The Company also enters into term easements and ground leases in which it prepays the entire term. For its Fiber segment, the Company's lessee arrangements primarily include leases of fiber assets to support the Company's small cells and fiber solutions.
The majority of the Company's lease agreements have certain termination rights that provide for cancellation after a notice period and multiple renewal options exercisable at the Company's option. The Company includes renewal option periods in its calculation of the estimated lease term when it determines the options are reasonably certain to be exercised. When such renewal options are deemed to be reasonably certain, the estimated lease term determined under ASC 842 will be greater than the non-cancelable term of the contractual arrangement. Although certain renewal periods are included in the estimated lease term, the Company would have the ability to terminate or elect to not renew a particular lease if business conditions warrant such a decision.
The Company classifies its lessee arrangements at inception as either operating leases or finance leases. A lease is classified as a finance lease if at least one of the following criteria is met: (1) the lease transfers ownership of the underlying asset to the lessee, (2) the lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise, (3) the lease term is for a major part of the remaining economic life of the underlying asset, (4) the present value of
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in millions, except per share amounts)
the sum of the lease payments equals or exceeds substantially all of the fair value of the underlying asset, or (5) the underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. A lease is classified as an operating lease if none of the five criteria described above for finance lease classification is met.
Right-of-use ("ROU") assets associated with operating leases are included in "Operating lease right-of-use assets" on the Company's consolidated balance sheet. Current and long-term portions of lease liabilities related to operating leases are included in "Current portion of operating lease liabilities" and "Operating lease liabilities" on the Company's consolidated balance sheet, respectively. ROU assets represent the Company's right to use an underlying asset for the estimated lease term and lease liabilities represent the Company's present value of its future lease payments. In assessing its leases and determining its lease liability at lease commencement or upon modification, the Company is not able to readily determine the rate implicit for its lessee arrangements, and thus uses its incremental borrowing rate on a collateralized basis to determine the present value of the lease payments. The Company's ROU assets are measured as the balance of the lease liability plus any prepaid or accrued lease payments and any unamortized initial direct costs. For both the Towers and Fiber segments, operating lease expenses are recognized on a ratable basis, regardless of whether the payment terms require the Company to make payments annually, quarterly, monthly, or for the entire term in advance. Certain of the Company's ground lease and fiber lease agreements contain fixed escalation clauses (such as fixed dollar or fixed percentage increases) or inflation-based escalation clauses (such as those tied to the change in consumer price index ("CPI")). If the payment terms include fixed escalator provisions, the effect of such increases is recognized on a straight-line basis. The Company calculates the straight-line expense over the tenant contract's estimated lease term, including any renewal option periods that the Company deems reasonably certain to be exercised.
Lease agreements may also contain provisions for a contingent payment based on (1) the revenues derived from the communications infrastructure located on the leased asset, (2) the change in CPI or (3) the usage of the leased asset. The Company's contingent payments are considered variable lease payments and are (1) not included in the initial measurement of the ROU asset or lease liability due to the uncertainty of the payment amount and (2) recorded as expense in the period such contingencies are resolved.
ROU assets associated with finance leases are included in "Property and equipment, net" on the Company's consolidated balance sheet. Lease liabilities associated with finance leases are included in "Current maturities of debt and other obligations" and "Debt and other long-term obligations" on the Company's consolidated balance sheet. For both its Towers and Fiber segments, the Company measures the lease liability for finance leases using the effective interest method. The initial lease liability is increased to reflect interest on the liability and decreased to reflect payments made during the period. Interest on the lease liability is determined each period during the lease term as the amount that results in a constant periodic discount rate on the remaining balance of the liability. The Company measures ROU assets for finance leases on a ratable basis over the applicable lease term.
The Company reviews the carrying value of its ROU assets for impairment, similar to its other long-lived assets, whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. The Company could record impairments in the future if there are changes in (1) long-term market conditions, (2) expected future operating results or (3) the utility of the assets that negatively impact the fair value of its ROU assets.
Lessor. The Company's lessor arrangements primarily include tenant contracts for dedicated space (including dedicated fiber) on its shared communications infrastructure. The Company classifies its leases at inception as operating, direct financing or sales-type leases. A lease is classified as a sales-type lease if at least one of the following criteria is met: (1) the lease transfers ownership of the underlying asset to the lessee, (2) the lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise, (3) the lease term is for a major part of the remaining economic life of the underlying asset, (4) the present value of the sum of the lease payments equals or exceeds substantially all of the fair value of the underlying assets or (5) the underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. Furthermore, when none of the above criteria is met, a lease is classified as a direct financing lease if both of the following criteria are met: (1) the present value of the of the sum of the lease payments and any residual value guaranteed by the lessee, that is not already reflected in the lease payments, equals or exceeds the fair value of the underlying asset and (2) it is probable that the lessor will collect the lease payments plus any amount necessary to satisfy a residual value guarantee. A lease is classified as an operating lease if it does not qualify as a sales-type or direct financing lease. Currently, the Company classifies all of its lessor arrangements as operating leases.
Site rental revenues from the Company’s lessor arrangements are recognized on a straight-line, ratable basis over the fixed, non-cancelable term of the relevant tenant contract, regardless of whether the payments from the tenant are received in equal monthly amounts during the life of a tenant contract. Certain of the Company's tenant contracts contain fixed escalation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in millions, except per share amounts)
clauses (such as fixed-dollar or fixed-percentage increases) or inflation-based escalation clauses (such as those tied to the change in CPI). If the payment terms call for fixed escalations, upfront payments, or rent-free periods, the rental revenue is recognized on a straight-line basis over the fixed, non-cancelable term of the agreement. When calculating straight-line site rental revenues, the Company considers all fixed elements of tenant contractual escalation provisions.
Certain of the Company's arrangements with tenants in its Fiber segment contain both lease and non-lease components. In such circumstances, the Company has determined (1) the timing and pattern of transfer for the lease and non-lease component are the same and (2) the stand-alone lease component would be classified as an operating lease. As such, the Company has aggregated certain non-lease components with lease components and has determined that the lease components (generally dedicated fiber) represent the predominant component of the arrangement.
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. Depreciation is computed utilizing the straight-line method at rates based upon the estimated useful lives of the various classes of assets. Depreciation of communications infrastructure is generally 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 and permanent improvements to the Company's communications infrastructure 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, 2020, 2019 and 2018, the Company had $270 million, $246 million and $212 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-down charges" on the Company's consolidated statement of operations and comprehensive income (loss) and were $77 million, $17 million and $22 million for the years ended December 31, 2020, 2019 and 2018, respectively. Asset write-down charges for the year ended December 31, 2020 included the write-off of property and equipment of approximately $63 million which, following the Sprint Cancellation, was deemed to have no alternative future use. See note 15 for further information regarding the Sprint Cancellation.
Asset Retirement Obligations
Pursuant to its ground lease, easement and leased facility agreements, the Company records obligations to perform asset retirement activities, including requirements to remove communications infrastructure or remediate the space on which certain of its communications infrastructure is located. The Company does not record an obligation for asset retirement activities related to its fiber, as a settlement date is indeterminable and therefore a reasonable estimation of fair value cannot be made. 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's reporting units are the same as its operating segments (Towers and Fiber). 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 the Company concludes 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 a quantitative goodwill impairment test. The quantitative goodwill impairment test compares the estimated fair value of the reporting unit and the carrying value of the reporting unit. If the carrying amount of a reporting unit is greater than its fair value, an impairment loss shall be recognized in an amount equal to such excess, limited to the total amount of goodwill allocated to the reporting unit. The Company performed its most recent annual goodwill impairment test as of October 1, 2020, which resulted in no impairments.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in millions, except per share amounts)
See "Recently Adopted Accounting Pronouncements" for a discussion of the recently adopted new guidance related to goodwill impairment evaluation.
Intangible Assets
Intangible assets are included in "Site rental contracts and tenant relationships, net" and "Other intangible assets, net" on the Company's consolidated balance sheet and predominately consist of the estimated fair value of site rental contracts and tenant relationships or other contractual rights, such as trademarks, that are recorded in conjunction with acquisitions. The site rental contracts and tenant relationships intangible assets are comprised of (1) the current term of the existing leases, (2) the high rate of tenant retention, and (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 tenant relationships intangible asset is limited by the maximum depreciable life of the communications infrastructure (20 years), as a result of the interdependency of the communications infrastructure and site rental leases. In contrast, the site rental contracts and tenant relationships are estimated to provide economic benefits for several decades because of the low rate of tenant cancellations and high rate of tenant retention experienced to date. Thus, while site rental contracts and tenant 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 tenant relationships are amortized over a period not to exceed 20 years.
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 tenant relationships intangible assets. First, the Company pools the site rental contracts and tenant relationships with the related communications 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 tenant 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 below-market tenant leases for contractual interests with tenants on acquired communications infrastructure, which are amortized to site rental revenues.
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 "Other assets, net" on the Company's consolidated balance sheet.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in millions, except per share amounts)
Revenue Recognition
The Company generates site rental revenues from its core business by providing tenants with access, including space or capacity, to its shared communications infrastructure via long-term tenant contracts in various forms, including lease, license, sublease and service agreements. Providing such access over the length of the tenant contract term represents the Company’s sole performance obligation under its tenant contracts.
Site rental revenues. Site rental revenues from the Company's tenant contracts are recognized on a straight-line, ratable basis over the fixed, non-cancelable term of the relevant tenant contract, which generally ranges from five to 15 years for wireless tenants and three to 20 years for the Company's fiber solutions tenants (including from organizations with high-bandwidth and multi-location demands), regardless of whether the payments from the tenant are received in equal monthly amounts during the life of the tenant contract. Certain of the Company's tenant contracts contain (1) fixed escalation clauses (such as fixed dollar or fixed percentage increases) or inflation-based escalation clauses (such as those tied to the CPI), (2) multiple renewal periods exercisable at the tenant's option and (3) only limited termination rights at the applicable tenant's option through the current term. If the payment terms call for fixed escalations, upfront payments, or rent-free periods, the revenue is recognized on a straight-line basis over the fixed, non-cancelable term of the agreement. When calculating straight-line rental revenues, the Company considers all fixed elements of tenant contractual escalation provisions, even if such escalation provisions contain a variable element in addition to a minimum. The Company's assets related to straight-line site rental revenues include current amounts of $152 million and $114 million included in "Other current assets" and non-current amounts of $1.4 billion and $1.4 billion included in "Deferred site rental receivables" for the years ended December 31, 2020 and 2019, respectively. Amounts billed or received prior to being earned are deferred and reflected in "Deferred revenues" and "Other long-term liabilities." Amounts to which the Company has an unconditional right to payment, which are related to both satisfied or partially satisfied performance obligations, are recorded within "Receivables, net" on the Company's consolidated balance sheet.
Services and other revenues. As part of the Company’s effort to provide comprehensive communications infrastructure solutions, as an ancillary business, the Company offers certain services primarily relating to its Towers segment, predominately consisting of (1) site development services and (2) installation services. Upon contract commencement, the Company assesses its services to tenants and identifies performance obligations for each promise to provide a distinct service.
The Company may have multiple performance obligations for site development services, which primarily include: structural analysis, zoning, permitting and construction drawings. For each of the above performance obligations, services revenues are recognized at completion of the applicable performance obligation, which represents the point at which the Company believes it has transferred goods or services to the tenant. The revenue recognized is based on an allocation of the transaction price among the performance obligations in a respective contract based on estimated standalone selling price. The volume and mix of site development services may vary among contracts and may include a combination of some or all of the above performance obligations. Payments generally are due within 45 to 60 days and generally do not contain variable-consideration provisions. The transaction price for the Company's tower installation services consists of amounts for (1) permanent improvements to the Company's towers that represent a lease component and (2) the performance of the service. Amounts under the Company's tower installation service agreements that represent a lease component are recognized as site rental revenues on a straight-line basis over the length of the associated estimated lease term. For the performance of the installation service, the Company has one performance obligation, which is satisfied at the time of the applicable installation or augmentation and recognized as services and other revenues. Since performance obligations are typically satisfied prior to receiving payment from tenants, the unconditional right to payment is recorded within "Receivables, net" on the Company’s condensed consolidated balance sheet. The vast majority of the Company’s services generally have a duration of one year or less.
Additional information on revenues. As of January 1, 2020 and December 31, 2020, a total of $2.9 billion and $2.8 billion of unrecognized revenue, respectively, was reported in "Deferred revenues" and "Other non-current liabilities" on the Company's consolidated balance sheet. During the year ended December 31, 2020, approximately $575 million of the January 1, 2020 unrecognized revenue balance was recognized as revenue. As of January 1, 2019, a total of $2.7 billion of unrecognized revenue was reported in "Deferred revenues" and "Other non-current liabilities" on the Company's consolidated balance sheet. During the year ended December 31, 2019, approximately $510 million of the January 1, 2019 unrecognized revenue balance was recognized as revenue.
See note 3 for further discussion regarding the Company’s revenues.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in millions, except per share amounts)
Costs of Operations
Approximately half of the Company's site rental costs of operations expenses consist of Towers ground lease expenses, and the remainder includes fiber access expenses, 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. Fiber access expenses primarily consist of leases of fiber assets and other access agreements to facilitate the Company's communications infrastructure.
Ground lease and fiber access expenses are recognized on a ratable basis, regardless of whether the payment terms require the Company to make payments annually, quarterly, monthly, or for the entire term in advance. Certain of the Company's ground lease and fiber access agreements contain fixed escalation clauses (such as fixed dollar or fixed percentage increases) or inflation-based escalation clauses (such as those tied to the change in CPI). If the payment terms include fixed escalator provisions, the effect of such increases is recognized on a straight-line basis. The Company's liability related to straight-line expense is included in "Operating lease right-of-use assets" on the Company's consolidated balance sheet. The Company's assets related to prepaid agreements is included in "Prepaid expenses" and "Operating lease right-of-use assets" on the Company's consolidated balance sheet.
Services and other costs of operations predominately consist of third-party service providers such as contractors and professional services firms and, to a lesser extent, internal labor costs.
The Company recognized $20 million as costs of operations during the year ended December 31, 2020 as a result of a reduction in staffing completed during the fourth quarter of 2020. Such costs were comprised of employee severance payments and termination benefits and primarily impacted the Company's Fiber segment.
Acquisitions and Integration Costs
Direct or incremental costs related to a potential or completed business combination transaction are expensed as incurred. Such costs are predominately comprised of severance, retention bonuses payable to employees of an acquired enterprise, temporary employees to assist with the integration of the acquired operations, fees paid for services (such as consulting, accounting, legal, or engineering reviews), and any other costs directly associated with the transaction. These business combination costs are included in "Acquisition and integration costs" on the Company's consolidated statement of operations and comprehensive income (loss). For those transactions accounted for as asset acquisitions, these costs are capitalized as part of the purchase price.
Stock-Based Compensation
Restricted Stock Units. The Company records stock-based compensation expense only for those 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 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 RSUs without market conditions is determined based on the number of shares relating to such RSUs and the quoted price of the Company's common stock at the date of grant. The Company estimates the fair value of RSUs with market conditions granted using a Monte Carlo simulation. The Company's determination of the fair value of 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 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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in millions, except per share amounts)
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,
|
|
|
2020
|
|
2019
|
|
2018
|
|
Interest expense on debt obligations
|
$
|
683
|
|
|
$
|
682
|
|
|
$
|
635
|
|
|
Amortization of deferred financing costs and adjustments on long-term debt, net
|
23
|
|
|
21
|
|
|
21
|
|
|
Capitalized interest
|
(17)
|
|
|
(20)
|
|
|
(15)
|
|
|
Other
|
—
|
|
|
—
|
|
|
1
|
|
|
Total
|
$
|
689
|
|
|
$
|
683
|
|
|
$
|
642
|
|
The Company amortizes deferred financing costs, discounts and premiums over the estimated term of the related borrowing using the effective interest yield method. Deferred financing costs and discounts 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 net taxable income that is currently distributed to its stockholders. The Company also may be subject to certain federal, state, local and foreign taxes on its income and assets, including (1) taxes on any undistributed income, (2) taxes related to the TRSs, (3) franchise taxes, (4) property taxes, and (5) transfer taxes. In addition, the Company could under 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.
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) are subject to foreign income taxes in the jurisdictions in which such assets and operations are located, regardless of whether they are included in a TRS or not. For its REIT conversion and certain subsequent acquisitions into the REIT, the Company will be subject to a federal corporate level tax rate (currently 21%) on any gain recognized from the sale of assets occurring within a specified period (generally 5 years) after the transfer date up to the amount of the built in gain that existed on the transfer date, which is based upon the fair market value of those assets in excess of the Company's tax basis on the transfer date. 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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in millions, except per share amounts)
December 31, 2020 and 2019, the Company has not recorded any material penalties related to its income tax positions. See note 9.
Per Share Information
Basic net income (loss) attributable to CCIC common stockholders, per common share, excludes dilution and is computed by dividing net income (loss) attributable to CCIC common stockholders by the weighted-average number of common shares outstanding during the period. For the years ended December 31, 2020, 2019 and 2018, diluted net income (loss) attributable to CCIC common stockholders, per common share, is computed by dividing net income (loss) attributable to CCIC common stockholders by the weighted-average number of common shares outstanding during the period, plus any potential dilutive common share equivalents, including shares issuable upon (1) the vesting of restricted stock units as determined under the treasury stock method and (2) conversion of the Company's previously outstanding 6.875% Mandatory Convertible Preferred Stock, Series A, par value $0.01 per share ("6.875% Convertible Preferred Stock"), as applicable, as determined under the if-converted method.
A reconciliation of the numerators and denominators of the basic and diluted per share computations is shown in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
|
|
|
|
Net income (loss) attributable to CCIC stockholders
|
$
|
1,056
|
|
|
$
|
860
|
|
|
$
|
622
|
|
|
Dividends/distributions on preferred stock
|
(57)
|
|
|
(113)
|
|
|
(113)
|
|
|
Net income (loss) attributable to CCIC common stockholders for basic and diluted computations
|
$
|
999
|
|
|
$
|
747
|
|
|
$
|
509
|
|
|
|
|
|
|
|
|
|
Weighted-average number of common shares outstanding (in millions):
|
|
|
|
|
|
|
Basic weighted-average number of common stock outstanding
|
423
|
|
|
416
|
|
|
413
|
|
|
Effect of assumed dilution from potential issuance of common shares relating to RSUs
|
2
|
|
|
2
|
|
|
2
|
|
|
Diluted weighted-average number of common shares outstanding
|
425
|
|
|
418
|
|
|
415
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to CCIC common stockholders, per common share:
|
|
|
|
|
|
|
Basic
|
$
|
2.36
|
|
|
$
|
1.80
|
|
|
$
|
1.23
|
|
|
Diluted
|
$
|
2.35
|
|
|
$
|
1.79
|
|
|
$
|
1.23
|
|
|
|
|
|
|
|
|
|
Dividends/distributions declared per share of common stock
|
$
|
4.93
|
|
|
$
|
4.58
|
|
|
$
|
4.28
|
|
For the years ended December 31, 2019 and 2018, 14 million and 15 million, respectively, common share equivalents related to the Company's previously outstanding 6.875% Convertible Preferred Stock were excluded from the dilutive common shares because the impact of the conversion of such preferred stock would be anti-dilutive based on the Company's common stock price at the end of each respective year. See note 10 for further discussion of the Company's previously outstanding 6.875% Convertible Preferred Stock.
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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in millions, except per share amounts)
The fair value of cash and cash equivalents and restricted cash approximate the carrying value. The Company determines the fair value of its debt securities based on indicative, non-binding quotes from brokers. Quotes from brokers require judgment and are based on the brokers' interpretation of market information, including implied credit spreads for similar borrowings on recent trades or bid/ask prices or quotes from active markets if available. 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, 2019 in the Company's valuation techniques used to measure fair values. See note 8 for a further discussion of fair values.
Recently Adopted Accounting Pronouncements
In January 2017, the Financial Accounting Standards Board ("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 quantitative 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 quantitative impairment test. The Company adopted the guidance during its most recent annual goodwill impairment test on October 1, 2020. The adoption of this guidance did not impact the Company's consolidated financial statements.
Recent Accounting Pronouncements Not Yet Adopted
No new accounting pronouncements issued but not yet adopted are expected to have a material impact on the Company's consolidated financial statements.
3.Revenues
The following table is a summary of the contracted amounts owed to the Company by tenants pursuant to tenant contracts in effect as of December 31, 2020. As of December 31, 2020, the weighted-average remaining term of tenant contracts is approximately five years, exclusive of renewals exercisable at the tenant's option.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ending December 31,
|
|
|
|
|
|
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
2025
|
|
Thereafter
|
|
Total
|
|
Contracted amounts(a)
|
|
$
|
4,354
|
|
|
$
|
4,153
|
|
|
$
|
3,564
|
|
|
$
|
2,875
|
|
|
$
|
2,380
|
|
|
$
|
9,560
|
|
|
$
|
26,886
|
|
(a)Based on the nature of the contract, tenant contracts are accounted for pursuant to relevant lease accounting (ASC 842) or revenue accounting (ASC 606) guidance. Excludes amounts related to services, as those contracts generally have a duration of one year or less.
See notes 2 and 13 for further discussion regarding the Company's lessor arrangements and note 14 for further information regarding the Company's operating segments.
4.Property and Equipment
The major classes of property and equipment are summarized in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Useful Lives
|
|
As of December 31,
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
Land(a)
|
—
|
|
$
|
2,171
|
|
|
$
|
2,080
|
|
|
Buildings
|
40 years
|
|
147
|
|
|
147
|
|
|
Communications infrastructure assets
|
1-20 years
|
|
22,027
|
|
|
20,521
|
|
|
Information technology assets and other
|
2-7 years
|
|
557
|
|
|
506
|
|
|
Construction in process
|
—
|
|
1,063
|
|
|
1,080
|
|
|
Total gross property and equipment
|
|
|
25,965
|
|
|
24,334
|
|
|
Less: accumulated depreciation
|
|
|
(10,803)
|
|
|
(9,668)
|
|
|
Total property and equipment, net
|
|
|
$
|
15,162
|
|
|
$
|
14,666
|
|
(a)Includes land owned through fee interests and perpetual easements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in millions, except per share amounts)
Depreciation expense for the years ended December 31, 2020, 2019 and 2018 was $1.2 billion, $1.1 billion and $1.1 billion, respectively. See note 13 for a discussion of finance leases recorded as "Property and equipment, net" on the Company's consolidated balance sheet.
5.Goodwill and Intangible Assets
Goodwill
There were no changes in the carrying value of goodwill during the years ended December 31, 2020 and 2019.
Intangibles
The following is a summary of the Company's intangible assets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2020
|
|
As of December 31, 2019
|
|
|
Gross Carrying Value
|
|
Accumulated Amortization
|
|
Net Book Value
|
|
Gross Carrying Value
|
|
Accumulated Amortization
|
|
Net Book Value
|
|
Site rental contracts and tenant relationships
|
$
|
7,797
|
|
|
$
|
(3,432)
|
|
|
$
|
4,365
|
|
|
$
|
7,761
|
|
|
$
|
(2,997)
|
|
|
$
|
4,764
|
|
|
Other intangible assets
|
143
|
|
|
(75)
|
|
|
68
|
|
|
143
|
|
|
(71)
|
|
|
72
|
|
|
Total
|
$
|
7,940
|
|
|
$
|
(3,507)
|
|
|
$
|
4,433
|
|
|
$
|
7,904
|
|
|
$
|
(3,068)
|
|
|
$
|
4,836
|
|
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
|
2020
|
|
2019
|
|
2018
|
|
Depreciation, amortization and accretion
|
$
|
439
|
|
|
$
|
428
|
|
|
$
|
428
|
|
|
Site rental costs of operations(a)
|
—
|
|
|
—
|
|
|
17
|
|
|
Total amortization expense
|
$
|
439
|
|
|
$
|
428
|
|
|
$
|
445
|
|
(a)Amortization expense of intangible assets classified as "Site rental costs of operations" on the Company's consolidated statement of operations and comprehensive income (loss) for the year ended December 31, 2018 represented amortization of below-market leases. Effective January 1, 2019, the Company adopted ASC 842 and these below-market leases were de-recognized and reclassified from "Other intangible assets, net" to the "Operating lease right-of-use assets" on the Company's consolidated balance sheet.
The estimated annual amortization expense related to intangible assets for the years ending December 31, 2021 to 2025 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ending December 31,
|
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
2025
|
|
Estimated annual amortization
|
$
|
444
|
|
|
$
|
444
|
|
|
$
|
442
|
|
|
$
|
393
|
|
|
$
|
371
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in millions, except per share amounts)
6.Other Liabilities
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,
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
Deferred rental revenues
|
|
$
|
1,707
|
|
|
$
|
1,814
|
|
|
Deferred credits, net
|
|
375
|
|
|
434
|
|
|
Asset retirement obligation
|
|
259
|
|
|
227
|
|
|
Deferred income tax liabilities
|
|
11
|
|
|
8
|
|
|
Other long-term liabilities
|
|
27
|
|
|
33
|
|
|
Total
|
|
$
|
2,379
|
|
|
$
|
2,516
|
|
Pursuant to its ground lease, easement and leased facility agreements, the Company has the obligation to perform certain asset retirement activities, including requirements upon contract termination to remove communications infrastructure or remediate the space on which its communications infrastructure is located. Accretion expense related to liabilities for retirement obligations amounted to $18 million, $15 million and $14 million for the years ended December 31, 2020, 2019 and 2018, respectively. As of December 31, 2020, the estimated undiscounted future cash outlay for asset retirement obligations was approximately $1.0 billion. See note 2.
For the year ended December 31, 2018, the Company recorded $18 million as a decrease to "Site rental costs of operations" for the amortization of above-market leases for land under the Company's towers. Effective January 1, 2019, the Company adopted ASC 842 and these above-market leases were de-recognized and reclassified from "Other long-term liabilities" into the "Operating lease right-of-use assets" on the Company's consolidated balance sheet.
For the years ended December 31, 2020, 2019 and 2018, the Company recognized $58 million, $65 million and $69 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 ending December 31, 2021 to 2025 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ending December 31,
|
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
2025
|
|
Below-market tenant leases
|
$
|
53
|
|
|
$
|
48
|
|
|
$
|
45
|
|
|
$
|
41
|
|
|
$
|
33
|
|
Other accrued liabilities
Other accrued liabilities included accrued payroll and other accrued compensation of $192 million and $174 million, respectively, as of December 31, 2020 and 2019.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in millions, except per share amounts)
7.Debt and Other Obligations
See note 17 for a discussion of the Company's issuance of the February 2021 Senior Notes (as defined in note 17) and the use of the net proceeds therefrom.
The table below sets forth the Company's debt and other obligations as of December 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Original
Issue Date
|
|
Contractual
Maturity
Date
|
|
Outstanding Balance as of December 31,
|
|
Stated
Interest Rate
as of
December 31,
|
|
|
2020
|
|
2019
|
2020
|
(a)
|
|
3.849% Secured Notes
|
Dec. 2012
|
|
Apr. 2023
|
|
$
|
997
|
|
|
$
|
995
|
|
|
3.9
|
%
|
|
|
Secured Notes, Series 2009-1, Class A-2
|
July 2009
|
|
Aug. 2029
|
|
60
|
|
|
67
|
|
|
9.0
|
%
|
|
|
Tower Revenue Notes, Series 2015-1
|
May 2015
|
|
May 2042
|
(b)(c)
|
299
|
|
|
298
|
|
|
3.2
|
%
|
|
|
Tower Revenue Notes, Series 2018-1
|
July 2018
|
|
July 2043
|
(b)(c)
|
248
|
|
|
248
|
|
|
3.7
|
%
|
|
|
Tower Revenue Notes, Series 2015-2
|
May 2015
|
|
May 2045
|
(b)(c)
|
695
|
|
|
694
|
|
|
3.7
|
%
|
|
|
Tower Revenue Notes, Series 2018-2
|
July 2018
|
|
July 2048
|
(b)(c)
|
743
|
|
|
742
|
|
|
4.2
|
%
|
|
|
Finance leases and other obligations
|
Various
|
|
Various
|
(d)
|
236
|
|
|
227
|
|
|
Various
|
(d)
|
|
Total secured debt
|
|
|
|
|
3,278
|
|
|
3,271
|
|
|
|
|
|
2016 Revolver
|
Jan. 2016
|
|
June 2024
|
|
290
|
|
(e)
|
525
|
|
|
1.3
|
%
|
(f)
|
|
2016 Term Loan A
|
Jan. 2016
|
|
June 2024
|
|
2,252
|
|
|
2,310
|
|
|
1.3
|
%
|
(f)
|
|
Commercial Paper Notes
|
Various
|
(g)
|
Various
|
(g)
|
285
|
|
|
155
|
|
|
0.5
|
%
|
|
|
3.400% Senior Notes
|
Feb./May 2016
|
|
Feb. 2021
|
|
—
|
|
|
850
|
|
|
N/A
|
|
|
2.250% Senior Notes
|
Sept. 2016
|
|
Sept. 2021
|
|
—
|
|
|
698
|
|
|
N/A
|
|
|
4.875% Senior Notes
|
Apr. 2014
|
|
Apr. 2022
|
|
—
|
|
|
846
|
|
|
N/A
|
|
|
5.250% Senior Notes
|
Oct. 2012
|
|
Jan. 2023
|
|
1,646
|
|
|
1,644
|
|
|
5.3
|
%
|
|
|
3.150% Senior Notes
|
Jan. 2018
|
|
July 2023
|
|
746
|
|
|
744
|
|
|
3.2
|
%
|
|
|
3.200% Senior Notes
|
Aug. 2017
|
|
Sept. 2024
|
|
745
|
|
|
744
|
|
|
3.2
|
%
|
|
|
1.350% Senior Notes
|
June 2020
|
|
July 2025
|
|
494
|
|
|
—
|
|
|
1.4
|
%
|
|
|
4.450% Senior Notes
|
Feb. 2016
|
|
Feb. 2026
|
|
894
|
|
|
893
|
|
|
4.5
|
%
|
|
|
3.700% Senior Notes
|
May 2016
|
|
June 2026
|
|
745
|
|
|
744
|
|
|
3.7
|
%
|
|
|
4.000% Senior Notes
|
Feb. 2017
|
|
Mar. 2027
|
|
496
|
|
|
495
|
|
|
4.0
|
%
|
|
|
3.650% Senior Notes
|
Aug. 2017
|
|
Sept. 2027
|
|
994
|
|
|
993
|
|
|
3.7
|
%
|
|
|
3.800% Senior Notes
|
Jan. 2018
|
|
Feb. 2028
|
|
991
|
|
|
990
|
|
|
3.8
|
%
|
|
|
4.300% Senior Notes
|
Feb. 2019
|
|
Feb. 2029
|
|
593
|
|
|
592
|
|
|
4.3
|
%
|
|
|
3.100% Senior Notes
|
Aug. 2019
|
|
Nov. 2029
|
|
544
|
|
|
543
|
|
|
3.1
|
%
|
|
|
3.300% Senior Notes
|
Apr. 2020
|
|
July 2030
|
|
737
|
|
|
—
|
|
|
3.3
|
%
|
|
|
2.250% Senior Notes
|
June 2020
|
|
Jan. 2031
|
|
1,088
|
|
|
—
|
|
|
2.3
|
%
|
|
|
4.750% Senior Notes
|
May 2017
|
|
May 2047
|
|
344
|
|
|
344
|
|
|
4.8
|
%
|
|
|
5.200% Senior Notes
|
Feb. 2019
|
|
Feb. 2049
|
|
395
|
|
|
395
|
|
|
5.2
|
%
|
|
|
4.000% Senior Notes
|
Aug. 2019
|
|
Nov. 2049
|
|
345
|
|
|
345
|
|
|
4.0
|
%
|
|
|
4.150% Senior Notes
|
Apr. 2020
|
|
July 2050
|
|
489
|
|
|
—
|
|
|
4.2
|
%
|
|
|
3.250% Senior Notes
|
June 2020
|
|
Jan. 2051
|
|
889
|
|
|
—
|
|
|
3.3
|
%
|
|
|
Total unsecured debt
|
|
|
|
|
$
|
16,002
|
|
|
$
|
14,850
|
|
|
|
|
|
Total debt and other obligations
|
|
|
|
|
$
|
19,280
|
|
|
$
|
18,121
|
|
|
|
|
|
Less: current maturities and short-term debt and other current obligations
|
|
|
$
|
129
|
|
|
$
|
100
|
|
|
|
|
|
Non-current portion of long-term debt and other long-term obligations
|
|
|
$
|
19,151
|
|
|
$
|
18,021
|
|
|
|
|
(a)Represents the weighted-average stated interest rate.
(b)The Tower Revenue Notes, Series 2015-1 and 2015-2 ("May 2015 Tower Revenue Notes") and Tower Revenue Notes, Series 2018-1 and 2018-2 ("July 2018 Tower Revenue Notes") are collectively referred to herein as "Tower Revenue Notes."
(c)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 governing the terms of such notes) of the issuers of such notes will be used to repay principal of the applicable series and class of the Tower Revenue Notes, and additional interest (of an additional approximately 5% per annum) will accrue on the respective Tower Revenue Notes. As of December 31, 2019, the Tower Revenue Notes have principal amounts of $300 million, $250 million, $700 million and $750 million, with anticipated repayment dates in 2022, 2023, 2025 and 2028, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in millions, except per share amounts)
(d)The Company's finance leases and other obligations relate to land, fiber, vehicles, and other assets and bear interest rates ranging up to 10% and mature in periods ranging from less than one year to approximately 25 years.
(e)As of December 31, 2020, the undrawn availability under the 2016 Revolver was $4.7 billion.
(f)Both the 2016 Revolver and 2016 Term Loan A bear interest, at our option, at either (1) LIBOR plus a credit spread ranging from 0.875% to 1.750% per annum or (2) an alternate base rate plus a credit spread ranging from 0.000% to 0.750% per annum, in each case, with the applicable credit spread based on the Company's senior unsecured debt rating. The Company pays a commitment fee ranging from 0.125% to 0.350%, based on the Company's senior unsecured debt rating, per annum on the undrawn available amount under the 2016 Revolver.
(g)The maturities of the Commercial Paper Notes, as defined below, when outstanding, may vary but may not exceed 397 days from the date of issue.
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 established 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) a $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 then 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 then outstanding 364-Day Facility.
In February 2017, the Company entered into an amendment to the 2016 Credit Facility to (1) incur additional term loans in an aggregate principal amount of $500 million and (2) extend the maturity of both the 2016 Term Loan A and the 2016 Revolver to January 2022.
In August 2017, the Company entered into an amendment to the 2016 Credit Facility to (1) increase commitments on the 2016 Revolver by $1.0 billion, for total 2016 Revolver commitments of $3.5 billion, and (2) extend the maturity of the Credit Facility to August 2022.
In June 2018, the Company entered into an amendment to the 2016 Credit Facility to (1) increase commitments on the 2016 Revolver by $750 million, for total 2016 Revolver commitments of $4.25 billion, and (2) extend the maturity of the Credit Facility from August 2022 to June 2023.
In April 2019, the Company established a commercial paper program ("CP Program"), pursuant to which the Company may issue short-term, unsecured commercial paper notes ("Commercial Paper Notes"). Commercial Paper Notes may be issued, repaid and re-issued from time to time, with an aggregate principal amount of Commercial Paper Notes outstanding under the CP Program at any time not to exceed $1.0 billion. The net proceeds of the Commercial Paper Notes are expected to be used for general corporate purposes. The Commercial Paper Notes are issued under customary terms in the commercial paper market and are issued at a discount from par or, alternatively, can be issued at par and bear varying interest rates on a fixed or floating basis. For the year ended December 31, 2020, the Company had net issuances of $285 million under the CP Program. At any point in time, the Company intends to maintain available commitments under its 2016 Revolver in an amount at least equal to the amount of Commercial Paper Notes outstanding. While any outstanding commercial paper issuances generally have short-term maturities, the Company classifies the outstanding issuances as long-term based on its ability and intent to refinance the outstanding issuances on a long-term basis.
In June 2019, the Company entered into an amendment to the 2016 Credit Facility to (1) increase commitments on the 2016 Revolver by $750 million, for total 2016 Revolver commitments of $5.0 billion, and (2) extend the maturity of the Credit Facility from June 2023 to June 2024.
Securitized Debt
The Tower Revenue Notes and the Secured Notes, Series 2009-1, Class A-2 ("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 May 2015 Tower Revenue Notes and July 2018 Tower Revenue Notes (each as defined below) are governed by one indenture and consist of multiple series of notes, each with its own anticipated repayment date.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in millions, except per share amounts)
In May 2015, the Company issued $1.0 billion aggregate principal amount of Senior Secured Tower Revenue Notes ("May 2015 Tower Revenue Notes"), which were issued pursuant to the existing indenture and have similar terms and security as the Company's then outstanding Tower Revenue Notes. The May 2015 Tower Revenue Notes consist of (1) $300 million aggregate principal amount of 3.222% senior secured tower revenue notes with an anticipated repayment date of May 2022 and a final maturity date of May 2042 and (2) $700 million aggregate principal amount of 3.663% senior secured tower revenue notes with an anticipated repayment date of May 2025 and a final maturity date of May 2045. The Company primarily used the net proceeds of the May 2015 Tower Revenue Notes, together with proceeds received from the Company's sale of the formerly 77.6% owned subsidiary that operated towers in Australia ("CCAL"), to (1) repay $250 million aggregate principal amount of the previously outstanding August 2010 Tower Revenue Notes, which had an anticipated repayment date of August 2015, (2) repay all of the then outstanding WCP Secured Wireless Site Contracts Revenue Notes, Series 2010-1 ("WCP Securitized Notes"), (3) repay portions of outstanding borrowings under the 2012 Credit Facility and (4) pay related fees and expenses.
In July 2018, the Company issued $1.0 billion aggregate principal amount of Senior Secured Tower Revenue Notes ("July 2018 Tower Revenue Notes"), which were issued pursuant to the existing indenture and have similar terms and security as the Company's existing Tower Revenue Notes. The July 2018 Tower Revenue Notes consist of (1) $250 million aggregate principal amount of 3.720% senior secured tower revenue notes with an anticipated repayment date of July 2023 and a final maturity of July 2043 and (2) $750 million aggregate principal amount of 4.241% senior secured tower revenue notes with an anticipated repayment date of July 2028 and a final maturity of July 2048. The Company used the net proceeds of the July 2018 Tower Revenue Notes, together with cash on hand, to repay all of the previously outstanding Tower Revenue Notes, Series 2010-6 and to pay related fees and expenses. In addition to the July 2018 Tower Revenue Notes described above, in connection with Exchange Act risk retention requirements ("Risk Retention Rules"), an indirect subsidiary of the Company issued and a majority-owned affiliate of the Company purchased approximately $53 million of the Senior Secured Tower Revenue Notes, Series 2018-1, Class R-2028 to retain an eligible horizontal residual interest (as defined in the Risk Retention Rules) in an amount equal to at least 5% of the fair value of the July 2018 Tower Revenue Notes.
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, 2020, the Securitized Debt was collateralized with personal property and equipment with an aggregate net book value of approximately $920 million, 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 May 2015 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 and the July 2018 Tower Revenue Notes from the date of issuance, provided in each case that such prepayment is accompanied by any applicable prepayment 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 April 2020, the Company issued $1.25 billion aggregate principal amount of senior unsecured notes ("April 2020 Senior Notes"), which consisted of (1) $750 million aggregate principal amount of 3.300% senior unsecured notes due July 2030 and (2) $500 million aggregate principal amount of 4.150% senior unsecured notes due July 2050. The Company used the net proceeds of the April 2020 Senior Notes offering to repay outstanding borrowings under the 2016 Revolver.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in millions, except per share amounts)
In June 2020, the Company issued $2.5 billion aggregate principal amount of senior unsecured notes ("June 2020 Senior Notes"), which consisted of (1) $500 million aggregate principal amount of 1.350% senior unsecured notes due July 2025, (2) $1.1 billion aggregate principal amount of 2.250% senior unsecured notes due January 2031 and (3) $900 million aggregate principal amount of 3.250% senior unsecured notes due January 2051. The Company used the net proceeds of the June 2020 Senior Notes offering, together with available cash, to redeem all of the previously outstanding 3.400% Senior Notes, 2.250% Senior Notes and 4.875% Senior Notes.
In February 2019, the Company issued $1.0 billion aggregate principal amount of senior unsecured notes ("February 2019 Senior Notes"), which consisted of (1) $600 million aggregate principal amount of 4.300% senior unsecured notes due February 2029 and (2) $400 million aggregate principal amount of 5.200% senior unsecured notes due February 2049. The Company used the net proceeds of the February 2019 Senior Notes offering to repay a portion of the outstanding borrowings under the 2016 Revolver.
In August 2019, the Company issued $900 million aggregate principal amount of senior unsecured notes ("August 2019 Senior Notes"), which consisted of (1) $550 million aggregate principal amount of 3.100% senior unsecured notes due November 2029 and (2) $350 million aggregate principal amount of 4.000% senior unsecured notes due November 2049. The Company used the net proceeds of the August 2019 Senior Notes offering to repay outstanding borrowings under the 2016 Revolver and CP Program.
In January 2018, the Company issued $750 million aggregate principal amount of 3.150% senior unsecured notes due July 2023 and $1.0 billion aggregate principal amount of 3.800% senior unsecured notes due February 2028 (collectively, "January 2018 Senior Notes"). The Company used the net proceeds of the January 2018 Senior Notes offering to repay (1) in full the January 2010 Tower Revenue Notes and (2) a portion of the outstanding borrowings under the 2016 Revolver.
In February 2017, the Company issued $500 million aggregate principal amount of 4.000% senior unsecured notes due March 2027 ("4.000% Senior Notes"). The Company used the net proceeds from the 4.000% Senior Notes offering to repay a portion of the outstanding borrowings under the 2016 Revolver.
In May 2017, the Company issued $350 million aggregate principal amount of 4.750% senior unsecured notes due May 2047 ("4.750% Senior Notes"). The Company used the net proceeds from the 4.750% Senior Notes offering to partially fund the 2017 acquisition of Wilcon Holdings LLC and to repay a portion of the outstanding borrowings under the 2016 Revolver.
In August 2017, the Company issued $1.75 billion aggregate principal amount of senior unsecured notes ("August 2017 Senior Notes"), which consisted of (1) $750 million aggregate principal amount of 3.200% senior unsecured notes due September 2024 ("3.200% Senior Notes") and (2) $1.0 billion aggregate principal amount of 3.650% senior unsecured notes due September 2027 ("3.650% Senior Notes"). The Company used the net proceeds from the August 2017 Senior Notes offering to partially fund the 2017 acquisition of LTS Group Holdings LLC and pay related fees and expenses.
In February 2016, the Company issued $1.5 billion aggregate principal amount of senior unsecured notes ("February 2016 Senior Notes"), which consisted of (1) $600 million aggregate principal amount of 3.400% senior notes due February 2021 ("3.400% Senior Notes") and (2) $900 million aggregate principal amount of 4.450% senior unsecured notes due February 2026 ("4.450% Senior Notes"). The Company used the net proceeds from the February 2016 Senior Notes offering, together with cash on hand, to (1) repay in full all outstanding borrowings under the then outstanding 364-Day Facility and (2) repay $500 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 consisted of (1) $250 million aggregate principal amount of additional 3.400% Senior Notes pursuant to the same indenture as the 3.400% Senior Notes issued in the February 2016 Senior Notes offering and (2) $750 million aggregate principal amount of 3.700% senior unsecured notes due June 2026 ("3.700% Senior Notes"). The Company used the 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 million aggregate principal amount of 2.250% senior unsecured notes ("2.250% Senior Notes") due September 2021. The Company used the net proceeds from the 2.250% Senior Notes offering to (1) repay $500 million aggregate principal amount of 2.381% secured notes due 2017 ("2.381% Secured Notes") issued by certain of its subsidiaries and (2) repay a portion of the outstanding borrowings under the 2016 Revolver.
In April 2014, the Company issued $850 million aggregate principal amount of 4.875% senior unsecured notes due April 2022 ("4.875% Senior Notes"). The net proceeds from the offering were approximately $839 million, after the deduction of
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in millions, except per share amounts)
associated fees. The Company utilized the net proceeds from the 4.875% Senior Notes offering (1) to repay $300 million of the January 2010 Tower Revenue Notes with an anticipated repayment date of January 2015 and (2) to redeem all of the then outstanding 7.125% senior unsecured notes due 2019.
In October 2012, the Company issued $1.65 billion aggregate principal amount of 5.250% senior unsecured notes due 2023 ("5.250% Senior Notes"). The Company used the net proceeds from the 5.250% Senior Notes offering to partially fund the T-Mobile Acquisition.
Each of the 5.250% Senior Notes, 4.450% Senior Notes, May 2016 Senior Notes, 4.000% Senior Notes, 4.750% Senior Notes, August 2017 Senior Notes, January 2018 Senior Notes, February 2019 Senior Notes, August 2019 Senior Notes, April 2020 Senior Notes and June 2020 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, if applicable, and accrued and unpaid interest, if any, to the date of redemption.
Bonds—Secured Notes
In December 2012, the Company issued $1.0 billion aggregate principal amount of 3.849% secured notes due 2023 ("3.849% Secured Notes"). The 3.849% Secured Notes were issued and are guaranteed by the same subsidiaries of CCIC that had previously issued and guaranteed the 7.750% senior unsecured notes due 2017 ("7.750% Secured Notes"). The 3.849% Secured Notes are secured by a pledge of the equity interests of such subsidiaries. The 3.849% 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 3.849% Secured Notes. The 3.849% 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 3.849% Secured Notes to repurchase and redeem the then outstanding 7.750% Secured Notes and a portion of the then outstanding 9.000% senior notes due 2011. The 3.849% 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 to the redemption date.
Previously Outstanding Indebtedness
See above for a discussion of the Company's recent redemptions and repayments of debt.
Scheduled Principal Payments and Final Maturities
The following are the scheduled principal payments and final maturities of the total debt and other long-term obligations of the Company outstanding as of December 31, 2020, which 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ending December 31,
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
2025
|
|
Thereafter
|
|
Total Cash Obligations
|
|
Unamortized Adjustments, Net
|
|
Total Debt and Other Obligations Outstanding
|
|
Scheduled principal payments and final maturities
|
$
|
415
|
|
|
$
|
154
|
|
|
$
|
3,608
|
|
|
$
|
2,941
|
|
|
$
|
525
|
|
|
$
|
11,780
|
|
|
$
|
19,423
|
|
|
$
|
(143)
|
|
|
$
|
19,280
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in millions, except per share amounts)
Debt Purchases and Redemptions
The following is a summary of the purchases and redemptions of debt during the years ended December 31, 2020, 2019 and 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2020
|
|
|
Principal Amount
|
|
Cash Paid(a)
|
|
Gains (losses)(b)
|
|
3.400% Senior Notes
|
$
|
850
|
|
|
$
|
863
|
|
|
$
|
(13)
|
|
|
2.250% Senior Notes
|
700
|
|
|
714
|
|
|
(16)
|
|
|
4.875% Senior Notes
|
850
|
|
|
913
|
|
|
(66)
|
|
|
Total
|
$
|
2,400
|
|
|
$
|
2,490
|
|
|
$
|
(95)
|
|
(a)Exclusive of accrued interest.
(b)Inclusive of the write-off of the respective deferred financing costs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2019
|
|
|
Principal Amount
|
|
Cash Paid(a)
|
|
Gains (losses)(b)
|
|
Secured Notes, Series 2009-1, Class A-1
|
$
|
12
|
|
|
$
|
12
|
|
|
$
|
(1)
|
|
|
2016 Term Loan A
|
—
|
|
|
—
|
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
12
|
|
|
$
|
12
|
|
|
$
|
(2)
|
|
(a)Exclusive of accrued interest.
(b)Inclusive of the write-off of the respective deferred financing costs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2018
|
|
|
Principal Amount
|
|
Cash Paid(a)
|
|
Gains (losses)(b)
|
|
Tower Revenue Notes, Series 2010-3
|
$
|
1,250
|
|
|
$
|
1,318
|
|
|
$
|
(71)
|
|
|
2016 Term Loan A
|
—
|
|
|
—
|
|
|
(3)
|
|
|
Tower Revenue Notes, Series 2010-6
|
1,000
|
|
|
1,028
|
|
|
(32)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
2,250
|
|
|
$
|
2,346
|
|
|
$
|
(106)
|
|
(a)Exclusive of accrued interest.
(b)Inclusive of the write-off of the respective deferred financing costs.
8.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, 2020
|
|
December 31, 2019
|
|
|
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
1
|
|
$
|
232
|
|
|
$
|
232
|
|
|
$
|
196
|
|
|
$
|
196
|
|
|
Restricted cash, current and non-current
|
1
|
|
149
|
|
|
149
|
|
|
142
|
|
|
142
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
Total debt and other obligations
|
2
|
|
19,280
|
|
|
21,302
|
|
|
18,121
|
|
|
19,170
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in millions, except per share amounts)
9.Income Taxes
Income (loss) from continuing operations before income taxes by geographic area is summarized in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
|
|
|
|
Domestic
|
$
|
1,046
|
|
|
$
|
850
|
|
|
$
|
618
|
|
|
Foreign(a)
|
30
|
|
|
31
|
|
|
23
|
|
|
Total
|
$
|
1,076
|
|
|
$
|
881
|
|
|
$
|
641
|
|
(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,
|
|
|
2020
|
|
2019
|
|
2018
|
|
Current:
|
|
|
|
|
|
|
Federal
|
$
|
(6)
|
|
|
$
|
(6)
|
|
|
$
|
(5)
|
|
|
Foreign
|
(6)
|
|
|
(8)
|
|
|
(7)
|
|
|
State
|
(5)
|
|
|
(5)
|
|
|
(5)
|
|
|
Total current
|
(17)
|
|
|
(19)
|
|
|
(17)
|
|
|
Deferred:
|
|
|
|
|
|
|
Foreign
|
(3)
|
|
|
(2)
|
|
|
(2)
|
|
|
|
|
|
|
|
|
|
Total deferred
|
(3)
|
|
|
(2)
|
|
|
(2)
|
|
|
Total tax benefit (provision)
|
$
|
(20)
|
|
|
$
|
(21)
|
|
|
$
|
(19)
|
|
|
|
|
|
|
|
|
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,
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
|
|
|
|
Benefit (provision) for income taxes at statutory rate
|
$
|
(225)
|
|
|
$
|
(185)
|
|
|
$
|
(135)
|
|
|
Tax effect of foreign income (losses)
|
—
|
|
|
1
|
|
|
1
|
|
|
Tax adjustment related to REIT operations
|
219
|
|
|
178
|
|
|
128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State tax (provision) benefit, net of federal
|
(5)
|
|
|
(5)
|
|
|
(4)
|
|
|
Foreign tax
|
(9)
|
|
|
(10)
|
|
|
(9)
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
(20)
|
|
|
$
|
(21)
|
|
|
$
|
(19)
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in millions, except per share amounts)
The components of the net deferred income tax assets and liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2020
|
|
2019
|
|
Deferred income tax liabilities:
|
|
|
|
|
Property and equipment
|
$
|
7
|
|
|
$
|
6
|
|
|
Deferred site rental receivable
|
7
|
|
|
7
|
|
|
|
|
|
|
|
Total deferred income tax liabilities
|
14
|
|
|
13
|
|
|
Deferred income tax assets:
|
|
|
|
|
Intangible assets
|
3
|
|
|
3
|
|
|
Net operating loss carryforwards(a)
|
15
|
|
|
18
|
|
|
Straight-line rent expense liability
|
3
|
|
|
3
|
|
|
|
|
|
|
|
Accrued liabilities
|
6
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
2
|
|
|
2
|
|
|
Valuation allowances
|
—
|
|
|
—
|
|
|
Total deferred income tax assets, net
|
29
|
|
|
31
|
|
|
Net deferred income tax asset (liabilities)
|
$
|
15
|
|
|
$
|
18
|
|
(a)Balance results from the Company's foreign NOLs. Due to the Company's REIT status, no federal or state NOLs result in the Company recording a deferred income tax asset. See further discussion surrounding the Company's NOL balances below.
The Company operates as a REIT for U.S. federal income tax purposes.
The components of the net deferred income tax assets (liabilities) are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
|
Classification
|
Gross
|
|
Valuation
Allowance
|
|
Net
|
|
Gross
|
|
Valuation
Allowance
|
|
Net
|
|
Federal
|
$
|
25
|
|
|
$
|
—
|
|
|
$
|
25
|
|
|
$
|
25
|
|
|
$
|
—
|
|
|
$
|
25
|
|
|
State
|
1
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
Foreign
|
(11)
|
|
|
—
|
|
|
(11)
|
|
|
(8)
|
|
|
—
|
|
|
(8)
|
|
|
Total
|
$
|
15
|
|
|
$
|
—
|
|
|
$
|
15
|
|
|
$
|
18
|
|
|
$
|
—
|
|
|
$
|
18
|
|
At December 31, 2020, the Company had U.S. federal and state NOLs of approximately $1.5 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 $40 million. If not utilized, the Company's U.S. federal NOLs expire starting in 2025 and ending in 2036, the state NOLs expire starting in 2021 and ending in 2036, and the foreign NOLs expire starting in 2023 and ending in 2036. 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, 2020, there were no unrecognized tax benefits that would impact the effective tax rate, if recognized.
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 Internal Revenue Service 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 primary focus of the audit relates to the Company's asset valuation methodology and whether the Company should be subject to Australian capital gains tax on its sale of CCAL. The Company believes its valuation methodology is appropriate, that it is not subject to such tax, and that the ultimate resolution of the audit will not be material to the Company’s financial position.
In addition, the Company regularly assesses the likelihood of additional assessments in each of the tax jurisdictions in which it has business operations. The Company has no uncertain tax positions as of December 31, 2020. Additionally, the
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in millions, except per share amounts)
Company does not believe any such additional assessments arising from other examinations or audits will have a material effect on the Company's financial statements.
As of December 31, 2020, the Company's deferred tax assets are included in "Other assets, net" and the Company's deferred tax liabilities are included in "Other long-term liabilities" on the Company's consolidated balance sheet.
10.Equity
2018 "At-The-Market" Stock Offering Program
In April 2018, the Company established an "at-the-market" stock offering program through which it may issue and sell shares of its common stock having an aggregate gross sales price of up to $750 million ("2018 ATM Program"). Sales under the 2018 ATM Program may be made by means of ordinary brokers' transactions on the NYSE or otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices or, subject to our specific instructions, at negotiated prices. The Company intends to use the net proceeds from any sales under the 2018 ATM Program for general corporate purposes, which may include (1) the funding of future acquisitions or investments or (2) the repayment or repurchase of any outstanding indebtedness. The Company has not sold any shares of common stock under the 2018 ATM Program. As of December 31, 2020, the Company had $750 million of gross sales of common stock availability remaining under the 2018 ATM Program.
Convertible Preferred Stock Conversion
In July and August 2020, all of the approximately 2 million shares of the Company's previously outstanding 6.875% Mandatory Convertible Preferred Stock were converted into approximately 14 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 8.8043 shares of common stock per each share of 6.875% Mandatory Convertible Preferred Stock.
March 2018 Common Stock Offering
In March 2018, the Company completed an offering of 8 million shares of its common stock, which generated net proceeds of $841 million ("March 2018 Equity Financing"). The Company used the net proceeds from the March 2018 Equity Financing for general corporate purposes, including repayment of outstanding indebtedness.
Declaration and Payment of Dividends
During the year ended December 31, 2020, the following dividends/distributions were declared or paid:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Type
|
|
Declaration Date
|
|
Record Date
|
|
Payment Date
|
|
Dividends Per Share
|
|
Aggregate
Payment
Amount
(In millions)
|
|
|
Common Stock
|
|
February 20, 2020
|
|
March 13, 2020
|
|
March 31, 2020
|
|
$
|
1.20
|
|
|
$
|
504
|
|
(a)
|
|
Common Stock
|
|
May 14, 2020
|
|
June 12, 2020
|
|
June 30, 2020
|
|
$
|
1.20
|
|
|
$
|
504
|
|
(a)
|
|
Common Stock
|
|
August 6, 2020
|
|
September 15, 2020
|
|
September 30, 2020
|
|
$
|
1.20
|
|
|
$
|
521
|
|
(a)
|
|
Common Stock
|
|
October 21, 2020
|
|
December 15, 2020
|
|
December 31, 2020
|
|
$
|
1.33
|
|
|
$
|
577
|
|
(a)
|
|
6.875% Convertible Preferred Stock
|
|
December 9, 2019
|
|
January 15, 2020
|
|
February 3, 2020
|
|
$
|
17.1875
|
|
|
$
|
28
|
|
|
|
6.875% Convertible Preferred Stock
|
|
March 12, 2020
|
|
April 15, 2020
|
|
May 1, 2020
|
|
$
|
17.1875
|
|
|
$
|
28
|
|
|
|
6.875% Convertible Preferred Stock
|
|
June 19, 2020
|
|
July 15, 2020
|
|
August 3, 2020
|
|
$
|
17.1875
|
|
|
$
|
28
|
|
|
(a)Inclusive of dividends accrued for holders of unvested RSUs, which will be paid when and if the RSUs vest.
See also note 17 for a discussion of the Company's common stock dividend declared in February 2021.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Tabular dollars in millions, except per share amounts)
Tax Treatment of Dividends
The following table summarizes, for income tax purposes, the nature of dividends paid during 2020 on the Company's common stock and previously outstanding 6.875% Convertible Preferred Stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Type
|
|
Payment Date
|
|
Cash Distribution (per share)
|
|
Ordinary Taxable Dividend (per share)
|
|
Qualified Taxable Dividend (per share)(a)
|
|
Section 199A Dividend (per share)
|
|
Non-Taxable Distribution (per share)
|
|
Common Stock
|
|
March 31, 2020
|
|
$
|
1.20
|
|
|
$
|
0.788
|
|
|
$
|
0.010
|
|
|
$
|
0.778
|
|
|
$
|
0.412
|
|
|
Common Stock
|
|
June 30, 2020
|
|
$
|
1.20
|
|
|
$
|
0.788
|
|
|
$
|
0.010
|
|
|
$
|
0.778
|
|
|
$
|
0.412
|
|
|
Common Stock
|
|
September 30, 2020
|
|
$
|
1.20
|
|
|
$
|
0.788
|
|
|
$
|
0.010
|
|
|
$
|
0.778
|
|
|
$
|
0.412
|
|
|
Common Stock
|
|
December 31, 2020
|
|
$
|
1.33
|
|
|
$
|
0.874
|
|
|
$
|
0.012
|
|
|
$
|
0.862
|
|
|
$
|
0.456
|
|
|
6.875% Convertible Preferred Stock
|
|
February 3, 2020
|
|
$
|
17.1875
|
|
|
$
|
17.1875
|
|
|
$
|
0.2265
|
|
|
$
|
16.9610
|
|
|
$
|
—
|
|
|
6.875% Convertible Preferred Stock
|
|
May 1, 2020
|
|
$
|
17.1875
|
|
|
$
|
17.1875
|
|
|
$
|
0.2265
|
|
|
$
|
16.9610
|
|
|
$
|
—
|
|
|
6.875% Convertible Preferred Stock
|
|
August 3, 2020
|
|
$
|
17.1875
|
|
|
$
|
17.1875
|
|
|
$
|
0.2265
|
|
|
$
|
16.9610
|
|
|
$
|
—
|
|
(a)Qualified taxable dividend and section 199A dividend amounts are included in ordinary taxable dividend amounts.
Purchases of the Company's Common Stock
During the years ended December 31, 2020, 2019 and 2018, the Company purchased 0.5 million, 0.4 million and 0.3 million shares of common stock, respectively, utilizing $76 million, $44 million and $34 million in cash, respectively.