filings.toolsItem 1. FINANCIAL STATEMENTS
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Item 1. FINANCIAL STATEMENTS
CROWN CASTLE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
(Amounts in millions, except par values)
| September 30, 2023 | December 31, 2022 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 117 | $ | 156 | |||||||
| Restricted cash | 167 | 166 | |||||||||
| Receivables, net | 512 | 593 | |||||||||
| Prepaid expenses | 143 | 102 | |||||||||
| Current portion of deferred site rental receivables | 115 | 127 | |||||||||
| Other current assets | 72 | 73 | |||||||||
| Total current assets | 1,126 | 1,217 | |||||||||
| Deferred site rental receivables | 2,189 | 1,954 | |||||||||
| Property and equipment, net of accumulated depreciation of $13,987 and $13,071, respectively | 15,573 | 15,407 | |||||||||
| Operating lease right-of-use assets | 6,309 | 6,526 | |||||||||
| Goodwill | 10,085 | 10,085 | |||||||||
| Other intangible assets, net | 3,276 | 3,596 | |||||||||
| Other assets, net | 141 | 136 | |||||||||
| Total assets | $ | 38,699 | $ | 38,921 | |||||||
| LIABILITIES AND EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 215 | $ | 236 | |||||||
| Accrued interest | 145 | 183 | |||||||||
| Deferred revenues | 650 | 736 | |||||||||
| Other accrued liabilities | 373 | 407 | |||||||||
| Current maturities of debt and other obligations | 827 | 819 | |||||||||
| Current portion of operating lease liabilities | 339 | 350 | |||||||||
| Total current liabilities | 2,549 | 2,731 | |||||||||
| Debt and other long-term obligations | 21,903 | 20,910 | |||||||||
| Operating lease liabilities | 5,660 | 5,881 | |||||||||
| Other long-term liabilities | 1,918 | 1,950 | |||||||||
| Total liabilities | 32,030 | 31,472 | |||||||||
| Commitments and contingencies (note 8) | |||||||||||
| Stockholders' equity: | |||||||||||
| Common stock, $0.01 par value; 1,200 shares authorized; shares issued and outstanding: September 30, 2023—434 and December 31, 2022—433 | 4 | 4 | |||||||||
| Additional paid-in capital | 18,241 | 18,116 | |||||||||
| Accumulated other comprehensive income (loss) | (5) | (5) | |||||||||
| Dividends/distributions in excess of earnings | (11,571) | (10,666) | |||||||||
| Total equity | 6,669 | 7,449 | |||||||||
| Total liabilities and equity | $ | 38,699 | $ | 38,921 |
See notes to condensed consolidated financial statements.
CROWN CASTLE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS) (Unaudited)
(Amounts in millions, except per share amounts)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Net revenues: | |||||||||||||||||||||||
| Site rental | $ | 1,577 | $ | 1,568 | $ | 4,929 | $ | 4,711 | |||||||||||||||
| Services and other | 90 | 178 | 378 | 511 | |||||||||||||||||||
| Net revenues | 1,667 | 1,746 | 5,307 | 5,222 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Costs of operations:(a) | |||||||||||||||||||||||
| Site rental | 420 | 405 | 1,259 | 1,204 | |||||||||||||||||||
| Services and other | 66 | 119 | 268 | 344 | |||||||||||||||||||
| Selling, general and administrative | 176 | 187 | 581 | 558 | |||||||||||||||||||
| Asset write-down charges | 8 | 3 | 30 | 26 | |||||||||||||||||||
| Acquisition and integration costs | — | — | 1 | 1 | |||||||||||||||||||
| Depreciation, amortization and accretion | 439 | 430 | 1,315 | 1,276 | |||||||||||||||||||
| Restructuring charges | 72 | — | 72 | — | |||||||||||||||||||
| Total operating expenses | 1,181 | 1,144 | 3,526 | 3,409 | |||||||||||||||||||
| Operating income (loss) | 486 | 602 | 1,781 | 1,813 | |||||||||||||||||||
| Interest expense and amortization of deferred financing costs, net | (217) | (177) | (627) | (506) | |||||||||||||||||||
| Gains (losses) on retirement of long-term obligations | — | (2) | — | (28) | |||||||||||||||||||
| Interest income | 3 | 1 | 10 | 1 | |||||||||||||||||||
| Other income (expense) | — | (2) | (4) | (5) | |||||||||||||||||||
| Income (loss) before income taxes | 272 | 422 | 1,160 | 1,275 | |||||||||||||||||||
| Benefit (provision) for income taxes | (7) | (3) | (21) | (14) | |||||||||||||||||||
| Net income (loss) | 265 | 419 | 1,139 | 1,261 | |||||||||||||||||||
| Other comprehensive income (loss): | |||||||||||||||||||||||
| Foreign currency translation adjustments | — | (2) | — | (3) | |||||||||||||||||||
| Total other comprehensive income (loss) | — | (2) | — | (3) | |||||||||||||||||||
| Comprehensive income (loss) | $ | 265 | $ | 417 | $ | 1,139 | $ | 1,258 | |||||||||||||||
| Net income (loss), per common share: | |||||||||||||||||||||||
| Basic | $ | 0.61 | $ | 0.97 | $ | 2.63 | $ | 2.91 | |||||||||||||||
| Diluted | $ | 0.61 | $ | 0.97 | $ | 2.63 | $ | 2.91 | |||||||||||||||
| Weighted-average common shares outstanding: | |||||||||||||||||||||||
| Basic | 434 | 433 | 434 | 433 | |||||||||||||||||||
| Diluted | 434 | 434 | 434 | 434 |
(a)Exclusive of depreciation, amortization and accretion shown separately.
See notes to condensed consolidated financial statements.
CROWN CASTLE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(In millions of dollars)
| Nine Months Ended September 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income (loss) | $ | 1,139 | $ | 1,261 | |||||||
| Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: | |||||||||||
| Depreciation, amortization and accretion | 1,315 | 1,276 | |||||||||
| (Gains) losses on retirement of long-term obligations | — | 28 | |||||||||
| Amortization of deferred financing costs and other non-cash interest | 22 | 10 | |||||||||
| Stock-based compensation expense, net | 126 | 120 | |||||||||
| Asset write-down charges | 30 | 26 | |||||||||
| Deferred income tax (benefit) provision | 1 | 2 | |||||||||
| Other non-cash adjustments, net | 10 | 6 | |||||||||
| Changes in assets and liabilities, excluding the effects of acquisitions: | |||||||||||
| Increase (decrease) in accrued interest | (38) | (63) | |||||||||
| Increase (decrease) in accounts payable | (20) | (10) | |||||||||
| Increase (decrease) in other liabilities | (162) | (256) | |||||||||
| Decrease (increase) in receivables | 87 | 8 | |||||||||
| Decrease (increase) in other assets | (252) | (370) | |||||||||
| Net cash provided by (used for) operating activities | 2,258 | 2,038 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Capital expenditures | (1,067) | (921) | |||||||||
| Payments for acquisitions, net of cash acquired | (93) | (15) | |||||||||
| Other investing activities, net | 5 | (10) | |||||||||
| Net cash provided by (used for) investing activities | (1,155) | (946) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from issuance of long-term debt | 2,347 | 748 | |||||||||
| Principal payments on debt and other long-term obligations | (58) | (55) | |||||||||
| Purchases and redemptions of long-term debt | (750) | (1,274) | |||||||||
| Borrowings under revolving credit facility | 2,943 | 2,625 | |||||||||
| Payments under revolving credit facility | (4,088) | (2,580) | |||||||||
| Net issuances (repayments) under commercial paper program | 561 | 1,329 | |||||||||
| Payments for financing costs | (23) | (14) | |||||||||
| Purchases of common stock | (29) | (64) | |||||||||
| Dividends/distributions paid on common stock | (2,044) | (1,924) | |||||||||
| Net cash provided by (used for) financing activities | (1,141) | (1,209) | |||||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | (38) | (117) | |||||||||
| Effect of exchange rate changes | — | (2) | |||||||||
| Cash, cash equivalents, and restricted cash at beginning of period | 327 | 466 | |||||||||
| Cash, cash equivalents, and restricted cash at end of period | $ | 289 | $ | 347 |
See notes to condensed consolidated financial statements.
CROWN CASTLE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
(Amounts in millions) (Unaudited)
| Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) ("AOCI") | Dividends/Distributions in Excess of Earnings | ||||||||||||||||||||||||||||||||
| Shares | ($0.01 Par) | Total | |||||||||||||||||||||||||||||||||
| Balance, June 30, 2023 | 434 | $ | 4 | $ | 18,202 | $ | (5) | $ | (11,155) | $ | 7,046 | ||||||||||||||||||||||||
| Stock-based compensation related activity, net of forfeitures | — | 39 | — | — | 39 | ||||||||||||||||||||||||||||||
| Purchases and retirement of common stock | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Other comprehensive income (loss)(a) | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Common stock dividends/distributions | — | — | — | — | (681) | (681) | |||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | — | 265 | 265 | |||||||||||||||||||||||||||||
| Balance, September 30, 2023 | 434 | $ | 4 | $ | 18,241 | $ | (5) | $ | (11,571) | $ | 6,669 | ||||||||||||||||||||||||
| Balance, June 30, 2022 | 433 | $ | 4 | $ | 18,050 | $ | (5) | $ | (10,188) | $ | 7,861 | ||||||||||||||||||||||||
| Stock-based compensation related activity, net of forfeitures | — | — | 38 | — | — | 38 | |||||||||||||||||||||||||||||
| Purchases and retirement of common stock | — | — | (1) | — | — | (1) | |||||||||||||||||||||||||||||
| Other comprehensive income (loss)(a) | — | — | — | (2) | — | (2) | |||||||||||||||||||||||||||||
| Common stock dividends/distributions | — | — | — | — | (636) | (636) | |||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | — | 419 | 419 | |||||||||||||||||||||||||||||
| Balance, September 30, 2022 | 433 | $ | 4 | $ | 18,087 | $ | (7) | $ | (10,405) | $ | 7,679 | ||||||||||||||||||||||||
| Balance, December 31, 2022 | 433 | $ | 4 | $ | 18,116 | $ | (5) | $ | (10,666) | $ | 7,449 | ||||||||||||||||||||||||
| Stock-based compensation related activity, net of forfeitures | 1 | — | 154 | — | — | 154 | |||||||||||||||||||||||||||||
| Purchases and retirement of common stock | — | — | (29) | — | — | (29) | |||||||||||||||||||||||||||||
| Other comprehensive income (loss)(a) | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Common stock dividends/distributions | — | — | — | — | (2,044) | (2,044) | |||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | — | 1,139 | 1,139 | |||||||||||||||||||||||||||||
| Balance, September 30, 2023 | 434 | $ | 4 | $ | 18,241 | $ | (5) | $ | (11,571) | $ | 6,669 | ||||||||||||||||||||||||
| Balance, December 31, 2021 | 432 | $ | 4 | $ | 18,011 | $ | (4) | $ | (9,753) | $ | 8,258 | ||||||||||||||||||||||||
| Stock-based compensation related activity, net of forfeitures | 1 | — | 140 | — | — | 140 | |||||||||||||||||||||||||||||
| Purchases and retirement of common stock | — | — | (64) | — | — | (64) | |||||||||||||||||||||||||||||
| Other comprehensive income (loss)(a) | — | — | — | (3) | — | (3) | |||||||||||||||||||||||||||||
| Common stock dividends/distributions | — | — | — | — | (1,913) | (1,913) | |||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | — | 1,261 | 1,261 | |||||||||||||||||||||||||||||
| Balance, September 30, 2022 | 433 | $ | 4 | $ | 18,087 | $ | (7) | $ | (10,405) | $ | 7,679 |
(a)See the condensed consolidated statement of operations and other comprehensive income (loss) for the components of other comprehensive income (loss).
See notes to condensed consolidated financial statements.
CROWN CASTLE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited
(Tabular dollars in millions, except per share amounts)
**1.**General
The information contained in the following notes to the condensed consolidated financial statements is condensed from that which would appear in the annual consolidated financial statements; accordingly, the condensed consolidated financial statements included herein should be reviewed in conjunction with the consolidated financial statements for the fiscal year ended December 31, 2022, and related notes thereto, included in the 2022 Form 10-K filed by Crown Castle Inc. ("CCI") with the SEC. Capitalized terms used but not defined in these notes to the condensed consolidated financial statements have the same meaning given to them in the 2022 Form 10-K. References to the "Company" refer to CCI and its predecessor, as applicable, and their subsidiaries, unless otherwise indicated or the context indicates otherwise. As used herein, the term "including," and any variation thereof means "including without limitation." The use of the word "or" herein is not exclusive. Unless the context suggests otherwise, references to "U.S." are to the United States of America and Puerto Rico, collectively.
The Company owns, operates and leases shared communications infrastructure that is geographically dispersed throughout the U.S., including (1) towers and other structures, such as rooftops (collectively, "towers"), and (2) fiber primarily supporting small cell networks ("small cells") and fiber solutions. The Company's towers, small cells and fiber 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 10.
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 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"). See note 12 for a discussion of the Company's restructuring plan, which includes discontinuing installation services as a Towers product offering.
The Company operates as a REIT for U.S. federal income tax purposes. In addition, the Company has certain taxable REIT subsidiaries ("TRSs"). See note 6.
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 those which T-Mobile assumed in its merger with Sprint). The Company has the option to purchase these towers at the end of their respective lease terms. The Company has no obligation to exercise such purchase options.
Basis of Presentation
The condensed consolidated financial statements included herein are unaudited; however, they include all adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are necessary to state fairly the condensed consolidated financial position of the Company as of September 30, 2023, the condensed consolidated results of operations for the three and nine months ended September 30, 2023 and 2022, and the condensed consolidated cash flows for the nine months ended September 30, 2023 and 2022. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
CROWN CASTLE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in millions, except per share amounts)
**2.**Summary of Significant Accounting Policies
Recently Adopted Accounting Pronouncements
No accounting pronouncements adopted during the nine months ended September 30, 2023 had a material impact on the Company's condensed 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 condensed consolidated financial statements.
**3.**Revenues
Site Rental Revenues
The Company generates site rental revenues from its core business by providing tenants with access, including space or capacity, to its shared communications infrastructure via long-term tenant contracts in various forms, including lease, license, sublease and service agreements. Typically, 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 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 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 escalators, upfront payments, or rent-free periods, the revenue is recognized on a straight-line basis over the fixed, non-cancelable term of the tenant contract. 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 are recorded within "Current portion of deferred site rental receivables" and "Deferred site rental receivables" on the Company's condensed consolidated balance sheet. Amounts billed or received prior to being earned are deferred and reflected in "Deferred revenues" and "Other long-term liabilities" on the Company's condensed consolidated balance sheet. Amounts to which the Company has an unconditional right to payment, which are related to both satisfied or partially satisfied performance obligations, are recorded within "Receivables, net" on the Company's condensed consolidated balance sheet.
Sprint Cancellation Payments. For the three and nine months ended September 30, 2023, site rental revenues include $6 million and $160 million, respectively, of payments in the Company's Fiber segment to satisfy the remaining rental obligations of certain canceled Sprint leases as a result of the T-Mobile US, Inc. and Sprint network consolidation. In connection with such canceled Sprint leases, the Company also recognized $57 million of accelerated prepaid rent amortization in the Company's Fiber segment during the nine months ended September 30, 2023.
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. See note 12 for a discussion of the Company's restructuring plan, which includes discontinuing installation services as a Towers product offering. 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 these 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 services revenue recognized is based on an allocation of the transaction price among the performance obligations in a respective tenant contract based on estimated standalone selling price. The volume and mix of site development services may vary among tenant contracts and may include a combination of some or all of the above performance obligations. Amounts are billed per contractual milestones, with payments generally due within 45
CROWN CASTLE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in millions, except per share amounts)
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 on the Company's condensed consolidated statement of operations and comprehensive income (loss). 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. Generally, the services the Company provides to its tenants have a duration of one year or less.
Additional Information on Revenues
As of January 1, 2023 and September 30, 2023, $2.3 billion and $2.2 billion of unrecognized revenues, respectively, were reported in "Deferred revenues" and "Other long-term liabilities" on the Company's condensed consolidated balance sheet. During the nine months ended September 30, 2023, approximately $503 million of the January 1, 2023 unrecognized revenues balance was recognized as revenues. As of January 1, 2022, $2.6 billion of unrecognized revenues were reported in "Deferred revenues" and "Other long-term liabilities" on the Company's condensed consolidated balance sheet. During the nine months ended September 30, 2022, approximately $495 million of the January 1, 2022 unrecognized revenues balance was recognized as 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 September 30, 2023.
| Three Months Ending December 31, | Years Ending December 31, | |||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2024 | 2025 | 2026 | 2027 | Thereafter | Total | ||||||||||||||||||||||||||||||||||||||
| Contracted amounts(a) | $ | 1,255 | $ | 4,937 | $ | 4,586 | $ | 4,448 | $ | 4,386 | $ | 19,781 | $ | 39,393 |
(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 note 10 for further information regarding the Company's operating segments.
CROWN CASTLE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in millions, except per share amounts)
**4.**Debt and Other Obligations
The table below sets forth the Company's debt and other obligations as of September 30, 2023.
| Original Issue Date | Final Maturity Date**(a)** | Balance as of September 30, 2023 | Balance as of December 31, 2022 | Stated Interest Rate as of September 30, 2023**(a)(b)** | ||||||||||||||||||||||||||||
| Secured Notes, Series 2009-1, Class A-2 | July 2009 | Aug. 2029 | $ | 41 | $ | 47 | 9.0 | % | ||||||||||||||||||||||||
| Tower Revenue Notes, Series 2015-2 | May 2015 | May 2045 | (c) | 698 | 698 | 3.7 | % | |||||||||||||||||||||||||
| Tower Revenue Notes, Series 2018-2 | July 2018 | July 2048 | (c) | 746 | 745 | 4.2 | % | |||||||||||||||||||||||||
| Finance leases and other obligations | Various | (d) | Various | (d) | 264 | 246 | Various | (d) | ||||||||||||||||||||||||
| Total secured debt | 1,749 | 1,736 | ||||||||||||||||||||||||||||||
| 2016 Revolver | Jan. 2016 | July 2027 | 160 | (e) | 1,305 | 6.5 | % | (f) | ||||||||||||||||||||||||
| 2016 Term Loan A | Jan. 2016 | July 2027 | 1,169 | 1,192 | 6.5 | % | (f) | |||||||||||||||||||||||||
| Commercial Paper Notes | Various | (g) | Various | (g) | 1,803 | (g) | 1,241 | 6.1 | % | |||||||||||||||||||||||
| 3.150% Senior Notes | Jan. 2018 | July 2023 | — | (h) | 749 | N/A | ||||||||||||||||||||||||||
| 3.200% Senior Notes | Aug. 2017 | Sept. 2024 | 749 | 748 | 3.2 | % | ||||||||||||||||||||||||||
| 1.350% Senior Notes | June 2020 | July 2025 | 498 | 497 | 1.4 | % | ||||||||||||||||||||||||||
| 4.450% Senior Notes | Feb. 2016 | Feb. 2026 | 897 | 896 | 4.5 | % | ||||||||||||||||||||||||||
| 3.700% Senior Notes | May 2016 | June 2026 | 748 | 747 | 3.7 | % | ||||||||||||||||||||||||||
| 1.050% Senior Notes | Feb. 2021 | July 2026 | 994 | 992 | 1.1 | % | ||||||||||||||||||||||||||
| 4.000% Senior Notes | Feb. 2017 | Mar. 2027 | 498 | 497 | 4.0 | % | ||||||||||||||||||||||||||
| 2.900% Senior Notes | Mar. 2022 | Mar. 2027 | 744 | 742 | 2.9 | % | ||||||||||||||||||||||||||
| 3.650% Senior Notes | Aug. 2017 | Sept. 2027 | 996 | 996 | 3.7 | % | ||||||||||||||||||||||||||
| 5.000% Senior Notes | Jan. 2023 | (i) | Jan. 2028 | (i) | 991 | — | 5.0 | % | ||||||||||||||||||||||||
| 3.800% Senior Notes | Jan. 2018 | Feb. 2028 | 994 | 993 | 3.8 | % | ||||||||||||||||||||||||||
| 4.800% Senior Notes | Apr. 2023 | (j) | Sept. 2028 | (j) | 594 | — | 4.8 | % | ||||||||||||||||||||||||
| 4.300% Senior Notes | Feb. 2019 | Feb. 2029 | 595 | 594 | 4.3 | % | ||||||||||||||||||||||||||
| 3.100% Senior Notes | Aug. 2019 | Nov. 2029 | 546 | 545 | 3.1 | % | ||||||||||||||||||||||||||
| 3.300% Senior Notes | Apr. 2020 | July 2030 | 740 | 739 | 3.3 | % | ||||||||||||||||||||||||||
| 2.250% Senior Notes | June 2020 | Jan. 2031 | 1,091 | 1,090 | 2.3 | % | ||||||||||||||||||||||||||
| 2.100% Senior Notes | Feb. 2021 | Apr. 2031 | 990 | 989 | 2.1 | % | ||||||||||||||||||||||||||
| 2.500% Senior Notes | June 2021 | July 2031 | 742 | 742 | 2.5 | % | ||||||||||||||||||||||||||
| 5.100% Senior Notes | Apr. 2023 | (j) | May 2033 | (j) | 742 | — | 5.1 | % | ||||||||||||||||||||||||
| 2.900% Senior Notes | Feb. 2021 | Apr. 2041 | 1,234 | 1,233 | 2.9 | % | ||||||||||||||||||||||||||
| 4.750% Senior Notes | May 2017 | May 2047 | 344 | 344 | 4.8 | % | ||||||||||||||||||||||||||
| 5.200% Senior Notes | Feb. 2019 | Feb. 2049 | 396 | 396 | 5.2 | % | ||||||||||||||||||||||||||
| 4.000% Senior Notes | Aug. 2019 | Nov. 2049 | 346 | 346 | 4.0 | % | ||||||||||||||||||||||||||
| 4.150% Senior Notes | Apr. 2020 | July 2050 | 490 | 490 | 4.2 | % | ||||||||||||||||||||||||||
| 3.250% Senior Notes | June 2020 | Jan. 2051 | 890 | 890 | 3.3 | % | ||||||||||||||||||||||||||
| Total unsecured debt | 20,981 | 19,993 | ||||||||||||||||||||||||||||||
| Total debt and other obligations | 22,730 | 21,729 | ||||||||||||||||||||||||||||||
| Less: current maturities of debt and other obligations | 827 | 819 | ||||||||||||||||||||||||||||||
| Non-current portion of debt and other long-term obligations | $ | 21,903 | $ | 20,910 |
(a)See the 2022 Form 10-K, including note 7 to the consolidated financial statements, for additional information regarding the maturity and principal amortization provisions and interest rates relating to the Company's indebtedness.
(b)Represents the weighted-average stated interest rate, as applicable.
(c)If the Tower Revenue Notes, Series 2015-2 and Series 2018-2 (collectively, "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 September 30, 2023, the Tower Revenue Notes, Series 2015-2 and Series 2018-2 have principal amounts of $700 million and $750 million, with anticipated repayment dates in 2025 and 2028, respectively.
(d)The Company's finance leases and other obligations relate to land, fiber, vehicles, and other assets and bear interest rates up to 10% and mature in periods ranging from less than one year to approximately 25 years.
(e)As of September 30, 2023, the undrawn availability under the Company's senior unsecured revolving credit facility ("2016 Revolver") was $6.8 billion.
CROWN CASTLE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in millions, except per share amounts)
(f)Both the 2016 Revolver and the senior unsecured term loan A facility ("2016 Term Loan A" and, collectively, "2016 Credit Facility") bear interest, at the Company's option, at either (1) Term SOFR plus (i) a credit spread adjustment of 0.10% per annum and (ii) 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 0.080% to 0.300%, based on the Company's senior unsecured debt rating, per annum on the undrawn available amount under the 2016 Revolver. See the 2022 Form 10-K, including note 7 to the consolidated financial statements, for information regarding potential adjustments to such percentages.
(g)The maturities of the Commercial Paper Notes, when outstanding, may vary but may not exceed 397 days from the date of issue. 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. 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 Notes generally have short-term maturities, the Company classifies the outstanding issuances, when applicable, as long-term based on its ability and intent to refinance the outstanding issuances on a long-term basis.
(h)In July 2023, the Company repaid in full the 3.150% Senior Notes on the contractual maturity date.
(i)In January 2023, the Company issued $1.0 billion aggregate principal amount of 5.000% senior unsecured notes due January 2028 ("January 2023 Senior Notes"). The Company used the net proceeds from the January 2023 Senior Notes offering to repay a portion of the outstanding indebtedness under the 2016 Revolver and pay related fees and expenses.
(j)In April 2023, the Company issued $600 million aggregate principal amount of 4.800% senior unsecured notes due September 2028 and $750 million aggregate principal amount of 5.100% senior unsecured notes due May 2033 (collectively, "April 2023 Senior Notes"). The Company used the net proceeds from the April 2023 Senior Notes offering to repay a portion of the outstanding indebtedness under the 2016 Revolver and pay related fees and expenses.
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 September 30, 2023, which do not consider the principal payments that will commence following the anticipated repayment dates on the Tower Revenue Notes.
| Three Months Ending December 31, | Years Ending December 31, | Total Cash Obligations | Unamortized Adjustments, Net | Total Debt and Other Obligations Outstanding | |||||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2024 | 2025 | 2026 | 2027 | Thereafter | ||||||||||||||||||||||||||||||||||||||||||||||||
| Scheduled principal payments and final maturities | $ | 1,819 | (a) | $ | 835 | $ | 597 | $ | 2,775 | $ | 3,406 | $ | 13,456 | $ | 22,888 | $ | (158) | $ | 22,730 |
(a)Predominately consists of outstanding indebtedness under the CP Program as discussed in footnote (g) of the preceding table.
Purchases and Redemptions of Long-Term Debt
The following is a summary of purchases and redemptions of long-term debt during the nine months ended September 30, 2023.
| Principal Amount | Cash Paid**(a)** | Gains (Losses) | |||||||||||||||
| 3.150% Senior Notes | $ | 750 | $ | 750 | $ | — |
(a)Exclusive of accrued interest.
Interest Expense and Amortization of Deferred Financing Costs, Net
The components of interest expense and amortization of deferred financing costs, net are as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Interest expense on debt obligations | $ | 213 | $ | 174 | $ | 616 | $ | 496 | |||||||||||||||
| Amortization of deferred financing costs and adjustments on long-term debt | 8 | 6 | 22 | 19 | |||||||||||||||||||
| Capitalized interest | (4) | (3) | (11) | (9) | |||||||||||||||||||
| Total | $ | 217 | $ | 177 | $ | 627 | $ | 506 |
CROWN CASTLE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in millions, except per share amounts)
**5.**Fair Value Disclosures
| Level in Fair Value Hierarchy | September 30, 2023 | December 31, 2022 | |||||||||||||||||||||||||||
| Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||
| Cash and cash equivalents | 1 | $ | 117 | $ | 117 | $ | 156 | $ | 156 | ||||||||||||||||||||
| Restricted cash, current and non-current | 1 | 172 | 172 | 171 | 171 | ||||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||
| Total debt and other obligations | 2 | 22,730 | 20,046 | 21,729 | 19,554 |
The fair values of cash and cash equivalents and restricted cash approximate the carrying values. 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. Since December 31, 2022, there have been no changes in the Company's valuation techniques used to measure fair values.
**6.**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 may be subject to certain federal, state, local and foreign taxes on its income, including (1) taxes on any undistributed income and (2) taxes related to the TRSs. 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, to maintain qualification for taxation as a REIT.
The Company's TRS assets and operations will continue to be subject, as applicable, to federal and state corporate income taxes or to foreign taxes in the jurisdictions in which such assets and operations are located. The Company's foreign assets and operations (including its tower operations in Puerto Rico) are subject to foreign income taxes in the jurisdictions in which such assets and operations are located, regardless of whether they are included in a TRS or not.
For the nine months ended September 30, 2023 and 2022, the Company's effective tax rate differed from the federal statutory rate predominately due to the Company's REIT status, including the dividends paid deduction.
**7.**Per Share Information
Basic net income (loss), per common share, excludes dilution and is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period. For the three and nine months ended September 30, 2023 and 2022, diluted net income (loss), per common share, is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period, plus any potential dilutive common share equivalents, including shares issuable upon the vesting of restricted stock units ("RSUs") as determined under the treasury stock method.
CROWN CASTLE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in millions, except per share amounts)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Net income (loss) | $ | 265 | $ | 419 | $ | 1,139 | $ | 1,261 | |||||||||||||||
| Weighted-average number of common shares outstanding (in millions): | |||||||||||||||||||||||
| Basic weighted-average number of common stock outstanding | 434 | 433 | 434 | 433 | |||||||||||||||||||
| Effect of assumed dilution from potential issuance of common shares relating to restricted stock units | — | 1 | — | 1 | |||||||||||||||||||
| Diluted weighted-average number of common shares outstanding | 434 | 434 | 434 | 434 | |||||||||||||||||||
| Net income (loss), per common share: | |||||||||||||||||||||||
| Basic | $ | 0.61 | $ | 0.97 | $ | 2.63 | $ | 2.91 | |||||||||||||||
| Diluted | $ | 0.61 | $ | 0.97 | $ | 2.63 | $ | 2.91 | |||||||||||||||
| Dividends/distributions declared per share of common stock | $ | 1.565 | $ | 1.470 | $ | 4.695 | $ | 4.410 |
During the nine months ended September 30, 2023, the Company granted two million RSUs to the Company's executives and certain other employees.
**8.**Commitments and Contingencies
The Company is involved in various claims, assessments, lawsuits or proceedings arising in the ordinary course of business. While there are uncertainties inherent in the ultimate outcome of such matters and it is impossible to presently determine the ultimate costs or losses that may be incurred, if any, management believes the adverse resolution of such uncertainties and the incurrence of such costs should not have a material adverse effect on the Company's condensed consolidated financial position or results of operations. The Company and certain of its subsidiaries are also contingently liable for commitments or performance guarantees arising in the ordinary course of business, including certain letters of credit or surety bonds. In addition, as mentioned in note 1, the Company has the option to purchase approximately 53% of its towers at the end of their respective lease terms. The Company has no obligation to exercise such purchase options.
**9.**Equity
Declaration and Payment of Dividends
During the nine months ended September 30, 2023, the following dividends/distributions were declared or paid:
| Equity Type | Declaration Date | Record Date | Payment Date | Dividends Per Share | Aggregate Payment Amount**(a)** | |||||||||||||||||||||||||||
| Common Stock | February 7, 2023 | March 15, 2023 | March 31, 2023 | $ | 1.565 | $ | 681 | |||||||||||||||||||||||||
| Common Stock | May 1, 2023 | June 15, 2023 | June 30, 2023 | $ | 1.565 | $ | 681 | |||||||||||||||||||||||||
| Common Stock | July 21, 2023 | September 15, 2023 | September 29, 2023 | $ | 1.565 | $ | 681 | |||||||||||||||||||||||||
(a)Inclusive of dividends accrued for holders of unvested RSUs, which will be paid when and if the RSUs vest.
See also note 13 for a discussion of the Company's common stock dividend declared in October 2023.
Purchases of the Company's Common Stock
For the nine months ended September 30, 2023, the Company purchased 0.2 million shares of its common stock utilizing $29 million in cash. The shares of common stock purchased relate to shares withheld in connection with the payment of withholding taxes upon vesting of RSUs.
2021 "At-the-Market" Stock Offering Program
In March 2021, 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 ("2021 ATM Program"). Sales under the
CROWN CASTLE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in millions, except per share amounts)
2021 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 the Company's specific instructions, at negotiated prices. The Company intends to use the net proceeds from any sales under the 2021 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 2021 ATM Program.
**10.**Operating Segments
The Company's operating segments consist of (1) Towers and (2) Fiber. The Towers segment provides access, including space or capacity, to the Company's more than 40,000 towers geographically dispersed throughout the U.S. The Towers segment also reflects certain ancillary services relating to the Company's towers, predominately consisting of site development services and installation services. See note 12 for a discussion of the Company's restructuring plan, which includes discontinuing installation services as a Towers product offering. The Fiber segment provides access, including space or capacity, to the Company's approximately (1) 115,000 small cells on air or under contract and (2) 85,000 route miles of fiber primarily supporting small cells and fiber solutions geographically dispersed throughout the U.S.
The measurements of profit or loss used by the Company's chief operating decision maker ("CODM") to evaluate the performance of its operating segments are (1) segment site rental gross margin, (2) segment services and other gross margin and (3) segment operating profit (loss). The Company defines segment site rental gross margin as segment site rental revenues less segment site rental costs of operations, excluding stock-based compensation expense, net and amortization of prepaid lease purchase price adjustments recorded in consolidated site rental costs of operations. The Company defines segment services and other gross margin as segment services and other revenues less segment services and other costs of operations, excluding stock-based compensation expense, net recorded in consolidated services and other costs of operations. The Company defines segment operating profit (loss) as segment site rental gross margin plus segment services and other gross margin, and segment other operating (income) expense, less segment selling, general and administrative expenses. All of these measurements of profit or loss are exclusive of depreciation, amortization and accretion, which are shown separately.
The following tables set forth the Company's segment operating results for the three and nine months ended September 30, 2023 and 2022. Costs that are directly attributable to Towers and Fiber are assigned to those respective segments. Additionally, certain costs are shared across segments and are reflected in the Company's segment measures through allocations that management believes to be reasonable. The "Other" column (1) represents amounts excluded from specific segments, such as restructuring charges (credits), asset write-down charges, acquisition and integration costs, depreciation, amortization and accretion, amortization of prepaid lease purchase price adjustments, interest expense and amortization of deferred financing costs, net, gains (losses) on retirement of long-term obligations, interest income, other income (expense), stock-based compensation expense, net and certain selling, general and administrative expenses, and (2) reconciles segment operating profit (loss) to income (loss) before income taxes, as the amounts are not utilized in assessing each segment’s performance. The "Other" total assets balance includes corporate assets such as cash and cash equivalents which have not been allocated to specific segments. There are no significant revenues resulting from transactions between the Company's operating segments.
CROWN CASTLE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in millions, except per share amounts)
| Three Months Ended September 30, 2023 | Three Months Ended September 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
| Towers | Fiber | Other | Consolidated Total | Towers | Fiber | Other | Consolidated Total | ||||||||||||||||||||||||||||||||||||||||
| Segment site rental revenues | $ | 1,074 | $ | 503 | $ | 1,577 | $ | 1,084 | $ | 484 | $ | 1,568 | |||||||||||||||||||||||||||||||||||
| Segment services and other revenues | 86 | 4 | 90 | 175 | 3 | 178 | |||||||||||||||||||||||||||||||||||||||||
| Segment revenues | 1,160 | 507 | 1,667 | 1,259 | 487 | 1,746 | |||||||||||||||||||||||||||||||||||||||||
| Segment site rental costs of operations | 236 | 175 | 411 | 230 | 166 | 396 | |||||||||||||||||||||||||||||||||||||||||
| Segment services and other costs of operations | 61 | 3 | 64 | 114 | 3 | 117 | |||||||||||||||||||||||||||||||||||||||||
| Segment costs of operations(a)(b) | 297 | 178 | 475 | 344 | 169 | 513 | |||||||||||||||||||||||||||||||||||||||||
| Segment site rental gross margin | 838 | 328 | 1,166 | 854 | 318 | 1,172 | |||||||||||||||||||||||||||||||||||||||||
| Segment services and other gross margin | 25 | 1 | 26 | 61 | — | 61 | |||||||||||||||||||||||||||||||||||||||||
| Segment selling, general and administrative expenses(b) | 24 | 48 | 72 | 28 | 47 | 75 | |||||||||||||||||||||||||||||||||||||||||
| Segment operating profit (loss) | 839 | 281 | 1,120 | 887 | 271 | 1,158 | |||||||||||||||||||||||||||||||||||||||||
| Other selling, general and administrative expenses(b) | $ | 75 | 75 | $ | 81 | 81 | |||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense, net | 36 | 36 | 38 | 38 | |||||||||||||||||||||||||||||||||||||||||||
| Depreciation, amortization and accretion | 439 | 439 | 430 | 430 | |||||||||||||||||||||||||||||||||||||||||||
| Restructuring charges | 72 | 72 | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Interest expense and amortization of deferred financing costs, net | 217 | 217 | 177 | 177 | |||||||||||||||||||||||||||||||||||||||||||
| Other (income) expenses to reconcile to income (loss) before income taxes(c) | 9 | 9 | 10 | 10 | |||||||||||||||||||||||||||||||||||||||||||
| Income (loss) before income taxes | $ | 272 | $ | 422 | |||||||||||||||||||||||||||||||||||||||||||
| Capital expenditures | $ | 49 | $ | 287 | $ | 11 | $ | 347 | $ | 45 | $ | 277 | $ | 15 | $ | 337 | |||||||||||||||||||||||||||||||
| Total assets (at period end) | $ | 21,783 | $ | 16,237 | $ | 679 | $ | 38,699 | $ | 22,226 | $ | 15,914 | $ | 721 | $ | 38,861 |
(a)Exclusive of depreciation, amortization and accretion shown separately.
(b)Segment costs of operations excludes (1) stock-based compensation expense, net of $7 million for each of the three months ended September 30, 2023 and 2022 and (2) prepaid lease purchase price adjustments of $4 million for each of the three months ended September 30, 2023 and 2022. Segment selling, general and administrative expenses and other selling, general and administrative expenses exclude stock-based compensation expense, net of $29 million and $31 million for the three months ended September 30, 2023 and 2022, respectively.
(c)See condensed consolidated statement of operations and comprehensive income (loss) for further information.
CROWN CASTLE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in millions, except per share amounts)
| Nine Months Ended September 30, 2023 | Nine Months Ended September 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
| Towers | Fiber | Other | Consolidated Total | Towers | Fiber | Other | Consolidated Total | ||||||||||||||||||||||||||||||||||||||||
| Segment site rental revenues | $ | 3,234 | $ | 1,695 | $ | 4,929 | $ | 3,237 | $ | 1,474 | $ | 4,711 | |||||||||||||||||||||||||||||||||||
| Segment services and other revenues | 356 | 22 | 378 | 502 | 9 | 511 | |||||||||||||||||||||||||||||||||||||||||
| Segment revenues | 3,590 | 1,717 | 5,307 | 3,739 | 1,483 | 5,222 | |||||||||||||||||||||||||||||||||||||||||
| Segment site rental costs of operations | 714 | 518 | 1,232 | 689 | 490 | 1,179 | |||||||||||||||||||||||||||||||||||||||||
| Segment services and other costs of operations | 252 | 8 | 260 | 329 | 7 | 336 | |||||||||||||||||||||||||||||||||||||||||
| Segment costs of operations(a)(b) | 966 | 526 | 1,492 | 1,018 | 497 | 1,515 | |||||||||||||||||||||||||||||||||||||||||
| Segment site rental gross margin | 2,520 | 1,177 | 3,697 | 2,548 | 984 | 3,532 | |||||||||||||||||||||||||||||||||||||||||
| Segment services and other gross margin | 104 | 14 | 118 | 173 | 2 | 175 | |||||||||||||||||||||||||||||||||||||||||
| Segment selling, general and administrative expenses(b) | 84 | 148 | 232 | 84 | 140 | 224 | |||||||||||||||||||||||||||||||||||||||||
| Segment operating profit (loss) | 2,540 | 1,043 | 3,583 | 2,637 | 846 | 3,483 | |||||||||||||||||||||||||||||||||||||||||
| Other selling, general and administrative expenses(b) | $ | 246 | 246 | $ | 234 | 234 | |||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | 126 | 126 | 121 | 121 | |||||||||||||||||||||||||||||||||||||||||||
| Depreciation, amortization and accretion | 1,315 | 1,315 | 1,276 | 1,276 | |||||||||||||||||||||||||||||||||||||||||||
| Restructuring charges | 72 | 72 | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Interest expense and amortization of deferred financing costs, net | 627 | 627 | 506 | 506 | |||||||||||||||||||||||||||||||||||||||||||
| Other (income) expenses to reconcile to income (loss) before income taxes(c) | 37 | 37 | 71 | 71 | |||||||||||||||||||||||||||||||||||||||||||
| Income (loss) before income taxes | $ | 1,160 | $ | 1,275 | |||||||||||||||||||||||||||||||||||||||||||
| Capital expenditures | $ | 160 | $ | 872 | $ | 35 | $ | 1,067 | $ | 137 | $ | 746 | $ | 38 | $ | 921 |
(a)Exclusive of depreciation, amortization and accretion shown separately.
(b)Segment costs of operations excludes (1) stock-based compensation expense, net of $23 million and $21 million for the nine months ended September 30, 2023 and 2022, respectively, and (2) prepaid lease purchase price adjustments of $12 million for each of the nine months ended September 30, 2023 and 2022. Segment selling, general and administrative expenses and other selling, general and administrative expenses exclude stock-based compensation expense, net of $103 million and $100 million for the nine months ended September 30, 2023 and 2022, respectively.
(c)See condensed consolidated statement of operations and comprehensive income (loss) for further information.
**11.**Supplemental Cash Flow Information
The following table is a summary of the Company's supplemental cash flow information for the nine months ended September 30, 2023 and 2022:
| Nine Months Ended September 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| Supplemental disclosure of cash flow information: | |||||||||||
| Cash payments related to operating lease liabilities(a) | $ | 429 | $ | 420 | |||||||
| Interest paid | 654 | 559 | |||||||||
| Income taxes paid | 13 | 10 | |||||||||
| Supplemental disclosure of non-cash operating, investing and financing activities: | |||||||||||
| ROU assets recorded in exchange for operating lease liabilities | 21 | 162 | |||||||||
| Increase (decrease) in accounts payable for purchases of property and equipment | 5 | (7) | |||||||||
| Purchase of property and equipment under finance leases and installment land purchases | 45 | 17 |
(a)Excludes the Company's contingent payments pursuant to operating leases, which are recorded as expense in the period such contingencies are resolved.
CROWN CASTLE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in millions, except per share amounts)
The reconciliation of cash, cash equivalents and restricted cash reported within various lines on the condensed consolidated balance sheet to amounts reported in the condensed consolidated statement of cash flows is shown below.
| September 30, 2023 | December 31, 2022 | ||||||||||
| Cash and cash equivalents | $ | 117 | $ | 156 | |||||||
| Restricted cash, current | 167 | 166 | |||||||||
| Restricted cash reported within other assets, net | 5 | 5 | |||||||||
| Cash, cash equivalents and restricted cash | $ | 289 | $ | 327 |
**12.**Restructuring
On July 24, 2023, the Company initiated a restructuring plan ("Plan") as part of its efforts to reduce costs to better align the Company's operational needs with lower tower activity. The Plan includes reducing the Company's total employee headcount by approximately 15%, discontinuing installation services as a Towers product offering while continuing to offer site development services on Company towers, and consolidating office space.
In the third quarter 2023, the Company recorded approximately $72 million in charges in connection with the Plan, $61 million of which represent cash payments that have been or will be made in connection with employee severance and other one-time termination benefits. An additional $1 million of non-cash charges relate to share-based compensation. In connection with the office space consolidation, the Company recorded a $6 million charge related to remaining obligations under facility leases and $4 million of non-cash charges representing accelerated depreciation.
The Company expects to incur an additional approximately $35 million of related charges during the fourth quarter 2023, primarily related to the office space consolidation.
The actions announced in July 2023 associated with the Plan and related charges are expected to be substantially complete and recorded by December 31, 2023 while the payments are expected to be completed for the employee headcount reduction and office space consolidation in 2024 and 2027, respectively.
The following table summarizes the activities related to the restructuring for the nine months ended September 30, 2023:
| Employee Headcount Reduction | Office Space Consolidation | Total | |||||||||||||||
| Charges | $ | 62 | $ | 10 | $ | 72 | |||||||||||
| Payments | (35) | (1) | (36) | ||||||||||||||
| Non-cash items | (1) | (4) | (5) | ||||||||||||||
| Liability as of September 30, 2023 | $ | 26 | $ | 5 | $ | 31 |
As of September 30, 2023, the liability for restructuring charges is included in "Other accrued liabilities" on the consolidated balance sheet, and the corresponding expense is included in "Restructuring charges" on the condensed consolidated statements of operations and comprehensive income.
The Company does not allocate restructuring charges between its operating segments. If such charges were allocated to operating segments, for the three and nine months ended September 30, 2023, $41 million and $13 million of the aforementioned charge would have been allocated to the Company's Towers and Fiber segment, respectively, with the remaining $18 million allocated to Other.
**13.**Subsequent Events
Common Stock Dividend
On October 17, 2023, the Company's board of directors declared a quarterly cash dividend of $1.565 per common share. The quarterly dividend will be payable on December 29, 2023 to common stockholders of record as of December 15, 2023.
CROWN CASTLE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in millions, except per share amounts)
Restructuring Update
On October 18, 2023, the Company announced plans to relocate approximately 1,000 employee positions from several locations nationwide to a centralized location by the end of the third quarter 2024. In connection with this action, the Company anticipates recording related restructuring charges, including employee relocation costs, employee severance and other one-time termination benefits, remaining obligations under facility leases and write-off of leasehold improvements; however, the magnitude of these charges is highly uncertain at this time.
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