CrownCastle 10Q 063012
 

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 June 30, 2012
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 July 27, 2012: 293,037,526
 


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," forms of these words 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 and small cell operations and technologies, including the expected impacts of the Wireless Capital Partners, LLC acquisition and the NextG Networks, Inc. acquisition, (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, 2011 ("2011 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)
 
June 30,
2012
 
December 31,
2011
 
(Unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
96,175

 
$
80,120

Restricted cash
275,948

 
252,368

Receivables, net
124,154

 
77,258

Prepaid expenses
101,063

 
80,529

Deferred income tax assets
93,889

 
85,385

Deferred site rental receivables and other current assets, net
47,881

 
23,492

Total current assets
739,110

 
599,152

Deferred site rental receivables, net
736,225

 
621,103

Property and equipment, net of accumulated depreciation of $4,023,205 and $3,824,136, respectively
5,347,867

 
4,861,227

Goodwill
2,776,121

 
2,035,390

Other intangible assets, net
2,391,292

 
2,178,182

Long-term prepaid rent, deferred financing costs and other assets, net
607,061

 
250,042

Total assets
$
12,597,676

 
$
10,545,096

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
46,279

 
$
32,055

Accrued interest
64,162

 
65,392

Deferred revenues and below-market tenant leases
195,330

 
167,238

Other accrued liabilities
104,050

 
104,904

Current maturities of debt and other obligations
79,303

 
32,517

Total current liabilities
489,124

 
402,106

Debt and other long-term obligations
8,307,783

 
6,853,182

Deferred income tax liabilities
81,665

 
97,562

Below-market tenant leases, deferred ground lease payable and other liabilities
853,106

 
500,350

Total liabilities
9,731,678

 
7,853,200

Commitments and contingencies (note 10)

 

Redeemable convertible preferred stock, $0.1 par value; 20,000,000 shares authorized; shares issued and outstanding: June 30, 2012—0 and December 31, 2011—6,111,000; stated net of unamortized issue costs; mandatory redemption and aggregate liquidation value: June 30, 2012—$0 and December 31, 2011—$305,550
—

 
305,032

CCIC stockholders' equity:
 
 
 
Common stock, $.01 par value; 600,000,000 shares authorized; shares issued and outstanding: June 30, 2012—293,038,013 and December 31, 2011—284,449,372
2,930

 
2,844

Additional paid-in capital
5,599,106

 
5,312,342

Accumulated other comprehensive income (loss)
(89,065
)
 
(116,996
)
Accumulated deficit
(2,648,530
)
 
(2,811,945
)
Total CCIC stockholders' equity
2,864,441

 
2,386,245

Noncontrolling interest
1,557

 
619

Total equity
2,865,998

 
2,386,864

Total liabilities and equity
$
12,597,676

 
$
10,545,096

 
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 June 30,
 
Six Months Ended June 30,
 
2012
 
2011
 
2012
 
2011
Net revenues:
 
 
 
 
 
 
 
Site rental
$
517,588

 
$
457,103

 
$
1,015,117

 
$
913,299

Network services and other
67,923

 
43,233

 
122,139

 
86,076

Net revenues
585,511

 
500,336

 
1,137,256

 
999,375

Operating expenses:
 
 
 
 
 
 
 
Costs of operations(a):
 
 
 
 
 
 
 
Site rental
131,571

 
121,143

 
254,442

 
239,558

Network services and other
40,262

 
25,906

 
71,783

 
53,130

General and administrative
47,078

 
41,259

 
98,079

 
86,003

Asset write-down charges
3,646

 
6,205

 
6,690

 
10,606

Acquisition and integration costs
7,495

 
490

 
9,175

 
1,044

Depreciation, amortization and accretion
152,482

 
138,191

 
291,882

 
275,464

Total operating expenses
382,534

 
333,194

 
732,051

 
665,805

Operating income (loss)
202,977

 
167,142

 
405,205

 
333,570

Interest expense and amortization of deferred financing costs
(144,940
)
 
(126,483
)
 
(282,412
)
 
(253,169
)
Gains (losses) on retirement of long-term obligations
(7,518
)
 
—

 
(14,586
)
 
—

Interest income
382

 
208

 
736

 
379

Other income (expense)
(2,249
)
 
(4,098
)
 
(3,326
)
 
(4,704
)
Income (loss) before income taxes
48,652

 
36,769

 
105,617

 
76,076

Benefit (provision) for income taxes
68,432

 
(5,755
)
 
61,737

 
(4,938
)
Net income (loss)
117,084

 
31,014

 
167,354

 
71,138

Less: Net income (loss) attributable to the noncontrolling interest
1,071

 
143

 
1,310

 
250

Net income (loss) attributable to CCIC stockholders
116,013

 
30,871

 
166,044

 
70,888

Dividends on preferred stock
—

 
(5,202
)
 
(2,629
)
 
(10,403
)
Net income (loss) attributable to CCIC stockholders after deduction of dividends on preferred stock
$
116,013

 
$
25,669

 
$
163,415

 
$
60,485

Net income (loss)
$
117,084

 
$
31,014

 
$
167,354

 
$
71,138

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
—

 
(1,160
)
 
—

 
(7,537
)
Derivative instruments, net of taxes of $5,712, $0, $5,712 and $0, respectively:
 
 
 
 
 
 
 
Net change in fair value of cash flow hedging instruments, net of taxes
—

 
(425
)
 
—

 
(850
)
Amounts reclassified into results of operations, net of taxes
10,609

 
17,959

 
26,947

 
35,848

Foreign currency translation adjustments
(6,645
)
 
6,084

 
244

 
10,154

Total other comprehensive income (loss)
3,964

 
22,458

 
27,191

 
37,615

Comprehensive income (loss)
121,048

 
53,472

 
194,545

 
108,753

Less: Comprehensive income (loss) attributable to the noncontrolling interest
1,057

 
150

 
570

 
633

Comprehensive income (loss) attributable to CCIC stockholders
$
119,991

 
$
53,322

 
$
193,975

 
$
108,120

Net income (loss) attributable to CCIC common stockholders, after deduction of dividends on preferred stock, per common share:
 
 
 
 
 
 
 
Basic
$
0.40

 
$
0.09

 
$
0.57

 
$
0.21

Diluted
$
0.40

 
$
0.09

 
$
0.57

 
$
0.21

Weighted-average common shares outstanding (in thousands):
 
 
 
 
 
 
 
Basic
290,649
 
285,280

 
287,781
 
286,139
Diluted
291,203
 
287,026

 
289,029
 
288,215
________________
(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)
 
Six Months Ended June 30,
 
2012
 
2011
Cash flows from operating activities:
 
 
 
Net income (loss)
$
167,354

 
$
71,138

Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
 
 
 
Depreciation, amortization and accretion
291,882

 
275,464

Gains (losses) on retirement of long-term obligations
14,586

 
—

Amortization of deferred financing costs and other non-cash interest
48,780

 
51,482

Stock-based compensation expense
17,105

 
17,254

Asset write-down charges
6,690

 
10,606

Deferred income tax benefit (provision)
(65,544
)
 
2,545

Other adjustments
(41
)
 
4,309

Changes in assets and liabilities, excluding the effects of acquisitions:
 
 
 
Increase (decrease) in accrued interest
(1,950
)
 
146

Increase (decrease) in accounts payable
(2,488
)
 
(7,094
)
Increase (decrease) in deferred revenues, deferred ground lease payables, other accrued liabilities and
     other liabilities
(3,145
)
 
(40,120
)
Decrease (increase) in receivables
(26,225
)
 
3,468

Decrease (increase) in prepaid expenses, deferred site rental receivables, long-term prepaid rent,
     restricted cash and other assets
(122,662
)
 
(105,389
)
Net cash provided by (used for) operating activities
324,342

 
283,809

Cash flows from investing activities:
 
 
 
Payments for acquisitions of businesses, net of cash acquired
(1,199,316
)
 
(12,375
)
Capital expenditures
(159,697
)
 
(116,690
)
Other investing activities, net
1,188

 
829

Net cash provided by (used for) investing activities
(1,357,825
)
 
(128,236
)
Cash flows from financing activities:
 
 
 
Proceeds from issuance of long-term debt
2,100,000

 
—

Proceeds from issuance of capital stock
238

 
757

Principal payments on debt and other long-term obligations
(34,744
)
 
(16,792
)
Purchases and redemptions of long-term debt
(699,486
)
 
—

Purchases of capital stock
(35,673
)
 
(192,563
)
Borrowings under revolving credit agreement
—

 
102,000

Payments under revolving credit facility
(251,000
)
 
(71,000
)
Payments for financing costs
(40,237
)
 
(82
)
Net (increase) decrease in restricted cash
12,620

 
27,088

Dividends on preferred stock
(2,481
)
 
(9,939
)
Net cash provided by (used for) financing activities
1,049,237

 
(160,531
)
Effect of exchange rate changes on cash
301

 
543

Net increase (decrease) in cash and cash equivalents
16,055

 
(4,415
)
Cash and cash equivalents at beginning of period
80,120

 
112,531

Cash and cash equivalents at end of period
$
96,175

 
$
108,116


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, April 1, 2012
—

 
$
—

 
292,928,485

 
$
2,929

 
$
5,591,191

 
$
(93,043
)
 
$
(2,764,543
)
 
$
132

 
$
2,736,666

Stock-based compensation related activity, net of forfeitures
—

 
—

 
113,168

 
1

 
7,915

 
—

 
—

 
—

 
7,916

Purchases and retirement of capital stock
—

 
—

 
(3,640
)
 
—

 

 
—

 
—

 
—

 
—

Other comprehensive income (loss)(a)
—

 
—

 
—

 
—

 
—

 
3,978

 
—

 
(14
)
 
3,964

Disposition of noncontrolling interest
—

 
—

 
—

 
—

 
—

 
—

 
—

 
368

 
368

Net income (loss)
—

 
—

 
—

 
—

 
—

 
—

 
116,013

 
1,071

 
117,084

Balance, June 30, 2012
—

 
$
—

 
293,038,013

 
$
2,930

 
$
5,599,106

 
$
(89,065
)
 
$
(2,648,530
)
 
$
1,557

 
$
2,865,998


 
 
 
 
 
CCIC Stockholders
 
 
 
 
 
Redeemable Convertible Preferred Stock
 
Common Stock
 
 
 
 
 
 
 
 
 
 
 
Shares
 
Amount
 
Shares
 
($.01 Par)
 
Additional
Paid-In
Capital
 
AOCI
 
Accumulated
Deficit
 
Noncontrolling
Interest
 
Total
Balance, April 1, 2011
6,361,000

 
$
316,813

 
290,717,872

 
$
2,907

 
$
5,549,448

 
$
(164,197
)
 
$
(2,925,266
)
 
$
104

 
$
2,462,996

Stock-based compensation related activity, net of forfeitures
—

 
—

 
(6,404
)
 
—

 
7,864

 
—

 
—

 
—

 
7,864

Purchases and retirement of capital stock
—

 
—

 
(3,612,029
)
 
(36
)
 
(150,302
)
 
—

 
—

 
—

 
(150,338
)
Other comprehensive income (loss)(a)
—

 
—

 
—

 
—

 
—

 
22,451

 
—

 
7

 
22,458

Dividends on preferred stock and amortization of issue costs
—

 
232

 
—

 
—

 
—

 
—

 
(5,202
)
 
—

 
(5,202
)
Net income (loss)
—

 
—

 
—

 
—

 
—

 
—

 
30,871

 
143

 
31,014

Balance, June 30, 2011
6,361,000

 
$
317,045

 
287,099,439

 
$
2,871

 
$
5,407,010

 
$
(141,746
)
 
$
(2,899,597
)
 
$
254

 
$
2,368,792



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, 2012
6,111,000

 
$
305,032

 
284,449,372

 
$
2,844

 
$
5,312,342

 
$
(116,996
)
 
$
(2,811,945
)
 
$
619

 
$
2,386,864

Stock-based compensation related activity, net of forfeitures
—

 
—

 
997,109

 
10

 
17,333

 
—

 
—

 
—

 
17,343

Conversion of redeemable convertible preferred stock into common stock
(6,111,000
)
 
(305,180
)
 
8,285,905

 
83

 
305,097

 
—

 
—

 
—

 
305,180

Purchases and retirement of capital stock
—

 
—

 
(694,373
)
 
(7
)
 
(35,666
)
 
—

 
—

 
—

 
(35,673
)
Other comprehensive income (loss)(a)
—

 
—

 
—

 
—

 
—

 
27,931

 
—

 
(740
)
 
27,191

Dividends on preferred stock and amortization of issue costs
—

 
148

 
—

 
—

 
—

 
—

 
(2,629
)
 
—

 
(2,629
)
Disposition of noncontrolling interest
—

 
—

 
—

 
—

 
—

 
—

 
—

 
368

 
368

Net income (loss)
—

 
—

 
—

 
—

 
—

 
—

 
166,044

 
1,310

 
167,354

Balance, June 30, 2012
—

 
$
—

 
293,038,013

 
$
2,930

 
$
5,599,106

 
$
(89,065
)
 
$
(2,648,530
)
 
$
1,557

 
$
2,865,998


 
 
 
 
 
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

Stock-based compensation related activity, net of forfeitures
—

 
—

 
911,515

 
9

 
18,002

 
—

 
—

 
—

 
18,011

Purchases and retirement of capital stock
—

 
—

 
(4,638,360
)
 
(46
)
 
(192,517
)
 
—

 
—

 
—

 
(192,563
)
Other comprehensive income (loss)(a)
—

 
—

 
—

 
—

 
—

 
37,232

 
—

 
383

 
37,615

Dividends on preferred stock and amortization of issue costs
—

 
464

 
—

 
—

 
—

 
—

 
(10,403
)
 
—

 
(10,403
)
Net income (loss)
—

 
—

 
—

 
—

 
—

 
—

 
70,888

 
250

 
71,138

Balance, June 30, 2011
6,361,000

 
$
317,045

 
287,099,439

 
$
2,871

 
$
5,407,010

 
$
(141,746
)
 
$
(2,899,597
)
 
$
254

 
$
2,368,792

___________________________
(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, 2011, and related notes thereto, included in the 2011 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 shared wireless infrastructure, including: (1) towers, (2) distributed antenna systems ("DAS"), a type of small cell ("small cells"), and (3) third party land interests, including ground lease related assets (unless the context otherwise suggests or requires, references herein to "wireless infrastructure" include towers, small cells and third party land interests). The Company's core business is renting space on its towers, small cells and, to a lesser extent, third party land interests (collectively, "site rental business") via long-term contracts in various forms. The Company also provides certain network services relating to its wireless infrastructure, consisting of installation services, and site development services relating to existing and new antenna installations on its wireless infrastructure. The Company conducts its operations through wireless infrastructure 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 June 30, 2012, and the consolidated results of operations and the consolidated cash flows for the six months ended June 30, 2012 and 2011. 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 2011 Form 10-K, other than certain changes to deferred credits.
Deferred Credits
Deferred credits are included in “deferred revenues and below-market tenant leases” and “below-market tenant leases, deferred ground lease payable and other liabilities” on the Company's consolidated balance sheet and consist of the estimated fair value of the following items recorded in conjunction with acquisitions: (1) below-market tenant leases for contractual interests with tenants on the acquired wireless infrastructure and (2) above-market leases for land interests under the Company's wireless infrastructure.
Fair value for these deferred credits represents the difference between the stated contractual payments to be made pursuant to the in-place lease and management's estimate of fair market lease rates for each corresponding lease. Deferred credits are measured over a period equal to the estimated remaining economic lease term considering renewal provisions, and economics associated with those renewal provisions, to the extent applicable. Below market tenant leases and above market leases for land interests are amortized to site rental revenues and site rental costs of operations, respectively, over their respective estimated remaining lease term at the acquisition date.
New Accounting Pronouncements
No accounting pronouncements adopted during the six months ended June 30, 2012 had a material impact on the Company's

7
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in thousands, except per share amounts)


consolidated financial statements. No new accounting pronouncements issued during the six months ended June 30, 2012 but not yet adopted are expected to have a material impact on the Company's consolidated financial statements.

3.
Acquisitions
WCP Acquisition
On January 12, 2012, the Company announced a definitive agreement to acquire certain subsidiaries of Wireless Capital Partners, LLC ("WCP"). On January 31, 2012 the Company closed the acquisition (“WCP Acquisition”). Upon closing, WCP held various contracts with wireless site owners, including approximately 2,300 ground lease related assets. The results of operations from WCP have been included in the consolidated statements of operations since the date of acquisition. The Company paid a purchase price that resulted in goodwill at CCUSA primarily because of the strategic opportunities.
The purchase price of $214.7 million includes $39.2 million of restricted cash and excludes the assumption of $336.3 million (after fair value adjustments) of debt. The Company utilized a portion of the borrowings under the senior secured term loans issued in January 2012 ("2012 Term Loans") to fund the cash consideration.
The preliminary purchase price allocation for the WCP Acquisition is based upon a preliminary valuation and the Company's estimates and assumptions, which are subject to change as the Company obtains additional information. The preliminary allocation of the total purchase price for the WCP Acquisition was primarily allocated to restricted cash, long-term prepaid rent, other intangible assets, deferred tax assets, goodwill and debt. The preliminary purchase price allocation to long-term prepaid rent was approximately $322.4 million and had a weighted-average amortization period of 38 years. See notes 4 and 5.
NextG Networks Acquisition
In December 2011, the Company entered into a definitive agreement to acquire NextG Networks, Inc. ("NextG") for approximately $1.0 billion in cash, subject to certain adjustments. On April 10, 2012, the Company closed the acquisition (“NextG Acquisition”). The results of operations from NextG have been included in the consolidated statements of operations since the date of acquisition.
Prior to the NextG Acquisition, NextG was the largest U.S. provider of outdoor DAS, a network of antennas connected by fiber to a communications hub designed to facilitate wireless communications for wireless carriers. Approximately 75% of NextG's nodes at the time of the acquisition were located in the ten largest metropolitan statistical areas in the U.S.
The Company utilized borrowings under the 2012 Term Loans to fund the cash consideration of approximately $1.0 billion.
The preliminary purchase price allocation for the NextG Acquisition is shown below. The preliminary purchase price allocation, including with respect to fixed assets, intangibles assets and certain liabilities, is based upon a preliminary valuation and the Company's estimates and assumptions, which are subject to change as the Company obtains additional information.
Preliminary Purchase Price Allocation
 
Current assets
$
74,246

Property and equipment
515,984

Goodwill
682,148

Other intangible assets, net
195,000

Other assets
4,251

Current liabilities
(86,433
)
Below-market tenant leases and other non-current liabilities
(330,045
)
Deferred income tax liabilities
(57,433
)
Net assets acquired
$
997,718

Subsequent to the closing of the NextG Acquisition, the Company finalized plans for the integration of NextG's operations and DAS into the Company's operations, including with respect to the Company's policies, procedures and systems. As a result, for the period ending June 30, 2012 the Company recognized integration costs of: (1) $3.4 million related to severance and retention bonuses payable to involuntarily terminated employees of NextG and (2) other incremental costs directly related to the integration of $3.3 million, including costs associated with temporary employees assisting with the NextG integration. These costs are classified as acquisition and integration costs in the Company's consolidated statement of operation and comprehensive income (loss).

8
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in thousands, except per share amounts)


Unaudited Pro Forma Operating Results
The following table presents the unaudited pro forma condensed consolidated results of operations of the Company as if the NextG Acquisition was completed as of January 1, 2011 for the periods presented below. The unaudited pro forma amounts are presented for illustrative purposes only and are not necessarily indicative of future consolidated results of operations.
 
Six Months Ended June 30,
 
 
2012
 
2011
 
Net revenues
$
1,172,450

 
$
1,061,257

 
Net income (loss)
$
101,989

 
$
57,918

(a)
Basic net income (loss) attributable to CCIC common stockholders, after deduction of dividends on preferred stock, per common share
$
0.34

 
$
0.17

 
Diluted net income (loss) attributable to CCIC common stockholders, after deduction of dividends on preferred stock, per common share
$
0.34

 
$
0.16

 
________________
(a)
Inclusive of $46.3 million in NextG stock-based compensation charges and $15.7 million in acquisition and integration costs.
The unaudited pro forma condensed consolidated results of operations include non-recurring pro forma adjustments predominately related to a $57.4 million decrease for the six months ended June 30, 2012 and a corresponding $57.4 million increase for the six months ended June 30, 2011 in income tax benefit related to the reversal of U.S. federal and state deferred income tax valuation allowances as a result of recording deferred tax liabilities.
See note 4 for discussion of goodwill and other intangible assets recognized in conjunction with the NextG Acquisition and note 6 for discussion of the income tax impact of the NextG Acquisition.

4.
Goodwill and Intangible Assets

Goodwill of $682.1 million was recorded in the CCUSA segment in connection with the NextG Acquisition, none of which is expected to be deductible for tax purposes. Goodwill of $54.8 million was recorded in connection with the WCP Acquisition, of which $40.9 million is not expected to be deductible for tax purposes.
The purchase price of the NextG Acquisition resulted in the recognition of a substantial amount of goodwill based on the following:
•
the acquired and in-process DAS have low average tenancy, which the Company believes provides an opportunity to co-locate additional tenants on those systems;
•
the Company believes that the economics associated with DAS are similar to the economics associated with the Company's towers, whereby expected increases in revenues from additional tenants on existing DAS are expected to result in high incremental margins due to relatively fixed operating costs;
•
the Company believes the demand for tenants to co-locate on DAS will be driven by the continued growth trends in the wireless communication industry as wireless carriers continue to focus on improving network quality and expanding capacity;
•
the Company believes the acquired DAS are well-positioned to benefit from the anticipated growth in the wireless industry with their previously mentioned locations in the ten largest metropolitan statistical areas in the U.S.; and
•
other intangibles not qualified for separate recognition, including the assembled work force.
To a lesser extent, a portion of the goodwill recognized is the result of recording the tax impact of the NextG Acquisition. See also note 6.

9
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in thousands, except per share amounts)


The following is a summary of the Company's intangible assets.
 
As of June 30, 2012
 
As of December 31, 2011
 
Gross Carrying Value
 
Accumulated Amortization
 
Net Book Value
 
Gross Carrying Value
 
Accumulated Amortization
 
Net Book Value
Site rental contracts and customer relationships
$
3,091,480

 
$
(825,535
)
 
$
2,265,945

 
$
2,823,832

 
$
(748,850
)
 
$
2,074,982

Other intangible assets
181,435

 
(56,088
)
 
125,347

 
152,375

 
(49,175
)
 
103,200

Total
$
3,272,915

 
$
(881,623
)
 
$
2,391,292

 
$
2,976,207

 
$
(798,025
)
 
$
2,178,182

The components of the additions to intangible assets during the six months ended June 30, 2012 are as follows:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2012
 
2012
 
Amount
 
Weighted-Average Amortization Period
 
Amount(a)
 
Weighted-Average Amortization Period
 
 
 
(In years)
 
 
 
(In years)
Site rental contracts and customer relationships
$
162,062

 
19.6

 
$
267,564

 
23.5
Other intangible assets
30,000

 
19.0

 
30,573

 
18.9
Total
$
192,062

 
19.5

 
$
298,137

 
23.0
________________
(a)
$94.5 million related to the WCP Acquisition.
Amortization expense related to intangible assets is classified as follows on the Company's consolidated statement of operations and comprehensive income (loss):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
Classification
2012
 
2011
 
2012
 
2011
Depreciation, amortization and accretion
$
42,353

 
$
39,663

 
$
82,525

 
$
79,234

Site rental costs of operations
755

 
875

 
1,563

 
1,995

Total amortization expense
$
43,108

 
$
40,538

 
$
84,088

 
$
81,229

The estimated annual amortization expense related to intangible assets (inclusive of those recorded to "site rental costs of operations") for the six months ended December 31, 2012 and years ended December 31, 2013 to 2016 is as follows:
 
Six Months Ended December 31,
 
Years Ending December 31,
 
2012
 
2013
 
2014
 
2015
 
2016
Estimated annual amortization
$
87,277

 
$
166,400

 
$
164,128

 
$
155,247

 
$
155,247

During the six months ended June 30, 2012, the Company recorded deferred credits of $277.2 million related to below-market tenant leases as a result of the preliminary purchase price allocation for the NextG Acquisition (see note 3). The below-market tenant leases recorded during the six months ended June 30, 2012 have a weighted-average amortization period of 11 years and are amortized to site rental revenues on the consolidated statement of operations and comprehensive income (loss).
The estimated annual amounts related to below-market tenant leases expected to be amortized into site rental revenues for the six months ended December 31, 2012 and years ended December 31, 2013 to 2016 are as follows:
 
Six Months Ended December 31,
 
Years Ending December 31,
 
2012
 
2013
 
2014
 
2015
 
2016
Estimated annual amortization
$
13,203

 
$
26,398

 
$
26,361

 
$
25,527

 
$
24,799



10
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in thousands, except per share amounts)


5.
Debt and Other Obligations
 
Original
Issue Date
 
Contractual
Maturity Date
 
Outstanding
Balance as of
June 30, 2012
 
Outstanding
Balance as of
December 31, 2011
 
Stated Interest
Rate as of
June 30, 2012(a)
 
Bank debt - variable rate:
 
 
 
 
 
 
 
 
 
 
Revolver
Jan. 2007
 
Sept. 2013
 
$
—

 
$
251,000

 
N/A

 
2012 Revolver
Jan. 2012
 
Jan. 2017
 
—

(b)
—

 
N/A

(c)
2007 Term Loans
Jan./March 2007
 
March 2014
 
—

 
619,125

 
N/A

 
2012 Term Loans
Jan. 2012
 
2017/2019
 
2,085,750

 
—

 
3.7
%
(c)
Total bank debt
 
 
 
 
2,085,750

 
870,125

 
 
 
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)
207,478

 
216,431

 
7.0
%
 
WCP Securitized Notes
Nov. 2010
 
Nov. 2040
(f)
331,663

(f)
—

 
5.4
%
(g)
Total securitized debt
 
 
 
 
3,989,141

 
3,666,431

 
 
 
High yield bonds - fixed rate:
 
 
 
 
 
 
 
 
 
 
9% Senior Notes
Jan. 2009
 
Jan. 2015
 
789,316

 
817,799

 
9.0
%
(h)
7.75% Secured Notes
April 2009
 
May 2017
 
945,836

 
978,983

 
7.8
%
(i)
7.125% Senior Notes
Oct. 2009
 
Nov. 2019
 
498,005

 
497,904

 
7.1
%
(j)
7.5% Senior Notes
Dec. 2003
 
Dec. 2013
 
51

 
51

 
7.5
%
 
Total high yield bonds
 
 
 
 
2,233,208

 
2,294,737

 
 
 
Other:
 
 
 
 
 
 
 
 
 
 
Capital leases and other obligations
Various
 
Various
(k)
78,987

 
54,406

 
Various

(k)
Total debt and other obligations
 
 
 
 
8,387,086

 
6,885,699

 
 
 
Less: current maturities and short-term debt and other current obligations
 
 
 
 
79,303

 
32,517

 
 
 
Non-current portion of long-term debt and other long-term obligations
 
 
 
 
$
8,307,783

 
$
6,853,182

 
 
 
________________
(a)
Represents the weighted-average stated interest rate.
(b)
As of June 30, 2012, the undrawn availability under the $1.0 billion senior secured revolving credit facility ("2012 Revolver") is $1.0 billion.
(c)
The 2012 Revolver and the Term Loan A bear interest at a per annum rate equal to LIBOR plus 2.0% to 2.75%, based on CCOC's total net leverage ratio. Term Loan B bears interest at a per annum rate equal to LIBOR plus 3.0% (with LIBOR subject to a floor of 1% per annum). The Company pays a commitment fee of 0.4% per annum on the undrawn available amount under the 2012 Revolver.
(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 (of 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 $137.5 million of principal as of June 30, 2012 that amortizes through 2019, and $70.0 million of principal as of June 30, 2012 that amortizes during the period beginning in 2019 and ending in 2029.
(f)
The WCP securitized notes ("WCP Securitized Notes") were assumed in connection with the WCP Acquisition. The WCP Securitized Notes include a fair value adjustment that increased the debt carrying value by $14.4 million as of June 30, 2012. The anticipated repayment date is 2015 for each class of the debt assumed in connection with the WCP Acquisition.
(g)
The effective yield is approximately 4.0%, inclusive of the fair value adjustment.
(h)
The effective yield is approximately 11.3%, inclusive of the discount.
(i)
The effective yield is approximately 8.2%, inclusive of the discount.
(j)
The effective yield is approximately 7.2%, inclusive of the discount.
(k)
The Company's capital leases and other obligations bear interest rates up to 10% and mature in periods ranging from less than one year to approximately 20 years.
2012 Credit Facility
In January 2012, the Company refinanced and repaid the Revolver and 2007 Term Loans with the proceeds of a $3.1 billion senior credit facility ("2012 Credit Facility") issued by CCOC. The 2012 Credit Facility consists of (1) a $1.0 billion 2012 Revolver

11
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in thousands, except per share amounts)


which will mature in January 2017, (2) a $500.0 million Term Loan A which will mature in January 2017, and (3) a $1.6 billion Term Loan B which will mature in January 2019. The Term Loan B was fully drawn at closing and the Revolver and the Term Loan A were undrawn at closing. In March 2012, the Company drew the full amount under the Term Loan A.
The 2012 Credit Facility is secured by a pledge of certain equity interests of certain subsidiaries of CCIC, as well as a security interest in CCOC and certain of its subsidiaries' deposit accounts ($42.1 million as of June 30, 2012) and securities accounts. The 2012 Credit Facility is guaranteed by CCIC and certain of its subsidiaries.
The proceeds of the 2012 Credit Facility were used in part to repay the existing Revolver, repay the 2007 Term Loans and to fund the cash consideration of the WCP Acquisition and NextG Acquisition (see note 3). The balance of the proceeds will be available for general corporate purposes, including purchases of shares of the Company's common stock.
WCP Securitized Notes
In January 2012, the Company assumed $320.1 million face value of secured debt in connection with the WCP Acquisition. The anticipated repayment date is 2015 for each class of the WCP Securitized Notes. If the WCP Securitized Notes are not repaid in full by their anticipated repayment dates, the applicable interest rate increases by an additional approximately 5% per annum. If the WCP Securitized Notes are not repaid in full by their rapid amortization date of 2017, monthly principal payments commence using the excess cash flows of the issuers of the WCP Securitized Notes. The Company also acquired restricted cash of $29.5 million that if not spent on third party land interests by November 2012 will be required to be used to repay principal amounts outstanding on the WCP Securitized Notes. Interest and principal are paid monthly on the WCP Securitized Notes. The provisions of the WCP Securitized Notes are similar to those of our 2010 Tower Revenue Notes (see note 6 of our 2011 10-K for a discussion of the Company's 2010 Tower Revenue Notes).
Contractual Maturities
The following are the scheduled contractual maturities of the total debt and other long-term obligations outstanding at June 30, 2012. These maturities reflect contractual maturity dates and do not consider the principal payments that will commence following the anticipated repayment dates on the Tower Revenue Notes and the rapid amortization date on the WCP Securitized Notes. See above for a further discussion on the WCP Securitized Notes.
 
Six Months Ended December 31,
 
Years Ending December 31,
 
 
 
Unamortized Adjustments, Net
 
Total Debt and Other Obligations Outstanding
 
2012
 
2013
 
2014
 
2015
 
2016
 
Thereafter
 
Total Cash Obligations
 
 
Scheduled contractual maturities
$
38,217

 
$
88,006

 
$
97,805

 
$
939,765

 
$
112,240

 
$
7,158,043

 
$
8,434,076

 
$
(46,990
)
 
$
8,387,086

Retirement of Long-Term Obligations
The following is a summary of the retirement of long-term obligations during the six months ended June 30, 2012.
 
Six Months Ended June 30, 2012
 
Principal Amount
 
Cash Paid(a)
 
Gains (Losses)(c)
Revolver
$
251,000

 
$
251,000

 
$
(1,445
)
2007 Term Loans
619,125

 
619,125

 
(1,893
)
9% Senior Notes
37,257

 
41,334

 
(6,517
)
7.75% Secured Notes(b)
35,488

 
39,027

 
(4,731
)
Total
$
942,870

 
$
950,486

 
$
(14,586
)
________________
(a)
Exclusive of accrued interest.
(b)
These debt purchases were made by CCIC rather than by the subsidiaries that issued the debt, because of restrictions upon the subsidiaries that issued the debt; as a result, the debt remains outstanding at the Company's subsidiaries.
(c)
Inclusive of an aggregate $7.0 million related to the write-off of deferred financing costs and discounts.


12
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 June 30,
 
Six Months Ended June 30,
 
2012
 
2011
 
2012
 
2011
Interest expense on debt obligations
$
120,625

 
$
100,802

 
$
233,632

 
$
201,687

Amortization of deferred financing costs
5,278

 
3,754

 
10,090

 
7,476

Amortization of adjustments on long-term debt
2,961

 
3,968

 
6,724

 
7,833

Amortization of interest rate swaps
16,319

 
17,959

 
32,657

 
35,848

Other, net of capitalized interest
(243
)
 
—

 
(691
)
 
325

Total
$
144,940

 
$
126,483

 
$
282,412

 
$
253,169


6.
Income Taxes
Key aspects of the accounting for income taxes for the three months ended June 30, 2012 are as follows:
•
the Company recorded $50.0 million of U.S. federal and $7.4 million of state deferred tax liabilities in the NextG Acquisition in connection with the preliminary purchase price allocation;
•
in conjunction with (1) recording deferred tax liabilities in the NextG Acquisition in connection with the preliminary purchase price allocation and (2) consideration of the Company's continued historical trend of positive income (during 2012, the Company will have cumulative pre-tax income for the three-year period), the Company determined that it is more likely than not that the substantial portion of the Company's remaining U.S. federal and state deferred tax assets will be realized in future years; and
•
as a result of the above, the Company reversed a total of $70.1 million of federal and $20.0 million of state valuation allowances to the benefit (provision) for income taxes.
The remaining valuation allowances as of June 30, 2012 reserve assets associated principally with (1) U.S. federal capital losses ($29.4 million), (2) certain state net operating losses ($9.7 million), and (3) deferred tax assets associated with CCAL ($61.7 million).

7.
Redeemable Convertible Preferred Stock
In January 2012, the Company exercised its right to convert all of the outstanding 6.25% Redeemable Convertible Preferred Stock. In February 2012, the Company issued 8.3 million shares of common stock associated with the previously outstanding 6.25% Redeemable Convertible Preferred Stock.

8.
Fair Value Disclosures
 
Level in Fair Value Hierarchy
 
June 30, 2012
 
December 31, 2011
 
 
Carrying
 Amount
 
Fair
Value
 
Carrying
 Amount
 
Fair
Value
Assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
1
 
$
96,175

 
$
96,175

 
$
80,120

 
$
80,120

Restricted cash, current and non-current
1
 
284,962

 
284,962

 
257,368

 
257,368

Liabilities:
 
 
 
 
 
 
 
 
 
Long-term debt and other obligations
2
 
8,387,086

 
9,018,076

 
6,885,699

 
7,355,652

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, non-binding quotes from brokers. Quotes from brokers require judgment and are based on the brokers' interpretation of market information including implied credit spreads for similar borrowings on recent trades or bid/ask prices or quotes from active markets if available. There were no changes since December 31, 2011 in the Company's valuation techniques used to measure fair values.

13
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in thousands, except per share amounts)



9.
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, 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, per common share is computed by dividing net income (loss) attributable to CCIC stockholders after deduction of dividends on preferred stock, by the weighted-average number of common shares outstanding during the period plus any potential dilutive common share equivalents 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
 June 30,
 
Six Months Ended
June 30,
 
2012
 
2011
 
2012
 
2011
Net income (loss) attributable to CCIC stockholders
$
116,013

 
$
30,871

 
$
166,044

 
$
70,888

Dividends on preferred stock
—

 
(5,202
)
 
(2,629
)
 
(10,403
)
Net income (loss) attributable to CCIC common stockholders after deduction of dividends on preferred stock for basic and diluted computations
$
116,013

 
$
25,669

 
$
163,415

 
$
60,485

Weighted-average number of common shares outstanding (in thousands):
 
 
 
 
 
 
 
Basic weighted-average number of common stock outstanding
290,649

 
285,280

 
287,781

 
286,139

Effect of assumed dilution from potential common shares relating to stock options and restricted stock awards
554

 
1,746

 
1,248

 
2,076

Diluted weighted-average number of common shares outstanding
291,203

 
287,026

 
289,029

 
288,215

Net income (loss) attributable to CCIC common stockholders after deduction of dividends on preferred stock, per common share:
 
 
 
 
 
 
 
Basic
$
0.40

 
$
0.09

 
$
0.57

 
$
0.21

Diluted
$
0.40

 
$
0.09

 
$
0.57

 
$
0.21

 For the three and six months ended June 30, 2012, 1.0 million restricted stock awards were excluded from the dilutive common shares because certain stock price hurdles would not have been achieved assuming that June 30, 2012 was the end of the contingency period. See note 12.

10.
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.

14
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in thousands, except per share amounts)


11.
Operating Segments
The Company's reportable operating segments are (1) CCUSA, primarily consisting of the Company's U.S. operations and (2) CCAL, the Company's Australian 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, amortization of prepaid lease purchase price adjustments, interest expense and amortization of deferred financing costs, gains (losses) on retirement of long-term obligations, net gain (loss) on interest rate swaps, impairment of available-for-sale securities, interest income, 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.
 
Three Months Ended June 30, 2012
 
Three Months Ended June 30, 2011
 
CCUSA
 
CCAL
 
Eliminations
 
Consolidated
Total
 
CCUSA
 
CCAL
 
Eliminations
 
Consolidated
Total
Net revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Site rental
$
487,761

 
$
29,827

 
$
—

 
$
517,588

 
$
429,454

 
$
27,649

 
$
—

 
$
457,103

Network services and other
62,049

 
5,874

 
—

 
67,923

 
40,017

 
3,216

 
—

 
43,233

Net revenues
549,810

 
35,701

 
—

 
585,511

 
469,471

 
30,865

 
—

 
500,336

Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs of operations:(a)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Site rental
123,063

 
8,508

 
—

 
131,571

 
112,153

 
8,990

 
—

 
121,143

Network services and other
36,846

 
3,416

 
—

 
40,262

 
23,576

 
2,330

 
—

 
25,906

General and administrative
41,541

 
5,537

 
—

 
47,078

 
36,702

 
4,557

 
—

 
41,259

Asset write-down charges
3,646

 
—

 
—

 
3,646

 
5,930

 
275

 
—

 
6,205

Acquisition and integration costs
7,469

 
26

 
—

 
7,495

 
490

 
—

 
—

 
490

Depreciation, amortization and accretion
144,793

 
7,689

 
—

 
152,482

 
130,488

 
7,703

 
—

 
138,191

Total operating expenses
357,358

 
25,176

 
—

 
382,534

 
309,339

 
23,855

 
—

 
333,194

Operating income (loss)
192,452

 
10,525

 
—

 
202,977

 
160,132

 
7,010

 
—

 
167,142

Interest expense and amortization of deferred financing costs
(144,940
)
 
(5,000
)
 
5,000

 
(144,940
)
 
(126,484
)
 
(5,816
)
 
5,817

 
(126,483
)
Gains (losses) on retirement of long-term obligations
(7,518
)
 
—

 
—

 
(7,518
)
 
—

 
—

 
—

 
—

Interest income
258

 
124

 
—

 
382

 
70

 
138

 
—

 
208

Other income (expense)
2,756

 
(5
)
 
(5,000
)
 
(2,249
)
 
1,717

 
2

 
(5,817
)
 
(4,098
)
Benefit (provision) for income taxes
68,921

 
(489
)
 
—

 
68,432

 
(5,184
)
 
(571
)
 
—

 
(5,755
)
Net income (loss)
111,929

 
5,155

 
—

 
117,084

 
30,251

 
763

 
—

 
31,014

Less: Net income (loss) attributable to the noncontrolling interest
(58
)
 
1,129

 
—

 
1,071

 
—

 
143

 
—

 
143

Net income (loss) attributable to CCIC stockholders
$
111,987

 
$
4,026

 
$
—

 
$
116,013

 
$
30,251

 
$
620

 
$
—

 
$
30,871

Capital expenditures
$
88,687

 
$
5,958

 


 
$
94,645

 
$
61,080

 
$
2,960

 
$
—

 
$
64,040

Total assets (at quarter end)
$
12,532,201

 
$
358,733

 
$
(293,258
)
 
$
12,597,676

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

15
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited (Continued)
(Tabular dollars in thousands, except per share amounts)


 
Six Months Ended June 30, 2012
 
Six Months Ended June 30, 2011
 
CCUSA
 
CCAL
 
Eliminations
 
Consolidated
Total
 
CCUSA
 
CCAL
 
Eliminations
 
Consolidated
Total
Net revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Site rental
$
955,880

 
$
59,237

 
$
—

 
$
1,015,117

 
$
860,097

 
$
53,202

 
$
—

 
$
913,299

Network services and other
109,017

 
13,122

 
—

 
122,139

 
77,681

 
8,395

 
—

 
86,076

Net revenues
1,064,897

 
72,359

 
—

 
1,137,256

 
937,778

 
61,597

 
—

 
999,375

Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs of operations:(a)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Site rental
237,007

 
17,435

 
—

 
254,442