QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2011
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period to
Commission File Number 001-16441
____________________________________
CROWN CASTLE INTERNATIONAL
CORP.
(Exact name of registrant as specified in its charter)
Delaware
76-0470458
(State or other jurisdiction
of incorporation or organization)
(I.R.S. Employer
Identification No.)
1220 Augusta Drive, Suite 500, Houston, Texas 77057-2261
(Address of principal executives office) (Zip Code)
(713) 570-3000
(Registrant's telephone number, including area code)
____________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
x
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x
Number of shares of common stock outstanding at October 28, 2011: 284,496,166
Cautionary Language Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements that are based on our management's expectations as of the filing date of this report with the SEC. Statements that are not historical facts are hereby identified as forward-looking statements. In addition, words such as "estimate," "anticipate," "project," "plan," "intend," "believe," "expect," "likely," "predicted" and similar expressions are intended to identify forward-looking statements. Such statements include plans, projections and estimates contained in "Part I—Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Part I—Item 3. Quantitative and Qualitative Disclosures About Market Risk" herein. Such forward-looking statements include (1) expectations regarding anticipated growth in the wireless communication industry, carriers' investments in their networks, new tenant additions, cancellations of customer contracts and demand for our towers, including the potential impact of AT&T's definitive agreement to acquire T-Mobile, (2) availability of cash flows and liquidity for, and plans regarding, future discretionary investments including capital expenditures, (3) anticipated growth in our future revenues, margins, Adjusted EBITDA and operating cash flows, and (4) expectations regarding the credit markets, our availability and cost of capital, and our ability to service our debt and comply with debt covenants.
Such forward-looking statements are subject to certain risks, uncertainties and assumptions, including prevailing market conditions, risk factors described under "Part II—Item 1A. Risk Factors" herein and in "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2010 ("2010 Form 10-K") and other factors. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those expected.
1
PART I—FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands of dollars, except share amounts)
September 30, 2011
December 31, 2010
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
75,524
$
112,531
Restricted cash
223,573
221,015
Receivables, net
64,762
59,912
Prepaid expenses
77,926
65,856
Deferred income tax assets
53,345
59,098
Deferred site rental receivables and other current assets, net
27,150
26,733
Total current assets
522,280
545,145
Property and equipment, net of accumulated depreciation of $3,708,238 and $3,451,475, respectively
4,864,400
4,893,651
Goodwill
2,031,949
2,029,296
Other intangible assets, net of accumulated amortization of $757,794 and $636,433, respectively
2,211,643
2,313,929
Deferred site rental receivables, long-term prepaid rent, deferred financing costs and other assets, net
812,943
687,508
Total assets
$
10,443,215
$
10,469,529
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
29,655
$
39,649
Accrued interest
55,266
65,191
Deferred revenues
174,906
202,123
Other accrued liabilities
83,395
105,235
Current maturities of debt and other obligations
33,612
28,687
Total current liabilities
376,834
440,885
Debt and other long-term obligations
6,903,074
6,750,207
Deferred income tax liabilities
67,613
66,686
Deferred ground lease payable and other liabilities
477,232
450,176
Total liabilities
7,824,753
7,707,954
Commitments and contingencies (note 8)
Redeemable convertible preferred stock, $0.1 par value; 20,000,000 shares authorized; shares issued and outstanding: September 30, 2011—6,111,000 and December 31, 2010—6,361,000; stated net of unamortized issue costs; mandatory redemption and aggregate liquidation value: September 30, 2011—$305,550 and December 31, 2010—$318,050
304,810
316,581
CCIC stockholders' equity:
Common stock, $.01 par value; 600,000,000 shares authorized; shares issued and outstanding: September 30, 2011—284,496,080 and December 31, 2010—290,826,284
2,845
2,908
Additional paid-in capital
5,306,679
5,581,525
Accumulated other comprehensive income (loss)
(140,602
)
(178,978
)
Accumulated deficit
(2,855,860
)
(2,960,082
)
Total CCIC stockholders' equity
2,313,062
2,445,373
Noncontrolling interest
590
(379
)
Total equity
2,313,652
2,444,994
Total liabilities and equity
$
10,443,215
$
10,469,529
See notes to condensed consolidated financial statements.
2
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS) (Unaudited)
(In thousands of dollars, except per share amounts)
Three Months Ended September 30,
Nine Months Ended September 30,
2011
2010
2011
2010
Net revenues:
Site rental
$
468,920
$
437,079
$
1,382,219
$
1,253,582
Network services and other
44,963
44,811
131,039
128,762
Net revenues
513,883
481,890
1,513,258
1,382,344
Operating expenses:
Costs of operations(a):
Site rental
121,759
116,233
361,317
345,453
Network services and other
25,083
26,767
78,213
82,990
General and administrative
42,922
41,420
128,925
121,449
Asset write-down charges
3,090
4,429
13,696
8,588
Acquisition and integration costs
617
867
1,661
1,139
Depreciation, amortization and accretion
138,523
136,218
413,987
403,512
Total operating expenses
331,994
325,934
997,799
963,131
Operating income (loss)
181,889
155,956
515,459
419,213
Interest expense and amortization of deferred financing costs
(127,119
)
(123,196
)
(380,288
)
(364,322
)
Gains (losses) on purchases and redemptions of debt
—
(71,933
)
—
(138,367
)
Net gain (loss) on interest rate swaps
—
(104,421
)
—
(292,295
)
Interest and other income (expense)
(562
)
847
(4,887
)
985
Income (loss) before income taxes
54,208
(142,747
)
130,284
(374,786
)
Benefit (provision) for income taxes
(2,825
)
7,597
(7,763
)
22,622
Net income (loss)
51,383
(135,150
)
122,521
(352,164
)
Less: Net income (loss) attributable to the noncontrolling interest
105
(141
)
355
(351
)
Net income (loss) attributable to CCIC stockholders
51,278
(135,009
)
122,166
(351,813
)
Dividends on preferred stock and losses on purchases of preferred stock
(7,541
)
(5,201
)
(17,944
)
(15,604
)
Net income (loss) attributable to CCIC stockholders after deduction of dividends on preferred stock and losses on purchases of preferred stock
$
43,737
$
(140,210
)
$
104,222
$
(367,417
)
Net income (loss)
$
51,383
$
(135,150
)
$
122,521
$
(352,164
)
Other comprehensive income (loss):
Available-for-sale securities, net of tax of $0, $0, $0 and $0, respectively:
Unrealized gains (losses) on available-for-sale securities, net of taxes
—
(1,265
)
(7,537
)
158
Derivative instruments net of taxes of $0, $(909), $0 and $(14,124), respectively:
Net change in fair value of cash flow hedging instruments, net of taxes
(43
)
(17,562
)
(893
)
(139,108
)
Amounts reclassified into results of operations, net of taxes
17,986
16,266
53,834
38,946
Foreign currency translation adjustments
(16,816
)
26,108
(6,662
)
17,097
Comprehensive income (loss)
52,510
(111,603
)
161,263
(435,071
)
Less: Comprehensive income (loss) attributable to the noncontrolling interest
88
(196
)
721
(241
)
Comprehensive income (loss) attributable to CCIC stockholders
$
52,422
$
(111,407
)
$
160,542
$
(434,830
)
Net income (loss) attributable to CCIC common stockholders, after deduction of dividends on preferred stock and losses on purchases of preferred stock, per common share:
Basic
$
0.16
$
(0.49
)
$
0.37
$
(1.28
)
Diluted
$
0.15
$
(0.49
)
$
0.36
$
(1.28
)
Weighted-average common shares outstanding (in thousands):
Basic
282,031
286,119
284,770
286,883
Diluted
283,899
286,119
286,868
286,883
________________
(a)
Exclusive of depreciation, amortization and accretion shown separately.
See notes to condensed consolidated financial statements.
3
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(In thousands of dollars)
Nine Months Ended September 30,
2011
2010
Cash flows from operating activities:
Net income (loss)
$
122,521
$
(352,164
)
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Depreciation, amortization and accretion
413,987
403,512
Gains (losses) on purchases and redemptions of long-term debt
—
138,367
Amortization of deferred financing costs and other non-cash interest
77,221
59,734
Stock-based compensation expense
24,937
26,185
Asset write-down charges
13,696
8,588
Deferred income tax benefit (provision)
6,684
(34,279
)
Income (expense) from forward-starting interest rate swaps
—
292,295
Other adjustments
4,848
818
Changes in assets and liabilities, excluding the effects of acquisitions:
Increase (decrease) in accrued interest
(9,925
)
(14,930
)
Increase (decrease) in accounts payable
(9,713
)
(5,309
)
Increase (decrease) in deferred revenues, deferred ground lease payables, other accrued liabilities and
other liabilities
(18,231
)
11,891
Decrease (increase) in receivables
(5,318
)
(7,295
)
Decrease (increase) in prepaid expenses, deferred site rental receivables, long-term prepaid rent,
restricted cash and other assets
(165,433
)
(119,758
)
Net cash provided by (used for) operating activities
455,274
407,655
Cash flows from investing activities:
Payments for acquisitions of businesses, net of cash acquired
(17,997
)
(126,972
)
Capital expenditures
(265,115
)
(148,274
)
Other investing activities, net
(14,375
)
(23,212
)
Net cash provided by (used for) investing activities
(297,487
)
(298,458
)
Cash flows from financing activities:
Proceeds from issuance of long-term debt
—
3,450,000
Proceeds from issuance of capital stock
1,523
16,310
Principal payments on long-term debt and other long-term obligations
(26,026
)
(18,282
)
Purchases and redemptions of long-term debt
—
(3,541,312
)
Purchases of capital stock
(301,369
)
(146,908
)
Purchases of preferred stock
(15,002
)
—
Borrowings under revolving credit agreement
273,000
—
Payments under revolving credit agreement
(125,000
)
—
Payments for financing costs
(82
)
(58,729
)
Payments for forward-starting interest rate swap settlements
—
(266,870
)
Net (increase) decrease in restricted cash
12,153
9,467
Dividends on preferred stock
(14,713
)
(14,909
)
Net cash provided by (used for) financing activities
(195,516
)
(571,233
)
Effect of exchange rate changes on cash
722
(131
)
Net increase (decrease) in cash and cash equivalents
(37,007
)
(462,167
)
Cash and cash equivalents at beginning of period
112,531
766,146
Cash and cash equivalents at end of period
$
75,524
$
303,979
See notes to condensed consolidated financial statements.
4
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND EQUITY
(In thousands of dollars, except share amounts) (Unaudited)
CCIC Stockholders
Redeemable Convertible Preferred Stock
Common Stock
Shares
Amount
Shares
($.01 Par)
Additional
Paid-In
Capital
AOCI
Accumulated
Deficit
Noncontrolling
Interest
Total
Balance, July 1, 2011
6,361,000
$
317,045
287,099,439
$
2,871
$
5,407,010
$
(141,746
)
$
(2,899,597
)
$
254
$
2,368,792
Issuances of capital stock, net of forfeitures
—
—
88,793
1
765
—
—
—
766
Purchases and retirement of capital stock
—
—
(2,692,152
)
(27
)
(108,779
)
—
—
—
(108,806
)
Purchases and retirement of preferred stock and losses on purchases of preferred stock
(250,000
)
(12,464
)
—
—
—
—
(2,538
)
—
(2,538
)
Stock-based compensation expense
—
—
—
—
7,683
—
—
—
7,683
Other comprehensive income (loss)(a)
—
—
—
—
—
1,144
—
(17
)
1,127
Dividends on preferred stock and amortization of issue costs
—
229
—
—
—
—
(5,003
)
—
(5,003
)
Acquisition of noncontrolling interest
—
—
—
—
—
—
—
248
248
Net income (loss)
—
—
—
—
—
—
51,278
105
51,383
Balance, September 30, 2011
6,111,000
$
304,810
284,496,080
$
2,845
$
5,306,679
$
(140,602
)
$
(2,855,860
)
$
590
$
2,313,652
CCIC Stockholders
Redeemable Convertible Preferred Stock
Common Stock
Shares
Amount
Shares
($.01 Par)
Additional
Paid-In
Capital
AOCI
Accumulated
Deficit
Noncontrolling
Interest
Total
Balance, July 1, 2010
6,361,000
$
316,117
290,250,963
$
2,903
$
5,565,554
$
(230,843
)
$
(2,855,543
)
$
(201
)
$
2,481,870
Issuances of capital stock, net of forfeitures
—
—
667,576
6
7,907
—
—
—
7,913
Purchases and retirement of capital stock
—
—
(571
)
—
(24
)
—
—
—
(24
)
Stock-based compensation expense
—
—
—
—
8,042
—
—
—
8,042
Other comprehensive income (loss)(a)
—
—
—
—
—
23,602
—
(55
)
23,547
Dividends on preferred stock and amortization of issue costs
—
232
—
—
—
—
(5,201
)
—
(5,201
)
Net income (loss)
—
—
—
—
—
—
(135,009
)
(141
)
(135,150
)
Balance, September 30, 2010
6,361,000
$
316,349
290,917,968
$
2,909
$
5,581,479
$
(207,241
)
$
(2,995,753
)
$
(397
)
$
2,380,997
___________________________
(a)
See the statement of operations and other comprehensive income (loss) for the allocation of the components of "other comprehensive income (loss)."
5
CCIC Stockholders
Redeemable Convertible Preferred Stock
Common Stock
Shares
Amount
Shares
($.01 Par)
Additional
Paid-In
Capital
AOCI
Accumulated
Deficit
Noncontrolling
Interest
Total
Balance, January 1, 2011
6,361,000
$
316,581
290,826,284
$
2,908
$
5,581,525
$
(178,978
)
$
(2,960,082
)
$
(379
)
$
2,444,994
Issuances of capital stock, net of forfeitures
—
—
1,000,308
10
1,513
—
—
—
1,523
Purchases and retirement of capital stock
—
—
(7,330,512
)
(73
)
(301,296
)
—
—
—
(301,369
)
Purchases and retirement of preferred stock and losses on purchases of preferred stock
(250,000
)
(12,464
)
—
—
—
—
(2,538
)
—
(2,538
)
Stock-based compensation expense
—
—
—
—
24,937
—
—
—
24,937
Other comprehensive income (loss)(a)
—
—
—
—
—
38,376
—
366
38,742
Dividends on preferred stock and amortization of issue costs
—
693
—
—
—
—
(15,406
)
—
(15,406
)
Acquisition of noncontrolling interest
—
—
—
—
—
—
—
248
248
Net income (loss)
—
—
—
—
—
—
122,166
355
122,521
Balance, September 30, 2011
6,111,000
$
304,810
284,496,080
$
2,845
$
5,306,679
$
(140,602
)
$
(2,855,860
)
$
590
$
2,313,652
CCIC Stockholders
Redeemable Convertible Preferred Stock
Common Stock
Shares
Amount
Shares
($.01 Par)
Additional
Paid-In
Capital
AOCI
Accumulated
Deficit
Noncontrolling
Interest
Total
Balance January 1, 2010
6,361,000
$
315,654
292,729,684
$
2,927
$
5,685,874
$
(124,224
)
$
(2,628,336
)
$
(156
)
$
2,936,085
Issuances of capital stock, net of forfeitures
—
—
2,022,024
20
16,290
—
—
—
16,310
Purchases and retirement of capital stock
—
—
(3,833,740
)
(38
)
(146,870
)
—
—
—
(146,908
)
Stock-based compensation expense
—
—
—
—
26,185
—
—
—
26,185
Other comprehensive income (loss)(a)
—
—
—
—
—
(83,017
)
—
110
(82,907
)
Dividends on preferred stock and amortization of issue costs
—
695
—
—
—
—
(15,604
)
—
(15,604
)
Net income (loss)
—
—
—
—
—
—
(351,813
)
(351
)
(352,164
)
Balance, September 30, 2010
6,361,000
$
316,349
290,917,968
$
2,909
$
5,581,479
$
(207,241
)
$
(2,995,753
)
$
(397
)
$
2,380,997
___________________________
(a)
See the statement of operations and other comprehensive income (loss) for the allocation of the components of "other comprehensive income (loss)."
See notes to condensed consolidated financial statements.
6
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited
(Tabular dollars in thousands, except per share amounts)
1.
General
The information contained in the following notes to the consolidated financial statements is condensed from that which would appear in the annual consolidated financial statements; accordingly, the consolidated financial statements included herein should be reviewed in conjunction with the consolidated financial statements for the fiscal year ended December 31, 2010, and related notes thereto, included in the 2010 Form 10-K filed by Crown Castle International Corp. ("CCIC") with the SEC. All references to the "Company" include CCIC and its subsidiary companies unless otherwise indicated or the context indicates otherwise.
The Company owns, operates and leases towers. The Company's primary business is the renting of antenna space to wireless communication companies via long-term contracts. To a lesser extent, the Company also provides certain network services relating to its towers, primarily consisting of installation services, as well as the following additional services: site acquisition, architectural and engineering, zoning and permitting, other construction and other services related to network development. The Company conducts its operations through tower portfolios in the United States, including Puerto Rico, and Australia.
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 present fairly the consolidated financial position of the Company at September 30, 2011, and the consolidated results of operations and the consolidated cash flows for the three and nine months ended September 30, 2011 and 2010. The year end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. Accounting measurements at interim dates inherently involve greater reliance on estimates than at year end. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the entire 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.
2.
Summary of Significant Accounting Policies
The significant accounting policies used in the preparation of the Company's consolidated financial statements are disclosed in the Company's 2010 Form 10-K, other than changes related to goodwill impairment testing discussed below.
New Accounting Pronouncements
No accounting pronouncements adopted during the nine months ended September 30, 2011 had a material impact on the Company's consolidated financial statements. No new accounting pronouncements issued during the nine months ended September 30, 2011 but not yet adopted are expected to have a material impact on the Company's consolidated financial statements.
In September 2011, the Financial Accounting Standards Board ("FASB") issued amended guidance on goodwill impairment testing. The amended guidance permits an entity to first perform a qualitative assessment to determine whether it is "more likely than not" that the fair value of a reporting unit is less than its carrying amount. If it is concluded that it is "more likely than not" that the fair value of a reporting unit is less than its carrying amount, it is then necessary to perform the two-step goodwill impairment test described in the 2010 Form 10-K. Otherwise, the two-step goodwill impairment test is not required. The Company adopted this amended guidance effective September 30, 2011, prior to performing its annual goodwill impairment test and, as such, anticipates performing the qualitative assessment in connection with the annual goodwill impairment test during the fourth quarter of 2011.
7
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in thousands, except per share amounts)
3.
Debt and Other Obligations
Original
Issue Date
Contractual
Maturity Date
Outstanding
Balance as of
September 30, 2011
Outstanding
Balance as of
December 31, 2010
Stated Interest
Rate as of
September 30, 2011(a)
Bank debt - variable rate:
Revolver
Jan. 2007
Sept. 2013
$
305,000
(b)
$
157,000
2.4
%
(c)
2007 Term Loans
Jan./March 2007
March 2014
620,750
625,625
1.7
%
(c)
Total bank debt
925,750
782,625
Securitized debt - fixed rate:
January 2010 Tower Revenue Notes
Jan. 2010
2035 - 2040
(d)
1,900,000
1,900,000
5.8
%
(d)
August 2010 Tower Revenue Notes
Aug. 2010
2035 - 2040
(d)
1,550,000
1,550,000
4.5
%
(d)
2009 Securitized Notes
July 2009
2019/2029
(e)
220,870
233,085
7.0
%
Total securitized debt
3,670,870
3,683,085
High yield bonds - fixed rate:
9% Senior Notes
Jan. 2009
Jan. 2015
814,456
804,971
9.0
%
(f)
7.75% Secured Notes
April 2009
May 2017
978,191
975,913
7.8
%
(g)
7.125% Senior Notes
Oct. 2009
Nov. 2019
497,856
497,712
7.1
%
(h)
7.5% Senior Notes
Dec. 2003
Dec. 2013
51
51
7.5
%
Total high yield bonds
2,290,554
2,278,647
Other:
Capital leases and other obligations
Various
Various
(i)
49,512
34,537
Various
(i)
Total debt and other obligations
6,936,686
6,778,894
Less: current maturities and short-term debt and other current obligations
33,612
28,687
Non-current portion of long-term debt and other long-term obligations
$
6,903,074
$
6,750,207
________________
(a)
Represents the weighted-average stated interest rate.
(b)
In June 2011, CCOC amended the senior secured revolving credit facility ("Revolver") to increase the aggregate revolving commitment availability by $50.0 million to a total revolving commitment availability of $450.0 million, subject to certain restrictions based on the maintenance of financial covenants in the 2007 Credit Agreement. As of September 30, 2011, the undrawn availability under the Revolver is $145.0 million.
(c)
The Revolver bears interest at a rate per annum, at the election of CCOC, equal to (i) the greater of the prime rate of The Royal Bank of Scotland plc and the Federal Funds Effective Rate plus 0.5%, plus a credit spread ranging from 1.0% to 1.4% or (ii) LIBOR plus a credit spread ranging from 2.0% to 2.4%, in each case based on the Company's consolidated leverage ratio. The 2007 Term Loans bear interest at a rate per annum, at CCOC's election, equal to (i) the greater of the prime rate of The Royal Bank of Scotland plc and the Federal Funds Effective Rate plus 0.5% or (ii) LIBOR plus 1.5%.
(d)
If the respective series of the January 2010 Tower Revenue Notes and August 2010 Tower Revenue Notes are not paid in full on or prior to 2015, 2017 and 2020, as applicable, then Excess Cash Flow (as defined in the indenture) of the issuers (of such notes) will be used to repay principal of the applicable series and class of the 2010 Tower Revenue Notes, and additional interest (by an additional approximately 5% per annum) will accrue on the respective 2010 Tower Revenue Notes. The January 2010 Tower Revenue Notes consist of three series of notes with principal amounts of $300.0 million, $350.0 million and $1.3 billion, having anticipated repayment dates in 2015, 2017 and 2020, respectively. The August 2010 Tower Revenue Notes consist of three series of notes with principal amounts of $250.0 million, $300.0 million and $1.0 billion, having anticipated repayment dates in 2015, 2017 and 2020, respectively.
(e)
The 2009 Securitized Notes consist of $150.9 million of principal as of September 30, 2011 that amortizes through 2019, and $70.0 million of principal as of September 30, 2011 that amortizes during the period beginning in 2019 and ending in 2029.
(f)
The effective yield is approximately 11.3%, inclusive of the discount.
(g)
The effective yield is approximately 8.2%, inclusive of the discount.
(h)
The effective yield is approximately 7.2%, inclusive of the discount.
(i)
The Company's capital leases and other obligations bear interest rates up to 9% and mature in periods ranging from less than one year to approximately 20 years.
8
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in thousands, except per share amounts)
Interest Expense and Amortization of Deferred Financing Costs
The components of "interest expense and amortization of deferred financing costs" are as follows:
Three Months Ended September 30,
Nine Months Ended September 30,
2011
2010
2011
2010
Interest expense on debt obligations
$
101,380
$
101,012
$
303,067
$
304,588
Amortization of deferred financing costs
3,790
3,825
11,266
11,705
Amortization of discounts on long-term debt
4,074
3,666
11,907
10,716
Amortization of interest rate swaps
17,986
14,400
53,834
36,225
Other, net of capitalized interest
(111
)
293
214
1,088
Total
$
127,119
$
123,196
$
380,288
$
364,322
4.
Income Taxes
During the nine months ended September 30, 2011 and 2010, the Company's provision for federal income taxes was reduced by a partial reversal of the valuation allowance on the Company's federal deferred tax assets, as a result of utilizing net operating losses that previously had a full valuation allowance. In addition, the first nine months of 2010 included $16.5 million of federal tax benefits recorded predominately as a result of discrete events, including the acquisition of NewPath. For the nine months ended September 30, 2011 and 2010, the effective tax rate differed from the federal statutory rate predominately due to the Company's federal deferred tax valuation allowances. During the third quarter of 2011, the IRS completed an examination of the Company's U.S federal tax return for the 2009 tax year with no material adjustments.
5.
Fair Value Disclosures
September 30, 2011
December 31, 2010
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Assets:
Cash and cash equivalents
$
75,524
$
75,524
$
112,531
$
112,531
Restricted cash, current and non-current
228,573
228,573
226,015
226,015
Liabilities:
Long-term debt and other obligations
6,936,686
7,413,440
6,778,894
7,121,156
Interest rate swaps(a)
1,436
1,436
5,198
5,198
________________
(a)
Variable to fixed interest rate swaps hedging a portion of the 2007 Term Loans until December 2011 with a notional value of $600.0 million.
The fair value of cash and cash equivalents and restricted cash approximate the carrying value. The Company determines fair value of its debt securities based on indicative quotes (that is non-binding quotes) from brokers that require judgment to interpret market information including implied credit spreads for similar borrowings on recent trades or bid/ask prices or quotes from active markets if available. The fair value of interest rate swaps is determined using the income approach and is predominately based on observable interest rates and yield curves and, to a lesser extent, the Company's and the contract counterparty's credit risk. There were no changes since December 31, 2010 in the Company's valuation techniques used to measure fair values.
As of September 30, 2011, the fair value of the Company's cash and cash equivalents and restricted cash is measured on a recurring basis and are classified as Level 1 fair value measurements. The following table is a summary of the activity during the nine months ended September 30, 2010 for interest rate swap liabilities previously classified as Level 3 fair value measurements. During the nine months ended September 30, 2011, all interest rate swap liabilities were classified as Level 2 fair value measurements.
9
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in thousands, except per share amounts)
Fair Value Measurement
Using Significant Unobservable
Inputs (Level 3)
Interest Rate Swaps, Net
Three Months Ended
September 30, 2010
Nine Months
Ended
September 30, 2010
Beginning balance
$
359,716
$
300,040
Settlements
(35,609
)
(271,283
)
Less: Total (gains) losses:
Included in earnings(a)
102,416
288,922
Included in other comprehensive income (loss)
16,794
125,638
Ending balance
$
443,317
$
443,317
________________
(a)
Includes $93.8 million and $203.2 million, respectively, for the three and nine months ended September 30, 2010, of losses that are attributable to the change in unrealized gains or losses relating to liabilities still held at the reporting date.
6.
Per Share Information
Basic net income (loss) attributable to CCIC common stockholders, after deduction of dividends on preferred stock, per common share excludes dilution and is computed by dividing net income (loss) attributable to CCIC stockholders after deduction of dividends on preferred stock and losses on purchases of preferred stock, by the weighted-average number of common shares outstanding during the period. Diluted net income (loss) attributable to CCIC common stockholders, after deduction of dividends on preferred stock and losses on purchases of preferred stock, per common share is computed by dividing net income (loss) attributable to CCIC stockholders after deduction of dividends on preferred stock and losses on purchases of preferred stock, by the weighted-average number of common shares outstanding during the period plus any potential dilutive common share equivalents, including shares issuable (1) upon exercise of stock options and the vesting of restricted stock awards as determined under the treasury stock method and (2) upon conversion of the Company's preferred stock, as determined under the if-converted method. The Company's restricted stock awards are considered participating securities and may be included in the computation pursuant to the two-class method. However, the Company does not present the two-class method when there is no difference between the per share amount under the two-class method and the treasury stock method.
Three Months Ended September 30,
Nine Months Ended September 30,
2011
2010
2011
2010
Net income (loss) attributable to CCIC stockholders
$
51,278
$
(135,009
)
$
122,166
$
(351,813
)
Dividends on preferred stock and losses on purchases of preferred stock
(7,541
)
(5,201
)
(17,944
)
(15,604
)
Net income (loss) attributable to CCIC common stockholders after deduction of dividends on preferred stock and losses on purchases of preferred stock for basic and diluted computations
$
43,737
$
(140,210
)
$
104,222
$
(367,417
)
Weighted-average number of common shares outstanding (in thousands):
Basic weighted-average number of common stock outstanding
282,031
286,119
284,770
286,883
Effect of assumed dilution from potential common shares relating to stock options and restricted stock awards
1,868
—
2,098
—
Diluted weighted-average number of common shares outstanding
283,899
286,119
286,868
286,883
Net income (loss) attributable to CCIC common stockholders after deduction of dividends on preferred stock and losses on purchases of preferred stock, per common share:
Basic
$
0.16
$
(0.49
)
$
0.37
$
(1.28
)
Diluted
$
0.15
$
(0.49
)
$
0.36
$
(1.28
)
For both the three and nine months ended September 30, 2011, 0.9 million restricted stock awards were excluded from the dilutive common shares because certain stock price hurdles would not have been achieved assuming that September 30, 2011 was the end of the contingency period. For the three and nine months ended September 30, 2010, all of the CCIC stock options and unvested restricted stock awards are excluded from dilutive common shares because the net impact is anti-dilutive. In addition, for the three and nine months ended September 30, 2011, 8.3 million shares reserved for issuance upon conversion of the 6.25%
10
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in thousands, except per share amounts)
convertible preferred stock and for the three and nine months ended September 30, 2010, 8.6 million shares reserved for issuance upon conversion of the 6.25% convertible preferred stock, respectively, are excluded from dilutive common shares because the impact is anti-dilutive as determined under the if-converted method. See note 10.
7.
Leases
Tenant Contracts
The following table is an updated summary of the rental cash payments owed to the Company, as a lessor, by tenants pursuant to contractual agreements in effect as of September 30, 2011. Generally, the Company's contracts with its tenants provide for (1) annual escalations and multiple renewal periods at the tenant's option and (2) only limited termination rights at the tenant's option through the current term. As of September 30, 2011, the weighted-average remaining term of tenant contracts is approximately 9 years, exclusive of renewals at the tenant's option. The tenants' rental payments included in the table below are through the current terms with a maximum current term of 20 years and do not assume exercise of tenant renewal options.
Three Months Ending December 31,
Years Ending December 31,
2011
2012
2013
2014
2015
Thereafter
Total
Tenant Contracts
$
404,017
$
1,604,622
$
1,573,313
$
1,542,603
$
1,485,123
$
10,268,644
$
16,878,322
8.
Commitments and Contingencies
The Company is involved in various claims, lawsuits and proceedings arising in the ordinary course of business. While there are uncertainties inherent in the ultimate outcome of such matters and it is impossible to presently determine the ultimate costs or losses that may be incurred, if any, management believes the resolution of such uncertainties and the incurrence of such costs should not have a material adverse effect on the Company's consolidated financial position or results of operations.
9.
Operating Segments
The Company's reportable operating segments are (1) CCUSA, primarily consisting of the Company's U.S. tower operations and (2) CCAL, the Company's Australian tower operations. Financial results for the Company are reported to management and the board of directors in this manner.
The measurement of profit or loss currently used by management to evaluate the results of operations for the Company and its operating segments is earnings before interest, taxes, depreciation, amortization and accretion, as adjusted ("Adjusted EBITDA"). The Company defines Adjusted EBITDA as net income (loss) plus restructuring charges (credits), asset write-down charges, acquisition and integration costs, depreciation, amortization and accretion, interest expense and amortization of deferred financing costs, gains (losses) on purchases and redemptions of debt, net gain (loss) on interest rate swaps, impairment of available-for-sale securities, interest and other income (expense), benefit (provision) for income taxes, cumulative effect of change in accounting principle, income (loss) from discontinued operations and stock-based compensation expense. Adjusted EBITDA is not intended as an alternative measure of operating results or cash flow from operations (as determined in accordance with GAAP), and the Company's measure of Adjusted EBITDA may not be comparable to similarly titled measures of other companies. There are no significant revenues resulting from transactions between the Company's operating segments. Inter-company borrowings and related interest between segments are eliminated to reconcile segment results and assets to the consolidated basis.
11
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in thousands, except per share amounts)
