filings.toolsCover and table of contents
19K characters. Original on sec.gov · Markdown
Cover and table of contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2019
or
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 001-16441
CROWN CASTLE INTERNATIONAL CORP**.**
(Exact name of registrant as specified in its charter)
| Delaware | 76-0470458 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
1220 Augusta Drive**,** Suite 600**,** Houston**,** Texas 77057-2261
(Address of principal executive offices) (Zip Code)
(713) 570-3000
(Registrant's telephone number, including area code)
| Securities Registered Pursuant to Section 12(b) of the Act | Trading Symbols | Name of Each Exchange on Which Registered | ||
| Common Stock, $0.01 par value | CCI | New York Stock Exchange | ||
| 6.875% Mandatory Convertible Preferred Stock, Series A, $0.01 par value | CCI.PRA | New York Stock Exchange |
Securities Registered Pursuant to Section 12(g) of the Act: NONE.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of a "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately $54.0 billion as of June 28, 2019, the last business day of the registrant's most recently completed second fiscal quarter, based on the New York Stock Exchange closing price on that day of $130.35 per share.
Applicable Only to Corporate Registrants
As of March 6, 2020, there were 416,746,380 shares of common stock outstanding.
Documents Incorporated by Reference
The information required to be furnished pursuant to Part III of this Form 10-K will be set forth in, and incorporated by reference from, the registrant's definitive proxy statement for the annual meeting of stockholders ("2020 Proxy Statement"), which will be filed with the Securities and Exchange Commission not later than 120 days after the end of the fiscal year ended December 31, 2019.
CROWN CASTLE INTERNATIONAL CORP.
TABLE OF CONTENTS
Cautionary Language Regarding Forward-Looking Statements
This Annual Report on Form 10-K contains forward-looking statements that are based on our management's expectations as of the filing date of this report with the Securities and Exchange Commission ("SEC"). Statements that are not historical facts are hereby identified as forward-looking statements. In addition, words such as "estimate," "anticipate," "project," "plan," "intend," "believe," "expect," "likely," "predicted," "positioned," "continue," "target," and any variations of these words and similar expressions are intended to identify forward-looking statements. Such statements include plans, projections and estimates contained in "Item 1. Business," "Item 3. Legal Proceedings," "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" ("MD&A"), and "Item 7A. Quantitative and Qualitative Disclosures About Market Risk" herein. Such forward-looking statements include (1) benefits and opportunities stemming from our strategy, strategic position, business model and capabilities, (2) the strength and growth potential of the U.S. market for shared communications infrastructure investment, (3) expectations regarding anticipated growth in the wireless industry, and consumption of and demand for data, including growth in, and factors driving, consumption and demand, (4) potential benefits of our communications infrastructure (on an individual and collective basis) and expectations regarding demand therefore, including potential benefits and continuity of and factors driving such demand, (5) expectations regarding construction, including duration of our construction projects, and acquisition of communications infrastructure, (6) the utilization of our net operating loss carryforwards ("NOLs"), (7) expectations regarding wireless carriers' focus on improving network quality and expanding capacity, (8) expectations regarding continued adoption and increase in usage of high-bandwidth applications by organizations, (9) expected benefits of future potential spectrum auctions, (10) competitive factors affecting our business, (11) expected use of net proceeds from issuances under the commercial paper program ("CP Program"), (12) assumed conversion of 6.785% Mandatory Convertible Preferred Stock and the impact therefrom
and dividends expected to be paid on such preferred stock, (13) our full year 2020 outlook and the anticipated growth in our financial results, including future revenues, and the expectations regarding our 2020 capital expenditures, as well as the factors impacting expected growth in financial results and the levels of capital expenditures, (14) expectations regarding our capital structure and the credit markets, our availability and cost of capital, capital allocation, our leverage ratio and interest coverage targets, our ability to service our debt and comply with debt covenants, future of LIBOR and any replacement rate thereto, level of available commitment we intend to maintain under our debt instruments, and the plans for and the benefits of any future refinancings, (15) the utility of certain financial measures, including non-GAAP financial measures, (16) expectations related to our ability to remain qualified as a real estate investment trust ("REIT") and the advantages, benefits or impact of, or opportunities created by, our REIT status, (17) adequacy, projected sources and uses of liquidity, (18) expectations related to the impact of tenant consolidation or ownership changes, including the impact from the potential transaction between T-Mobile and Sprint, (19) continued slowdown in demand for our communications infrastructure, (20) expectations regarding non-renewals of tenant contracts, (21) our dividend policy and the timing, amount, growth or tax characterization of any dividends, (22) the potential effects of the restatement of our previously issued consolidated financial statements, including the Historical Adjustments (as defined below) related thereto, and any litigation stemming therefrom and (23) expectations regarding our remediation efforts related to a material weakness in our internal control over financial reporting. All future dividends are subject to declaration by our board of directors.
Such forward-looking statements should, therefore, be considered in light of various risks, uncertainties and assumptions, including prevailing market conditions, risk factors described under "Item 1A. Risk Factors" herein and other factors. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those expected.
Our filings with the SEC are available through the SEC website at www.sec.gov or through our investor relations website at investor.crowncastle.com. We use our investor relations website to disclose information about us that may be deemed to be material. We encourage investors, the media and others interested in us to visit our investor relations website from time to time to review up-to-date information or to sign up for e-mail alerts to be notified when new or updated information is posted on the site.
Interpretation
As used herein, the term "including," and any variation thereof, means "including without limitation." The use of the word "or" herein is not exclusive. Unless this Form 10-K indicates otherwise or the context otherwise requires, the terms, "we," "our," "our company," "the company" or "us" as used in this Form 10-K refer to Crown Castle International Corp. and its predecessor (organized in 1995), as applicable, each a Delaware corporation (together, "CCIC"), and their subsidiaries. Additionally, unless the context suggests otherwise, references to "U.S." are to the United States of America and Puerto Rico, collectively.
Explanatory Note
General
Prior to the filing of this Form 10-K, we identified historical errors related to the timing of revenue recognition for our tower installation services. Specifically, we determined that our historical practice of recognizing the full transaction price as service revenues upon completion of an installation was not acceptable under generally accepted accounting principles in the U.S. ("GAAP"). Instead, a portion of the transaction price for our tower installation services, specifically the amounts associated with permanent improvements recorded as fixed assets, represents a lease component and should be recognized as site rental revenues on a ratable basis over the associated estimated lease term.
Due to these errors, on February 25, 2020, the Audit Committee of our Board of Directors, after considering the recommendation of management and after discussion with our independent registered public accounting firm, PricewaterhouseCoopers LLP, concluded that the following previously issued financial statements should no longer be relied upon: (1) our audited consolidated financial statements and related disclosures for years ended December 31, 2016 through and including 2018, and (2) each of our unaudited condensed consolidated financial statements and related disclosures for the quarterly and year-to-date periods during 2018 and for the first three quarters of fiscal year 2019. As a result, we have restated our financial statements for the years ended December 31, 2018 and 2017, and quarterly unaudited financial information for the quarterly and year-to-date periods in the year ended December 31, 2018 and first three quarters for the year ended December 31, 2019. The restatement also affects periods prior to 2017, the cumulative effect of which is reflected as an adjustment to opening "Dividends/distributions in excess of earnings" as of January 1, 2017.
Items Restated in This Filing
For ease of reference, this Annual Report on Form 10-K restates historical information in the following sections:
-
Part II, Item 6. Selected Financial Data
-
Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
-
Part II, Item 8. Financial Statements and Supplementary Data
-
Part IV, Item 15. Exhibits, Financial Statement Schedules
Impact of Restatement
The restatement of previously issued consolidated financial statements reduced our net income and diluted earnings per share for the year ended December 31, 2018 by approximately $48 million or $0.11 per share, respectively, and $59 million or $0.16 per share, respectively, for the year ended December 31, 2017. The cumulative impact of the errors for all previously issued financial statements for the periods through September 30, 2019 was a reduction in net income of approximately $516 million. The historical errors do not have an impact on the Company’s business operations or net cash flows. We refer to the adjustments to correct the historical error described above as the "Restatement Adjustments." In addition to the Restatement Adjustments, we have also made other adjustments to the financial statements referenced above to correct errors that were not material to our consolidated financial statements. Such immaterial adjustments are related to (1) an out-of-period adjustment to reduce 2017 site development service revenues which are now recorded in 2016; and (2) a revision in the presentation of certain tower installation activities from a gross basis to a net basis, including the associated removal of certain amounts historically categorized as capital expenditures. These immaterial adjustments relate exclusively to our Towers segment. Collectively, we refer to the Restatement Adjustments and immaterial adjustments as "Historical Adjustments."
Note 2 to our consolidated financial statements illustrates the impact of the Historical Adjustments to our consolidated financial statements for the years ended December 31, 2018 and 2017. For information on the restatement for years prior to 2017, see "Item 6. Selected Financial Data" in this Annual Report on Form 10-K.
The restated quarterly unaudited financial information for the quarters and year-to-date periods described above is included in note 18 to our consolidated financial statements within this Form 10-K. As such, we have not amended, and do not intend to amend, previously filed Quarterly Reports on Form 10-Q.
Internal Control Considerations
We have determined that the restatement of our previously issued financial statements as described above indicates the existence of a material weakness in our internal control over financial reporting and that our internal control over financial reporting and disclosure controls and procedures were ineffective as of December 31, 2019. We have created a plan of remediation to address the material weakness. See Item 9A in this Annual Report on Form 10-K for a further discussion of the material weakness in our internal control over financial reporting and plan of remediation.
PART I