EX-99.3 5 d508510dex993.htm EX-99.3 EX-99.3

Exhibit 99.3

Unaudited Preliminary Pro Forma Condensed

Combined Financial Information

On July 18, 2017, Crown Castle International Corp. (“Crown Castle”, “Company” or “CCIC”) entered into a definitive agreement to acquire LTS Group Holdings LLC (“Lightower”) for approximately $7.1 billion in cash, subject to certain limited post-closing adjustments (“Lightower Acquisition”). Lightower owns or has rights to approximately 32,000 route miles of fiber located primarily in top metro markets in the Northeast, including Boston, New York and Philadelphia. On November 1, 2017, the Company closed the Lightower Acquisition, which was financed using (1) cash on hand, including proceeds from the July 2017 Equity Financings and August 2017 Senior Notes Offering, and (2) borrowings under the 2016 Revolver (each as defined below).

The accompanying unaudited preliminary pro forma condensed combined financial statements present the preliminary pro

forma combined financial position and results of operations of the combined company based upon the historical financial statements of Crown Castle and Lightower, after giving effect to the Lightower Acquisition.

The adjustments set forth herein and described in the accompanying footnotes are intended to reflect the impact of the Lightower Acquisition on Crown Castle. The accompanying unaudited preliminary pro forma condensed combined financial statements are based upon the historical financial statements and have been derived from the (1) audited consolidated financial statements of Crown Castle contained in its Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and the unaudited condensed consolidated financial statements of Crown Castle contained in its Quarterly Report on Form 10-Q for the nine months ended September 30, 2017, and (2) consolidated statement of operations of LTS Group Holdings LLC for the year ended December 31, 2016 and the nine months ended September 30, 2017. References to “LTS Group Holdings LLC” refer to the collective operations of the Lightower assets.

The accompanying unaudited preliminary pro forma condensed combined financial statements are prepared using the purchase method of accounting, with Crown Castle treated as the acquirer and as if the Lightower Acquisition had been consummated on (1) September 30, 2017 for purposes of preparing the unaudited pro forma condensed combined balance sheet and (2) on January 1, 2016 for purposes of preparing the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2016 and the nine months ended September 30, 2017. Crown Castle is in the process of obtaining a third-party valuation related to assets acquired and liabilities assumed from Lightower. Given the size and timing of the Lightower Acquisition, the amount of certain assets presented are based on preliminary valuations and are subject to adjustment as additional information is obtained and the third-party valuation is finalized. The primary areas of the purchase price allocation that are not finalized relate to fair values of property and equipment, intangibles, goodwill, and deferred revenues. However, as indicated in note (B) to the unaudited preliminary pro forma condensed combined financial statements, Crown Castle made preliminary estimates of major categories of assets and liabilities in preparing the unaudited preliminary pro forma condensed combined financial statements. Any excess purchase price over the acquired net assets, as adjusted to reflect estimated fair values, has been recorded as goodwill.

Crown Castle operates as a real estate investment trust (“REIT”) for U.S. federal income tax purposes. As a REIT, Crown Castle 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. However, Crown Castle may be subject to certain federal, state, local and foreign taxes on its income or assets, including (1) alternative minimum taxes, (2) taxes on any undistributed income, (3) taxes related to its taxable REIT subsidiaries (“TRSs”), (4) franchise taxes, (5) property taxes and (6) transfer taxes.

Based on preliminary tax studies, Crown Castle anticipates that a substantial amount of the assets and related income from the Lightower Acquisition will be included in the REIT, with certain non-qualifying assets being included in TRSs. Accordingly, the accompanying unaudited preliminary pro forma condensed combined financial statements have been prepared under the assumption that approximately 85% of Lightower’s assets and related income will be included in the REIT. Crown Castle will continue to evaluate the level of assets and related income that will be included in the REIT.

 

1


The accompanying unaudited preliminary pro forma condensed combined financial statements are provided for illustrative purposes only and do not purport to represent what the actual consolidated results of operations or the consolidated financial position of Crown Castle would have been had the Lightower Acquisition occurred on the dates assumed, nor are they necessarily indicative of future consolidated results of operations or consolidated financial position. The accompanying unaudited preliminary pro forma condensed combined financial statements address a hypothetical situation, and actual results may differ from these unaudited preliminary pro forma condensed combined financial statements once Crown Castle has completed the tax and valuation studies necessary to finalize the required purchase price allocations. There can be no assurance that such finalization will not result in material changes. The unaudited preliminary pro forma condensed combined financial statements do not include the realization of potential cost savings from operating efficiencies or restructuring costs that may result from the Lightower Acquisition. The unaudited preliminary pro forma condensed combined financial statements should be read in conjunction with the separate historical consolidated financial statements and accompanying notes of Crown Castle, previously filed on Crown Castle’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and Quarterly Report on Form 10-Q for the nine months ended September 30, 2017, and the separate historical consolidated financial statements and accompanying notes of LTS Group Holdings LLC for the year ended December 31, 2016 and nine months ended September 30, 2017 included elsewhere in this filing.

 

2


Unaudited Preliminary Pro Forma Condensed Combined Balance Sheet

Crown Castle International Corp. and Subsidiaries

September 30, 2017

(In thousands of dollars, except share amounts)

 

     Historical (A)           Adjustments
for the
Lightower
Acquisition (B)
          Pro Forma  
ASSETS           

Current assets:

          

Cash and cash equivalents

   $ 6,719,134        



(7,158,585)

8,690
655,000
(50,000)

 

 
 
 

   

(B1

(B2

(B3

(B1


  $ 174,239  

Restricted cash

     115,730             115,730  

Receivables, net

     317,856         59,859       (B2     377,715  

Prepaid expenses

     167,235             167,235  

Other current assets

     154,600         25,036       (B2     179,636  
  

 

 

     

 

 

     

 

 

 

Total current assets

     7,474,555         (6,460,000       1,014,555  

Deferred site rental receivables

     1,285,547             1,285,547  

Property and equipment, net of accumulated depreciation

     10,599,604         2,367,241       (B2     12,966,845  

Goodwill

     6,905,922         3,128,809       (B2     10,034,731  

Other intangible assets, net

     3,885,311         2,040,624       (B2     5,925,935  

Long-term prepaid rent and other assets, net

     860,817             860,817  
  

 

 

     

 

 

     

 

 

 

Total assets

   $ 31,011,756       $ 1,076,674       $ 32,088,430  
  

 

 

     

 

 

     

 

 

 
LIABILITIES AND EQUITY                               

Current liabilities:

          

Accounts payable

   $ 179,335       $ 47,183       (B2   $ 226,518  

Accrued interest

     99,467             99,467  

Deferred revenues

     387,447         51,538       (B2     438,985  

Other accrued liabilities

     268,424         80,904       (B2     349,328  

Current maturities of debt and other obligations

     114,198             114,198  
  

 

 

     

 

 

     

 

 

 

Total current liabilities

     1,048,871         179,625         1,228,496  

Debt and other long-term obligations

     15,090,217         655,000       (B3     15,745,217  

Other long-term liabilities

     2,200,336         292,049       (B2     2,492,385  
  

 

 

     

 

 

     

 

 

 

Total liabilities

     18,339,424         1,126,674         19,466,098  

Commitments and contingencies

          

CCIC stockholders’ equity:

          

Common stock, $0.01 par value

     4,063       (B3         4,063  

6.875% Mandatory Convertible Preferred Stock, Series A, $0.01 par value

     17       (B3         17  

Additional paid-in capital

     16,818,738       (B3         16,818,738  

Accumulated other comprehensive income (loss)

     (4,959           (4,959

Dividends/distributions in excess of earnings

     (4,145,527     (B3     (50,000     (B1     (4,195,527
  

 

 

     

 

 

     

 

 

 

Total equity

     12,672,332         (50,000       12,622,332  
  

 

 

     

 

 

     

 

 

 

Total liabilities and equity

   $ 31,011,756       $ 1,076,674       $ 32,088,430  
  

 

 

     

 

 

     

 

 

 

See notes to unaudited preliminary pro forma condensed combined financial statements.

 

3


Unaudited Preliminary Pro Forma Condensed Combined Statement of Operations

Crown Castle International Corp. and Subsidiaries

Year Ended December 31, 2016

(In thousands except per share data)

 

     Historical Year
Ended (C)
          Adjustments
for the
Lightower
Acquisition (D)
          Pro Forma Year
Ended
       

Net revenues:

            

Site rental

   $ 3,233,307       $ 746,140       (D1   $ 3,979,447    

Network services and other

     687,918             687,918    
  

 

 

     

 

 

     

 

 

   

Net revenues

     3,921,225         746,140         4,667,365    
  

 

 

     

 

 

     

 

 

   

Operating expenses:

            

Costs of operations(1):

            

Site rental

     1,023,350         210,205       (D1     1,233,555    

Network services and other

     417,171             417,171    

General and administrative

     371,031         108,398       (D1     479,429    

Asset write-down charges

     34,453             34,453    

Acquisition and integration costs

     17,453             17,453    

Depreciation, amortization and accretion

     1,108,551         310,662       (D2     1,419,213    
  

 

 

     

 

 

     

 

 

   

Total operating expenses

     2,972,009         629,265         3,601,274    
  

 

 

     

 

 

     

 

 

   

Operating income (loss)

     949,216         116,875         1,066,091    

Interest expense and amortization of deferred financing costs

     (515,032       (77,661     (D3     (592,693  

Gains (losses) on retirement of long-term obligations

     (52,291           (52,291  

Interest income

     796             796    

Other income (expense)

     (8,835       (100     (D1     (8,935  
  

 

 

     

 

 

     

 

 

   

Income (loss) before income taxes

     373,854         39,114         412,968    

Benefit (provision) for income taxes

     (16,881       (7,012     (D4     (23,893  
  

 

 

     

 

 

     

 

 

   

Net income (loss)

     356,973         32,102         389,075    

Dividends on preferred stock

     (32,991       (113,438     (D5     (146,429  
  

 

 

     

 

 

     

 

 

   

Net income (loss) attributable to CCIC common stockholders

   $ 323,982       $ (81,336     $ 242,646    
  

 

 

     

 

 

     

 

 

   

Net income (loss)

   $ 356,973       $ 32,102       $ 389,075    

Other comprehensive income (loss):

            

Foreign currency translation adjustments

     (1,490           (1,490  
  

 

 

     

 

 

     

 

 

   

Total other comprehensive income (loss)

     (1,490       —           (1,490  
  

 

 

     

 

 

     

 

 

   

Comprehensive income (loss) attributable to CCIC stockholders

   $ 355,483       $ 32,102       $ 387,585    
  

 

 

     

 

 

     

 

 

   

Net income (loss) attributable to CCIC common stockholders, per common share:

            

Basic

   $ 0.95         N/M       $ 0.64       (D6

Diluted

   $ 0.95         N/M       $ 0.64       (D6

Weighted-average common shares outstanding (in thousands):

            

Basic

     340,349       (D6     40,150       (D6     380,499       (D6

Diluted

     340,879       (D6     40,150       (D6     381,029       (D6

 

(1) Exclusive of depreciation, amortization and accretion shown separately.

N/M:  Not meaningful

See notes to unaudited preliminary pro forma condensed combined financial statements.

 

4


Unaudited Preliminary Pro Forma Condensed Combined Statement of Operations

Crown Castle International Corp. and Subsidiaries

Nine Months Ended September 30, 2017

(In thousands except per share data)

 

     Historical
Nine Months
Ended (E)
          Adjustments
for the
Lightower
Acquisition (F)
          Pro Forma
Nine Months
Ended
       

Net revenues:

            

Site rental

   $ 2,618,505       $ 596,640       (F1   $ 3,215,145    

Network services and other

     499,010             499,010    
  

 

 

     

 

 

     

 

 

   

Net revenues

     3,117,515         596,640         3,714,155    
  

 

 

     

 

 

     

 

 

   

Operating expenses:

            

Costs of operations(1):

            

Site rental

     814,969         163,611       (F1     978,580    

Network services and other

     310,137             310,137    

General and administrative

     299,232         83,388       (F1     382,620    

Asset write-down charges

     10,284             10,284    

Acquisition and integration costs

     27,080             27,080    

Depreciation, amortization and accretion

     880,197         232,997       (F2     1,113,194    
  

 

 

     

 

 

     

 

 

   

Total operating expenses

     2,341,899         479,996         2,821,895    
  

 

 

     

 

 

     

 

 

   

Operating income (loss)

     775,616         116,644         892,260    

Interest expense and amortization of deferred financing costs

     (430,402       (48,163     (F3     (478,565  

Gains (losses) on retirement of long-term obligations

     (3,525           (3,525  

Interest income

     12,585             12,585    

Other income (expense)

     3,462         (338     (F1     3,124    
  

 

 

     

 

 

     

 

 

   

Income (loss) before income taxes

     357,736         68,143         425,879    

Benefit (provision) for income taxes

     (11,290       (6,999     (F4     (18,289  
  

 

 

     

 

 

     

 

 

   

Net income (loss)

     346,446         61,144         407,590    

Dividends on preferred stock

     (29,935       (55,143     (F5     (85,078  
  

 

 

     

 

 

     

 

 

   

Net income (loss) attributable to CCIC common stockholders

   $ 316,511       $ 6,001       $ 322,512    
  

 

 

     

 

 

     

 

 

   

Net income (loss)

   $ 346,446       $ 61,144       $ 407,590    

Other comprehensive income (loss):

            

Foreign currency translation adjustments

     929             929    
  

 

 

     

 

 

     

 

 

   

Total other comprehensive income (loss)

     929                 929    
  

 

 

     

 

 

     

 

 

   

Comprehensive income (loss) attributable to CCIC stockholders

   $ 347,375       $ 61,144       $ 408,519    
  

 

 

     

 

 

     

 

 

   

Net income (loss) attributable to CCIC common stockholders, per common share:

            

Basic

   $ 0.85         N/M       $ 0.80       (F6

Diluted

   $ 0.84         N/M       $ 0.80       (F6

Weighted-average common shares outstanding (in thousands):

            

Basic

     373,561       (F6     30,404       (F6     403,965       (F6

Diluted

     374,992       (F6     30,404       (F6     405,396       (F6

 

(1) Exclusive of depreciation, amortization and accretion shown separately.

N/M: Not meaningful

See notes to unaudited preliminary pro forma condensed combined financial statements.

 

5


Notes to Preliminary Pro Forma Condensed Combined Financial Information (Unaudited)

Crown Castle International Corp. and Subsidiaries

(tabular dollars in thousands)

 

A. Reflects Crown Castle’s condensed consolidated balance sheet as of September 30, 2017 derived from Crown Castle’s unaudited condensed consolidated financial statements contained in Crown Castle’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2017.

 

B. Reflects the following as set forth below.

 

  B1. Crown Castle financed the Lightower Acquisition and paid related fees and expenses through a combination of (1) cash on hand as of September 30, 2017, including proceeds from the July 2017 Equity Financings and August 2017 Senior Notes Offering, and (2) borrowings under the 2016 Revolver.

The table below reflects the cash paid and financing sources for the Lightower Acquisition.

 

Merger consideration

   $ 4,141,355  

Closing debt balance

     2,929,574  

Other items, including Lightower’s transaction expenses

     87,656  
  

 

 

 

Total cash paid

   $ 7,158,585  
  

 

 

 

July 2017 Common Stock Offering, net of fees (see B3)

   $ 3,756,744  

Mandatory Convertible Preferred Stock Offering, net of fees (see B3)

     1,607,759  

August 2017 Senior Notes Offering, net of fees (see B3)

     1,732,295  

Other sources, including cash on hand and proceeds from the 2016 Revolver (see B3)

     61,787  
  

 

 

 

Total source of funds

   $ 7,158,585  
  

 

 

 

Additionally, dividends/distributions in excess of earnings were impacted by $50 million (reflected as a corresponding decrease in cash) for estimated transaction costs directly related to the Lightower Acquisition that we anticipate will be expensed. Such transaction costs have not been included in the unaudited preliminary pro forma condensed combined statement of operations.

 

  B2. The table below reflects the preliminary purchase price allocation for the Lightower Acquisition for certain line items.

 

Balance Sheet Caption    Amount  

Cash and cash equivalents

   $ 8,690  

Receivables, net

     59,859  

Other current assets

     25,036  

Property and equipment, net

     2,367,241  

Goodwill

     3,128,809  

Other intangible assets, net

     2,040,624  

Accounts payable

     47,183  

Deferred revenues

     51,538  

Other accrued liabilities

     80,904  

Other long-term liabilities (i)

     292,049  
  

 

 

 

Net assets acquired

   $ 7,158,585  
  

 

 

 
  

(i)     Predominately comprised of the long-term portion of deferred revenues.

      

 

No deferred taxes have been recorded for purposes of the unaudited preliminary pro forma condensed combined financial statements as Crown Castle expects that any provision for income taxes resulting from the Lightower Acquisition will be current tax. See notes D4 and F4. Crown Castle will continue to evaluate the level of assets and related income that will be included in the REIT.

 

6


Notes to Preliminary Pro Forma Condensed Combined Financial Information (Unaudited)

Crown Castle International Corp. and Subsidiaries

(tabular dollars in thousands)

 

  B3. Crown Castle financed the Lightower Acquisition and paid related fees and expenses in the following manner:

July 2017 Common Stock Offering

In July 2017, Crown Castle issued approximately 40.15 million shares of common stock resulting in net proceeds of approximately $3.8 billion (“July 2017 Common Stock Offering”). Crown Castle used the net proceeds from the July 2017 Common Stock Offering to partially fund the Lightower Acquisition and pay related fees and expenses. As of September 30, 2017, Crown Castle had approximately 406.3 million shares of common stock outstanding.

July 2017 Preferred Stock Offering

In July 2017, Crown Castle issued 1.65 million shares of the 6.875% Mandatory Convertible Preferred Stock and generated net proceeds of approximately $1.6 billion (“Mandatory Convertible Preferred Stock Offering” and, together with the July 2017 Common Stock Offering, “July 2017 Equity Financings”). Crown Castle used the net proceeds of the Mandatory Convertible Preferred Stock Offering to partially fund the Lightower Acquisition and pay related fees and expenses. Unless converted earlier, each outstanding share of the 6.875% Mandatory Convertible Preferred Stock will automatically convert into shares of Crown Castle common stock on August 1, 2020. Currently, each share of the 6.875% Mandatory Convertible Preferred Stock will convert into between 8.6806 shares (based on the current maximum conversion price of $115.20) and 10.4167 shares (based on the current minimum conversion price of $96.00) of common stock on August 1, 2020, depending on the applicable market value of the common stock and subject to certain anti-dilution adjustments. At any time prior to August 1, 2020, holders of the 6.875% Mandatory Convertible Preferred Stock may elect to convert all or a portion of their shares into common stock at the minimum conversion rate of 8.6806 shares of common stock per share of 6.875% Mandatory Convertible Preferred Stock, subject to certain anti-dilution adjustments. As of September 30, 2017, Crown Castle had approximately 1.65 million shares of the 6.875% Mandatory Convertible Preferred Stock outstanding.

August 2017 Senior Notes Offering

In August 2017, Crown Castle issued $750 million aggregate principal amount of 3.20% Senior Notes due September 2024 and $1.0 billion aggregate principal amount of 3.65% Senior Notes due September 2027 (collectively, “August 2017 Senior Notes Offering”). Crown Castle used the net proceeds of the August 2017 Senior Notes Offering to partially fund the Lightower Acquisition and pay related fees and expenses.

2016 Revolver proceeds

Additionally, in October 2017, Crown Castle drew $655 million under its $3.5 billion unsecured revolving credit facility (“2016 Revolver”). Crown Castle used a portion of the proceeds from the amount drawn from the 2016 Revolver to partially fund the Lightower Acquisition and pay related fees and expenses.

As of September 30, 2017, after giving effect to the October 2017 draw under the 2016 Revolver, Crown Castle had approximately $15.9 billion of debt and other obligations outstanding.

 

C. Reflects Crown Castle’s consolidated statement of operations for the year ended December 31, 2016, derived from Crown Castle’s audited consolidated financial statements contained in its Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

 

7


Notes to Preliminary Pro Forma Condensed Combined Financial Information (Unaudited)

Crown Castle International Corp. and Subsidiaries

(tabular dollars in thousands)

 

D. Reflects the following as set forth below.

 

  D1. Reflects the consolidated statement of operations of LTS Group Holdings LLC for the year ended December 31, 2016, as adjusted for the items footnoted below. These amounts were derived from the audited consolidated financial statements of LTS Group Holdings LLC for the year ended December 31, 2016.

 

     Year Ended December 31, 2016  
(i)    As Reported     Adjustments     As Adjusted  

Revenue

   $ 746,140       $ 746,140  

Operating expenses

      

Cost of revenue

     210,205         210,205  

Depreciation and amortization

     229,381       (229,381 ) (ii)      —    

General and administrative expense

     108,398         108,398  
  

 

 

   

 

 

   

 

 

 

Total operating expenses

     547,984       (229,381     318,603  
  

 

 

   

 

 

   

 

 

 

Income from operations

     198,156       229,381       427,537  

Other expense

         —    

Interest expense, net

     176,037       (176,037 ) (iii)      —    

Loss on debt extinguishment

     9,984       (9,984 ) (iii)      —    

Other expense

     100         100  
  

 

 

   

 

 

   

 

 

 

Total other expense, net

     186,121       (186,021     100  
  

 

 

   

 

 

   

 

 

 

Income before income taxes

     12,035       415,402       427,437  

Provision for income taxes

     21,881       (21,881 ) (iv)      —    
  

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (9,846   $ 437,283       427,437  
  

 

 

   

 

 

   

 

 

 

 

  (i) Certain line items have been renamed to align with Crown Castle’s financial statement presentation.
  (ii) Eliminates historical basis of depreciation and amortization. See note D2 for a discussion of pro forma depreciation and amortization expense.
  (iii) Eliminates historical basis of interest expense and net loss on debt extinguishment, as such debt was retired upon the closing of the Lightower Acquisition. See note D3 for a discussion of pro forma interest expense.
  (iv) Eliminates historical provision for income taxes. Crown Castle will continue to evaluate the level of assets and related income that will be included in the REIT. See note D4 for a discussion of pro forma income taxes.

 

  D2. Reflects depreciation and amortization on the Lightower assets. For purposes of computing pro forma depreciation expense, a tangible asset useful life of approximately 13 years was utilized. For purposes of computing pro forma amortization expense, an intangible useful life of approximately 16 years was utilized.

 

     Amount      Annual
Expense
 

Property and equipment

   $ 2,367,241      $ 181,317  

Intangible assets

     2,040,624        129,345  
     

 

 

 

Total

      $ 310,662  
     

 

 

 

 

  D3. Reflects the increased annual interest expense and amortization of deferred financing costs as a result of the August 2017 Senior Notes Offering and proceeds from the 2016 Revolver, as discussed in note B3.

 

  D4. Crown Castle anticipates that a substantial amount of the assets and related income from the Lightower Acquisition will be included in the REIT, with certain non-qualifying assets being included in TRSs. The accompanying unaudited preliminary pro forma condensed combined financial statements have been prepared under the assumption that approximately 85% of Lightower’s assets and related income will be included in the REIT. As such, the adjustment to the provision for income taxes for certain non-qualifying assets was calculated as follows:

 

     Year Ended
December 31,
2016
 

Operating income from “Adjustments for the Lightower Acquisition”

   $ 116,875  

Anticipated percentage of TRSs assets

     15
  

 

 

 

Anticipated operating income related to TRSs assets

   $ 17,531  

Effective tax rate

     40
  

 

 

 

Provision for income taxes

   $ 7,012  
  

 

 

 

Crown Castle will continue to evaluate the level of assets and related income that will be included in the REIT.

 

 

8


Notes to Preliminary Pro Forma Condensed Combined Financial Information (Unaudited)

Crown Castle International Corp. and Subsidiaries

(tabular dollars in thousands)

 

  D5. Reflects impact of dividends paid on the 6.875% Mandatory Convertible Preferred Stock. See note B3.

 

  D6. The following is a summary of the pro forma adjustment to the weighted-average common shares outstanding and net income (loss) attributable to CCIC common stockholders.

 

     Year Ended December 31, 2016  
     Historical Year
Ended
     Adjustments      Pro Forma
Year End
 

Weighted-average common shares outstanding (in thousands):

        

Basic weighted-average common shares outstanding

     340,349        40,150        380,499  

Effect of assumed dilution from potential common shares relating to stock options and restricted stock awards

     530           530  
  

 

 

    

 

 

    

 

 

 

Diluted weighted-average common shares outstanding

     340,879        40,150        381,029  
  

 

 

    

 

 

    

 

 

 

The pro forma weighted-average common shares outstanding are inclusive of the impact of the 40.15 million shares of common stock issued in connection with the July 2017 Common Stock Offering, the proceeds of which were used to partially fund the Lightower Acquisition, as discussed previously in note B3.

 

E. Reflects Crown Castle’s unaudited condensed consolidated statement of operations for the nine months ended September 30, 2017, derived from Crown Castle’s unaudited condensed consolidated financial statements contained in Crown Castle’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2017.

 

F. Reflects the transactions as set forth below.

 

  F1. Reflects the unaudited condensed consolidated statement of operations of LTS Group Holdings LLC for the nine months ended September 30, 2017, as adjusted for the items footnoted below. These amounts were derived from the unaudited condensed consolidated financial statements of LTS Group Holdings LLC for the nine months ended September 30, 2017.

 

     Nine Months Ended September 30, 2017  
(i)    As Reported      Adjustments     As Adjusted  

Revenue

   $ 596,640        $ 596,640  

Operating expenses

       

Cost of revenue

     163,611          163,611  

Depreciation and amortization

     184,428        (184,428 ) (ii)      —    

General and administrative expense

     82,419        969   (iii)      83,388  

Transaction costs

     969        (969 ) (iii)      —    
  

 

 

    

 

 

   

 

 

 

Total operating expenses

     431,427        (184,428     246,999  
  

 

 

    

 

 

   

 

 

 

Income from operations

     165,213        184,428       349,641  

Other expense

          —    

Interest expense, net

     130,409        (130,409 ) (iv)      —    

Other expense

     338          338  
  

 

 

    

 

 

   

 

 

 

Total other expense, net

     130,747        (130,409     338  
  

 

 

    

 

 

   

 

 

 

Income before income taxes

     34,466        314,837       349,303  

Provision for income taxes

     15,593        (15,593 ) (v)      —    
  

 

 

    

 

 

   

 

 

 

Net income (loss)

   $ 18,873      $ 330,430       349,303  
  

 

 

    

 

 

   

 

 

 

 

  (i) Certain line items have been renamed to align with Crown Castle’s financial statement presentation.
  (ii) Eliminates historical basis of depreciation and amortization. See note F2 for a discussion of pro forma depreciation and amortization expense.
  (iii) Reclassifies insignificant transaction costs to general and administrative expenses.
  (iv) Eliminates historical basis of interest expense and net loss on debt extinguishment, as such debt was retired upon the closing of the Lightower Acquisition. See note F3 for a discussion of pro forma interest expense.

 

9


Notes to Preliminary Pro Forma Condensed Combined Financial Information (Unaudited)

Crown Castle International Corp. and Subsidiaries

(tabular dollars in thousands)

 

  (v) Eliminates historical provision for income taxes. Crown Castle will continue to evaluate the level of assets and related income that will be included in the REIT. See note F4 for a discussion of pro forma income taxes.

 

  F2. Reflects depreciation and amortization on the Lightower assets. For purposes of computing pro forma depreciation expense, a tangible asset useful life of approximately 13 years was utilized. For purposes of computing pro forma amortization expense, an intangible useful life of approximately 16 years was utilized.

 

     Amount      Nine Months of
Expense
 

Property and equipment

   $ 2,367,241      $ 135,988  

Intangible assets

     2,040,624        97,009  
     

 

 

 

Total

      $ 232,997  
     

 

 

 

 

  F3. Reflects the increased nine month interest expense and amortization of deferred financing costs as a result of the August 2017 Senior Notes Offering and the October 2017 draw under the 2016 Revolver, as discussed in note B3.

 

  F4. Crown Castle anticipates that a substantial amount of the assets and related income from the Lightower Acquisition will be included in the REIT, with certain non-qualifying assets being included in TRSs. The accompanying unaudited preliminary pro forma condensed combined financial statements have been prepared under the assumption that approximately 85% of Lightower’s assets and related income will be included in the REIT. As such, the adjustment to the provision for income taxes for certain non-qualifying assets was calculated as follows:

 

     Nine Months Ended
September 30, 2017
 

Operating income from “Adjustments for the Lightower Acquisition”

   $ 116,644  

Anticipated percentage of TRSs assets

     15
  

 

 

 

Anticipated operating income related to TRSs assets

   $ 17,497  

Effective tax rate

     40
  

 

 

 

Provision for income taxes

   $ 6,999  
  

 

 

 

Crown Castle will continue to evaluate the level of assets and related income that will be included in the REIT.

 

  F5. Reflects impact of dividends paid on the 6.875% Mandatory Convertible Preferred Stock. See note B3.

 

  F6. The following is a summary of the pro forma adjustment to the weighted-average common shares outstanding and net income (loss) attributable to CCIC common stockholders.

 

     Nine Months Ended September 30, 2017  
     Historical
Nine Months
Ended
     Adjustments      Pro forma
Nine Months
Ended
 

Weighted-average common shares outstanding (in thousands):

        

Basic weighted-average common shares outstanding

     373,561        30,404        403,965  

Effect of assumed dilution from potential common shares relating to restricted stock awards

     1,431           1,431  
  

 

 

    

 

 

    

 

 

 

Diluted weighted-average common shares outstanding

     374,992        30,404        405,396  
  

 

 

    

 

 

    

 

 

 

The pro forma weighted-average common shares outstanding are inclusive of the impact of the 40.15 million shares of common stock issued in connection with the July 2017 Common Stock Offering, the proceeds of which were used to partially fund the Lightower Acquisition, as discussed previously in note B3.

 

10