CrownCastle 10Q 093011
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________
 
FORM 10-Q
____________________________________
x
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
 
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES

INDEX

 
 
 
Page
 
ITEM 1.
 
 
 
 
 
 
 
 
 
 
 
ITEM 2.
 
ITEM 3.
 
ITEM 4.
 
 
ITEM 1A.
 
ITEM 2.
 
ITEM 6.
 
 


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)



 
Three Months Ended September 30, 2011
 
Three Months Ended September 30, 2010
 
CCUSA
 
CCAL
 
Eliminations
 
Consolidated
Total
 
CCUSA
 
CCAL
 
Eliminations
 
Consolidated
Total
Net revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Site rental
$
441,137

 
$
27,783

 
$
—

 
$
468,920

 
$
414,265

 
$
22,814

 
$
—

 
$
437,079

Network services and other
40,853

 
4,110

 
—

 
44,963

 
42,544

 
2,267

 
—

 
44,811

Net revenues
481,990

 
31,893

 
—

 
513,883

 
456,809

 
25,081

 
—

 
481,890

Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs of operations:(a)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Site rental
112,843

 
8,916

 
—

 
121,759

 
108,966

 
7,267

 
—

 
116,233

Network services and other
22,713

 
2,370

 
—

 
25,083

 
25,192

 
1,575

 
—

 
26,767

General and administrative
37,295

 
5,627

 
—

 
42,922

 
37,495

 
3,925

 
—

 
41,420

Asset write-down charges
3,165

 
(75
)
 
—

 
3,090

 
4,325

 
104

 
—

 
4,429

Acquisition and integration costs
617

 
—

 
—

 
617

 
867

 
—

 
—

 
867

Depreciation, amortization and accretion
130,878

 
7,645

 
—

 
138,523

 
129,169

 
7,049

 
—

 
136,218

Total operating expenses
307,511

 
24,483

 
—

 
331,994

 
306,014

 
19,920

 
—

 
325,934

Operating income (loss)
174,479

 
7,410

 
—

 
181,889

 
150,795

 
5,161

 
—

 
155,956

Interest expense and amortization of deferred financing costs
(127,119
)
 
(5,755
)
 
5,755

 
(127,119
)
 
(122,905
)
 
(5,368
)
 
5,077

 
(123,196
)
Gains (losses) on purchases and redemptions of debt
—

 
—

 
—

 
—

 
(71,933
)
 
—

 
—

 
(71,933
)
Net gain (loss) on interest rate swaps
—

 
—

 
—

 
—

 
(104,421
)
 
—

 
—

 
(104,421
)
Interest and other income (expense)
5,067

 
126

 
(5,755
)
 
(562
)
 
5,789

 
135

 
(5,077
)
 
847

Benefit (provision) for income taxes
(2,261
)
 
(564
)
 
—

 
(2,825
)
 
8,096

 
(499
)
 
—

 
7,597

Net income (loss)
50,166

 
1,217

 
—

 
51,383

 
(134,579
)
 
(571
)
 
—

 
(135,150
)
Less: Net income (loss) attributable to the noncontrolling interest
(141
)
 
246

 
—

 
105

 
—

 
(141
)
 
—

 
(141
)
Net income (loss) attributable to CCIC stockholders
$
50,307

 
$
971

 
$
—

 
$
51,278

 
$
(134,579
)
 
$
(430
)
 
$
—

 
$
(135,009
)
Capital expenditures
$
144,129

 
$
4,296

 
$
—

 
$
148,425

 
$
53,423

 
$
3,086

 
$
—

 
$
56,509

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

12
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in thousands, except per share amounts)


 
Nine Months Ended September 30, 2011
 
Nine Months Ended September 30, 2010
 
CCUSA
 
CCAL
 
Eliminations
 
Consolidated
Total
 
CCUSA
 
CCAL
 
Eliminations
 
Consolidated
Total
Net revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Site rental
$
1,301,234

 
$
80,985

 
$
—

 
$
1,382,219

 
$
1,186,276

 
$
67,306

 
$
—

 
$
1,253,582

Network services and other
118,534

 
12,505

 
—

 
131,039

 
121,665

 
7,097

 
—

 
128,762

Net revenues
1,419,768

 
93,490

 
—

 
1,513,258

 
1,307,941

 
74,403

 
—

 
1,382,344

Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs of operations:(a)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Site rental
335,421

 
25,896

 
—

 
361,317

 
324,660

 
20,793

 
—

 
345,453

Network services and other
70,246

 
7,967

 
—

 
78,213

 
77,984

 
5,006

 
—

 
82,990

General and administrative
113,594

 
15,331

 
—

 
128,925

 
109,335

 
12,114

 
—

 
121,449

Asset write-down charges
13,452

 
244

 
—

 
13,696

 
8,461

 
127

 
—

 
8,588

Acquisition and integration costs
1,661

 
—

 
—

 
1,661

 
1,139

 
—

 
—

 
1,139

Depreciation, amortization and accretion
391,342

 
22,645

 
—

 
413,987

 
382,418

 
21,094

 
—

 
403,512

Total operating expenses
925,716

 
72,083

 
—

 
997,799

 
903,997

 
59,134

 
—

 
963,131

Operating income (loss)
494,052

 
21,407

 
—

 
515,459

 
403,944

 
15,269

 
—

 
419,213

Interest expense and amortization of deferred financing costs
(379,964
)
 
(17,513
)
 
17,189

 
(380,288
)
 
(363,235
)
 
(15,380
)
 
14,293

 
(364,322
)
Gains (losses) on purchases and redemptions of debt
—

 
—

 
—

 
—

 
(138,367
)
 
—

 
—

 
(138,367
)
Net gain (loss) on interest rate swaps
—

 
—

 
—

 
—

 
(292,295
)
 
—

 
—

 
(292,295
)
Interest and other income (expense)
11,937

 
365

 
(17,189
)
 
(4,887
)
 
15,068

 
210

 
(14,293
)
 
985

Benefit (provision) for income taxes
(6,076
)
 
(1,687
)
 
—

 
(7,763
)
 
24,025

 
(1,403
)
 
—

 
22,622

Net income (loss)
119,949

 
2,572

 
—

 
122,521

 
(350,860
)
 
(1,304
)
 
—

 
(352,164
)
Less: Net income (loss) attributable to the noncontrolling interest
(141
)
 
496

 
—

 
355

 
—

 
(351
)
 
—

 
(351
)
Net income (loss) attributable to CCIC stockholders
$
120,090

 
$
2,076

 
$
—

 
$
122,166

 
$
(350,860
)
 
$
(953
)
 
$
—

 
$
(351,813
)
Capital expenditures
$
256,455

 
$
8,660

 
$
—

 
$
265,115

 
$
140,875

 
$
7,399

 
$
—