CrownCastle 10Q 033113
 

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 March 31, 2013
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 April 29, 2013: 293,770,213
 



CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES

INDEX

 
 
 
Page
 
ITEM 1.
 
 
 
 
 
 
 
 
 
 
 
ITEM 2.
 
ITEM 3.
 
ITEM 4.
 
 
ITEM 1A.
 
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES
 
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, customer consolidation or ownership changes, and demand for our towers and small cell networks, (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, 2012 ("2012 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. As used herein, the term "including," and any variation of thereof, means "including without limitation. The use of the word “or” herein is not exclusive.
 



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)
 
March 31,
2013
 
December 31,
2012
 
(Unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
160,865

 
$
441,364

Restricted cash
139,455

 
575,938

Receivables, net
212,732

 
192,833

Prepaid expenses
102,315

 
103,808

Deferred income tax assets
180,817

 
193,420

Other current assets
69,231

 
73,961

Total current assets
865,415

 
1,581,324

Deferred site rental receivables, net
926,705

 
864,819

Property and equipment, net of accumulated depreciation of $4,384,508 and $4,249,183, respectively
6,882,411

 
6,917,531

Goodwill
3,180,510

 
3,119,957

Other intangible assets, net
2,861,315

 
2,941,696

Deferred income tax assets
31,616

 
33,914

Long-term prepaid rent, deferred financing costs and other assets, net
624,533

 
629,468

Total assets
$
15,372,505

 
$
16,088,709

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
96,874

 
$
115,999

Accrued interest
80,170

 
52,592

Deferred revenues
230,792

 
241,127

Other accrued liabilities
134,951

 
140,084

Current maturities of debt and other obligations
94,839

 
688,056

Total current liabilities
637,626

 
1,237,858

Debt and other long-term obligations
10,741,317

 
10,923,186

Deferred income tax liabilities
50,336

 
65,830

Below-market tenant leases, deferred ground lease payable and other liabilities
978,595

 
910,571

Total liabilities
12,407,874

 
13,137,445

Commitments and contingencies (note 8)

 

CCIC stockholders' equity:
 
 
 
Common stock, $.01 par value; 600,000,000 shares authorized; shares issued and outstanding: March 31, 2013—293,771,206 and December 31, 2012—293,164,786
2,938

 
2,932

Additional paid-in capital
5,610,039

 
5,623,595

Accumulated other comprehensive income (loss)
(52,036
)
 
(61,791
)
Accumulated deficit
(2,610,528
)
 
(2,625,990
)
Total CCIC stockholders' equity
2,950,413

 
2,938,746

Noncontrolling interest
14,218

 
12,518

Total equity
2,964,631

 
2,951,264

Total liabilities and equity
$
15,372,505

 
$
16,088,709

 
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
 March 31,
 
2013
 
2012
Net revenues:
 
 
 
Site rental
$
615,415

 
$
497,529

Network services and other
124,645

 
54,216

Net revenues
740,060

 
551,745

Operating expenses:
 
 
 
Costs of operations(a):
 
 
 
Site rental
177,606

 
122,871

Network services and other
77,377

 
31,521

General and administrative
58,246

 
51,001

Asset write-down charges
3,715

 
3,044

Acquisition and integration costs
1,602

 
1,680

Depreciation, amortization and accretion
186,459

 
139,400

Total operating expenses
505,005

 
349,517

Operating income (loss)
235,055

 
202,228

Interest expense and amortization of deferred financing costs
(164,369
)
 
(137,472
)
Gains (losses) on retirement of long-term obligations
(35,909
)
 
(7,068
)
Interest income
297

 
354

Other income (expense)
(629
)
 
(1,077
)
Income (loss) before income taxes
34,445

 
56,965

Benefit (provision) for income taxes
(17,708
)
 
(6,695
)
Net income (loss)
16,737

 
50,270

Less: Net income (loss) attributable to the noncontrolling interest
1,275

 
239

Net income (loss) attributable to CCIC stockholders
15,462

 
50,031

Dividends on preferred stock

 
(2,629
)
Net income (loss) attributable to CCIC stockholders after deduction of dividends on preferred stock
$
15,462

 
$
47,402

Net income (loss)
$
16,737

 
$
50,270

Other comprehensive income (loss):
 
 
 
Interest rate swaps, net of taxes of $5,692 and $0, respectively:
 
 
 
Amounts reclassified into "interest expense and amortization deferred financing costs", net of taxes (see note 4)
10,570

 
16,338

Foreign currency translation adjustments
(390
)
 
6,889

Total other comprehensive income (loss)
10,180

 
23,227

Comprehensive income (loss)
26,917

 
73,497

Less: Comprehensive income (loss) attributable to the noncontrolling interest
1,700

 
(487
)
Comprehensive income (loss) attributable to CCIC stockholders
$
25,217

 
$
73,984

Net income (loss) attributable to CCIC common stockholders, after deduction of dividends on preferred stock, per common share:
 
 
 
Basic
$
0.05

 
$
0.17

Diluted
$
0.05

 
$
0.17

Weighted-average common shares outstanding (in thousands):
 
 
 
Basic
291,102
 
284,913

Diluted
292,570
 
285,853

________________
(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)
 
Three Months Ended March 31,
 
2013
 
2012
Cash flows from operating activities:
 
 
 
Net income (loss)
$
16,737

 
$
50,270

Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
 
 
 
Depreciation, amortization and accretion
186,459

 
139,400

Gains (losses) on retirement of long-term obligations
35,909

 
7,068

Amortization of deferred financing costs and other non-cash interest
36,920

 
24,465

Stock-based compensation expense
10,029

 
9,035

Asset write-down charges
3,715

 
3,044

Deferred income tax benefit (provision)
14,740

 
4,813

Other adjustments
765

 
4

Changes in assets and liabilities, excluding the effects of acquisitions:
 
 
 
Increase (decrease) in accrued interest
27,578

 
(10,853
)
Increase (decrease) in accounts payable
(6,545
)
 
(238
)
Increase (decrease) in deferred revenues, deferred ground lease payables, other accrued liabilities and
     other liabilities
10,506

 
(3,270
)
Decrease (increase) in receivables
(19,808
)
 
(2,080
)
Decrease (increase) in prepaid expenses, deferred site rental receivables, long-term prepaid rent,
     restricted cash and other assets
(30,379
)
 
(59,446
)
Net cash provided by (used for) operating activities
286,626

 
162,212

Cash flows from investing activities:
 
 
 
Payments for acquisitions of businesses, net of cash acquired
(12,810
)
 
(221,316
)
Capital expenditures
(116,353
)
 
(65,052
)
Other investing activities, net
147

 
1,195

Net cash provided by (used for) investing activities
(129,016
)
 
(285,173
)
Cash flows from financing activities:
 
 
 
Proceeds from issuance of long-term debt

 
2,095,000

Proceeds from issuance of capital stock

 
195

Principal payments on debt and other long-term obligations
(25,333
)
 
(13,631
)
Purchases and redemptions of long-term debt
(644,422
)
 
(648,385
)
Purchases of capital stock
(23,579
)
 
(35,476
)
Payments under revolving credit facility
(165,000
)
 
(251,000
)
Payments for financing costs
(3,927
)
 
(40,237
)
Net (increase) decrease in restricted cash
425,774

 
948

Dividends on preferred stock

 
(2,481
)
Net cash provided by (used for) financing activities
(436,487
)
 
1,104,933

Effect of exchange rate changes on cash
(1,622
)
 
1,592

Net increase (decrease) in cash and cash equivalents
(280,499
)
 
983,564

Cash and cash equivalents at beginning of period
441,364

 
80,120

Cash and cash equivalents at end of period
$
160,865

 
$
1,063,684


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
 
 
 
AOCI
 
 
 
 
 
 
 
Shares
 
Amount
 
Shares
 
($.01 Par)
 
Additional
Paid-In
Capital
 
Foreign Currency Translation Adjustments
 
Derivative Instruments
 
Accumulated
Deficit
 
Noncontrolling
Interest
 
Total
Balance, January 1, 2013

 
$

 
293,164,786

 
$
2,932

 
$
5,623,595

 
$
102,125

 
(163,916
)
 
$
(2,625,990
)
 
$
12,518

 
$
2,951,264

Stock-based compensation related activity, net of forfeitures

 

 
947,979

 
9

 
10,020

 

 

 

 

 
10,029

Purchases and retirement of capital stock

 

 
(341,559
)
 
(3
)
 
(23,576
)
 

 

 

 

 
(23,579
)
Other comprehensive income (loss)(a)

 

 

 

 

 
(815
)
 
10,570

 

 
425

 
10,180

Net income (loss)

 

 

 

 

 

 

 
15,462

 
1,275

 
16,737

Balance, March 31, 2013

 
$

 
293,771,206

 
$
2,938

 
$
5,610,039

 
$
101,310

 
(153,346
)
 
$
(2,610,528
)
 
$
14,218

 
$
2,964,631


 
 
 
 
 
CCIC Stockholders
 
 
 
 
 
 
 
Redeemable Convertible Preferred Stock
 
Common Stock
 
 
 
AOCI
 
 
 
 
 
 
 
Shares
 
Amount
 
Shares
 
($.01 Par)
 
Additional
Paid-In
Capital
 
Foreign Currency Translation Adjustments
 
Derivative Instruments
 
Accumulated
Deficit
 
Noncontrolling
Interest
 
Total
Balance, January 1, 2012
6,111,000

 
$
305,032

 
284,449,372

 
$
2,844

 
$
5,312,342

 
$
95,044

 
(212,040
)
 
$
(2,811,945
)
 
$
619

 
$
2,386,864

Stock-based compensation related activity, net of forfeitures

 

 
883,941

 
9

 
9,221

 

 

 

 

 
9,230

Purchases and retirement of capital stock

 

 
(690,733
)
 
(7
)
 
(35,469
)
 

 

 

 

 
(35,476
)
Conversion of redeemable preferred stock into common stock
(6,111,000
)
 
(305,180
)
 
8,285,905

 
83

 
305,097

 

 

 

 

 
305,180

Other comprehensive income (loss)(a)

 

 

 

 

 
7,615

 
16,338

 

 
(726
)
 
23,227

Dividends on preferred stock and amortization of issue costs

 
148

 

 

 

 

 

 
(2,629
)
 

 
(2,629
)
Net income (loss)

 

 

 

 

 

 

 
50,031

 
239

 
50,270

Balance, March 31, 2012

 
$

 
292,928,485

 
$
2,929

 
$
5,591,191

 
$
102,659

 
(195,702
)
 
$
(2,764,543
)
 
$
132

 
$
2,736,666

___________________________
(a)
See the statement of operations and other comprehensive income (loss) for the components of "other comprehensive income (loss)" and note 4 with respect to the reclassification adjustment.

See notes to condensed consolidated financial statements.

5


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, 2012, and related notes thereto, included in the 2012 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) DAS, a type of small cell network, and (3) third party land interests. The Company conducts operations through subsidiaries of CCOC, including (1) certain subsidiaries which operate wireless infrastructure portfolios in the United States, including Puerto Rico ("U.S." or "CCUSA") and (2) a 77.6% owned subsidiary that operates towers in Australia (referred to as "CCAL"). The Company's core business is providing access, including space or capacity, to (1) its approximately 31,600 towers (of which approximately 29,800 towers are in CCUSA and approximately 1,700 towers are in CCAL) and, to a lesser extent, to (2) its small cell networks and (3) third party land interests, to wireless communication companies via long-term contracts in various forms. As further discussed in the 2012 Form 10-K, approximately 12,700 of the Company's towers are leased or operated under master leases and subleases.
To a lesser extent, the Company also provides certain network services relating to its wireless infrastructure, consisting of (1) customer equipment installation and subsequent augmentation (collectively, "installation services") and (2) the following additional site development services relating to existing and new antenna installations on its wireless infrastructure: site acquisition, architectural and engineering, zoning and permitting, other construction and network development related services.
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 fairly state the consolidated financial position of the Company at March 31, 2013, and the consolidated results of operations and the consolidated cash flows for the three months ended March 31, 2013 and 2012. 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 2012 Form 10-K.
New Accounting Pronouncements
No accounting pronouncements adopted during the three months ended March 31, 2013 had a material impact on the Company's consolidated financial statements. No new accounting pronouncements issued during the three months ended March 31, 2013 but not yet adopted are expected to have a material impact on the Company's consolidated financial statements.


6

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


3.
Acquisitions
T-Mobile Acquisition
In September 2012, the Company entered into a definitive agreement with T-Mobile to acquire the exclusive rights to lease, operate or otherwise acquire approximately 7,100 T-Mobile towers for approximately $2.5 billion. On November 30, 2012, the Company closed on the T-Mobile Acquisition. Upon closing, the Company obtained the exclusive right to lease and operate the T-Mobile towers (that are otherwise not owned by the Company). See the 2012 Form 10-K for further discussion of the terms of the T-Mobile lease including the purchase option. The Company utilized cash on hand, inclusive of the proceeds from the 5.25% Senior Notes, and borrowings from the 2012 Revolver to fund the T-Mobile Acquisition.
The purchase price and the purchase price allocation for the T-Mobile Acquisition is not finalized as of March 31, 2013. As such, the preliminary purchase price allocation presented below is based upon a preliminary valuation which is subject to change as the Company obtains additional information, including with respect to fixed assets, intangible assets, deferred taxes and certain liabilities. The principal changes in the preliminary purchase price allocation between December 31, 2012 and March 31, 2013 relate to a $31.1 million decrease to the below-market lease intangible, a $40.3 million increase to the above-market lease deferred credit, a $22.6 million increase to deferred income tax assets and a corresponding increase to goodwill. The effect of the change in the preliminary purchase price allocation on the Company's Statement of Operations and Comprehensive Income (Loss) is immaterial to the periods presented. The preliminary purchase price allocation for the T-Mobile Acquisition, as of March 31, 2013, is shown below.
 
Preliminary Purchase Price Allocation
 
Presented March 31, 2013
Current assets
$
17,854

Property and equipment
1,457,594

Goodwill(b)
483,603

Other intangible assets, net
372,225

Deferred income tax assets
226,197

Below-market tenant leases and other non-current liabilities(a)
(71,687
)
Net assets acquired
$
2,485,786

    
(a)
Inclusive of above-market leases for land interests under the Company's towers.
(b)
The preliminary purchase price allocation for the T-Mobile Acquisition resulted in the recognition of goodwill at CCUSA primarily because of the anticipated growth opportunities in the tower portfolio. In addition, $405.7 million is not expected to be deductible for tax purposes.
Unaudited Pro Forma Operating Results
The unaudited pro forma condensed consolidated results of operations combine the historical results of the Company, along with the historical results of the WCP Acquisition, NextG Acquisition and T-Mobile Acquisition for the period presented below. The following table presents the unaudited pro forma condensed consolidated results of operations of the Company for the period presented as if each acquisition was completed as of January 1, 2011. The unaudited pro forma amounts are presented for illustrative purposes only and are not necessarily indicative of future consolidated results of operations.
 
Three Months Ended March 31, 2012
 
Net revenues
$
658,862

(a) 
Net income (loss)
$
44,056

(b)(c) 
Basic net income (loss) attributable to CCIC common stockholders, after deduction of dividends on preferred stock, per common share
$
0.14

 
Diluted net income (loss) attributable to CCIC common stockholders, after deduction of dividends on preferred stock, per common share
$
0.14

 
    
(a)
For the three months ended March 31, 2012, amounts are inclusive of pro forma adjustments to increase net revenues of $65.1 million that we expect to recognize from T-Mobile under T-Mobile's contracted lease of space on the towers acquired in the T-Mobile Acquisition.
(b)
For the three months ended March 31, 2012, amounts are inclusive of pro forma adjustments to increase depreciation and amortization of $47.6 million related to property and equipment and intangibles recorded as a result of the combined effect of the WCP Acquisition, NextG Acquisition, and T-Mobile Acquisition.
(c)
For the three months ended March 31, 2012, the pro forma adjustments are tax effected using the federal statutory rate and no adjustment was made with respect to the Company's reversal of valuation allowance.

7

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


4.
Debt and Other Obligations
 
Original
Issue Date
 
Contractual
Maturity Date
 
Outstanding
Balance as of
March 31, 2013
 
Outstanding
Balance as of
December 31, 2012
 
Stated Interest
Rate as of
March 31, 2013(a)
 
Bank debt - variable rate:
 
 
 
 
 
 
 
 
 
 
2012 Revolver
Jan. 2012
 
Jan. 2017
(b) 
1,088,000

(b) 
1,253,000

 
2.7
%
(c) 
2012 Term Loans
Jan. 2012
 
2017/2019
 
2,055,000

 
2,065,250

 
3.7
%
(c) 
Total bank debt
 
 
 
 
3,143,000

 
3,318,250

 
 
 
Securitized debt - fixed rate:
 
 
 
 
 
 
 
 
 
 
January 2010 Tower Revenue Notes
Jan. 2010
 
2035 - 2040
(d) 
1,900,000

 
1,900,000

 
5.7
%
(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) 
193,800

 
198,463

 
7.2
%
 
WCP Securitized Notes
Nov. 2010
 
Nov. 2040
(f) 
302,538

(f) 
307,739

 
5.5
%
 
Total securitized debt
 
 
 
 
3,946,338

 
3,956,202

 
 
 
Bonds - fixed rate:
 
 
 
 
 
 
 
 
 
 
9% Senior Notes
Jan. 2009
 
Jan. 2015
 

 
304,718

 
N/A

 
7.75% Secured Notes
Apr. 2009
 
May 2017
 

 
291,394

 
N/A

 
7.125% Senior Notes
Nov. 2009
 
Nov. 2019
 
498,166

 
498,110

 
7.1
%
 
     5.25% Senior Notes
Oct. 2012
 
Jan. 2023
 
1,650,000

 
1,650,000

 
5.3
%
 
2012 Senior Notes
Dec. 2012
 
2017/2023
(g) 
1,500,000

 
1,500,000

 
3.4
%
 
Total bonds
 
 
 
 
3,648,166

 
4,244,222

 
 
 
Other:
 
 
 
 
 
 
 
 
 
 
Capital leases and other obligations
Various
 
Various
 
98,652

 
92,568

 
Various

 
Total debt and other obligations
 
 
 
 
10,836,156

 
11,611,242

 
 
 
Less: current maturities and short-term debt and other current obligations
 
 
 
 
94,839

 
688,056

 
 
 
Non-current portion of long-term debt and other long-term obligations
 
 
 
 
$
10,741,317

 
$
10,923,186

 
 
 
________________
(a)
Represents the weighted-average stated interest rate.
(b)
As of March 31, 2013, the undrawn availability under the $1.5 billion 2012 Revolver is $412.0 million.
(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). See note 11.
(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 $123.8 million of principal as of March 31, 2013 that amortizes through 2019, and $70.0 million of principal as of March 31, 2013 that amortizes during the period beginning in 2019 and ending in 2029.
(f)
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.
(g)
The 2012 Secured Notes consists of $500 million aggregate principal amount of 2.381% secured notes due 2017 and $1.0 billion aggregate principal amount of 3.849% secured notes due 2023.
See note 11 for a discussion of the refinancing of the Term Loan B in April 2013.

8

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


Contractual Maturities
The following are the scheduled contractual maturities of the total debt and other long-term obligations outstanding at March 31, 2013. 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.
 
Nine Months Ended December 31,
 
Years Ending December 31,
 
 
 
 
 
Unamortized Adjustments, Net
 
Total Debt and Other Obligations Outstanding
 
2013
 
2014
 
2015
 
2016
 
2017
 
Thereafter
 
Total Cash Obligations
 
 
Scheduled contractual maturities
$
68,314

 
$
99,773

 
$
112,241

 
$
113,508

 
$
1,975,529

 
$
8,457,942

 
$
10,827,307

 
$
8,849

 
$
10,836,156

Debt Purchases and Repayments
The following is a summary of debt purchases and repayments of debt during the three months ended March 31, 2013.
 
Three Months Ended March 31, 2013
 
Principal Amount
 
Cash Paid(a)
 
Gains (Losses)(c)
Revolver
$
165,000

 
$
165,000

 
$

9% Senior Notes
314,170

 
332,001

 
(17,850
)
7.75% Secured Notes(b)
294,362

 
312,421

 
(18,059
)
Total
$
773,532

 
$
809,422

 
$
(35,909
)
________________
(a)
Exclusive of accrued interest.
(b)
The redemption of the 7.75% Secured Notes was funded by the release of restricted cash.
(c)
The losses relate to cash losses, including with respect to make whole payments.
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 March 31,
 
2013
 
2012
Interest expense on debt obligations
$
127,449

 
$
113,007

Amortization of deferred financing costs
9,047

 
4,812

Amortization of adjustments on long-term debt
11,436

 
3,763

Amortization of interest rate swaps(a)
16,262

 
16,338

Other, net of capitalized interest
175

 
(448
)
Total
$
164,369

 
$
137,472

    
(a)
Amounts reclassified from accumulated other comprehensive income (loss).

5.
Income Taxes
For the three months ended March 31, 2013, the Company's effective rate differed from the federal statutory rate predominately due to state taxes of $6.9 million, including the impact of certain subsidiaries without state income tax filing requirements incurring taxable losses for which no state benefit could be recorded.   As further discussed in our 2012 Form 10-K, for the three months ended March 31, 2012, the Company's effective tax rate differed from the federal statutory rate predominately due to its federal valuation allowances.


9

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


6.
Fair Value Disclosures
 
Level in Fair Value Hierarchy
 
March 31, 2013
 
December 31, 2012
 
 
Carrying
 Amount
 
Fair
Value
 
Carrying
 Amount
 
Fair
Value
Assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
1
 
$
160,865

 
$
160,865

 
$
441,364

 
$
441,364

Restricted cash, current and non-current
1
 
144,455

 
144,455

 
580,938

 
580,938

Liabilities:
 
 
 
 
 
 
 
 
 
Long-term debt and other obligations
2
 
10,836,156

 
11,529,722

 
11,611,242

 
12,438,032

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, 2012 in the Company's valuation techniques used to measure fair values.

7.
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 March 31,
 
2013
 
2012
Net income (loss) attributable to CCIC stockholders
$
15,462

 
$
50,031

Dividends on preferred stock

 
(2,629
)
Net income (loss) attributable to CCIC common stockholders after deduction of dividends on preferred stock for basic and diluted computations
$
15,462

 
$
47,402

Weighted-average number of common shares outstanding (in thousands):
 
 
 
Basic weighted-average number of common stock outstanding
291,102

 
284,913

Effect of assumed dilution from potential common shares relating to stock options and restricted stock awards
1,468

 
940

Diluted weighted-average number of common shares outstanding
292,570

 
285,853

Net income (loss) attributable to CCIC common stockholders after deduction of dividends on preferred stock, per common share:
 
 
 
Basic
$
0.05

 
$
0.17

Diluted
$
0.05

 
$
0.17

 For the three months ended March 31, 2013, 0.7 million restricted stock awards were excluded from the dilutive common shares because certain stock price hurdles would not have been achieved assuming that March 31, 2013 was the end of the contingency period.

10

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


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. Additionally, the Company and certain of its subsidiaries are contingently liable for commitments and performance guarantees arising in the ordinary course of business.

9.
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.

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 March 31, 2013
 
Three Months Ended March 31, 2012
 
CCUSA
 
CCAL
 
Eliminations
 
Consolidated
Total
 
CCUSA
 
CCAL
 
Eliminations
 
Consolidated
Total
Net revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Site rental
$
581,265

 
$
34,150

 
$

 
$
615,415

 
$
468,119

 
$
29,410

 
$

 
$
497,529

Network services and other
117,862

 
6,783

 

 
124,645

 
46,968

 
7,248

 

 
54,216

Net revenues
699,127

 
40,933

 

 
740,060

 
515,087

 
36,658

 

 
551,745

Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs of operations:(a)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Site rental
167,591

 
10,015

 

 
177,606

 
113,944

 
8,927

 

 
122,871

Network services and other
71,848

 
5,529

 

 
77,377

 
26,802

 
4,719

 

 
31,521

General and administrative
52,562

 
5,684

 

 
58,246

 
43,653

 
7,348

 

 
51,001

Asset write-down charges
3,603

 
112

 

 
3,715

 
3,033

 
11

 

 
3,044

Acquisition and integration costs
1,602

 

 

 
1,602

 
1,652

 
28

 

 
1,680

Depreciation, amortization and accretion
179,126

 
7,333

 

 
186,459

 
131,641

 
7,759

 

 
139,400

Total operating expenses
476,332

 
28,673

 

 
505,005

 
320,725

 
28,792

 

 
349,517

Operating income (loss)
222,795

 
12,260

 

 
235,055

 
194,362

 
7,866

 

 
202,228

Interest expense and amortization of deferred financing costs
(164,369
)
 
(4,445
)
 
4,445

 
(164,369
)
 
(137,459
)
 
(5,337
)
 
5,324

 
(137,472
)
Gains (losses) on retirement of long-term obligations
(35,909
)
 

 

 
(35,909
)
 
(7,068
)
 

 

 
(7,068
)
Interest income
203

 
94

 

 
297

 
197

 
157

 

 
354

Other income (expense)
3,819

 
(3
)
 
(4,445
)
 
(629
)
 
4,287

 
(40
)
 
(5,324
)
 
(1,077
)
Benefit (provision) for income taxes
(15,613
)
 
(2,095
)
 

 
(17,708
)
 
(6,174
)
 
(521
)
 

 
(6,695
)
Net income (loss)
10,926

 
5,811

 

 
16,737

 
48,145

 
2,125

 

 
50,270

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

 
1,275

 

 
1,275

 
(210
)
 
449

 

 
239

Net income (loss) attributable to CCIC stockholders
$
10,926

 
$
4,536

 
$

 
$
15,462

 
$
48,355

 
$
1,676

 
$

 
$
50,031

Capital expenditures
$
113,199

 
$
3,154

 
$

 
$
116,353

 
$
62,214

 
$
2,838

 
$

 
$
65,052

________________
(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)


The following are reconciliations of net income (loss) to Adjusted EBITDA for the three months ended March 31, 2013 and 2012.
 
Three Months Ended March 31, 2013
 
Three Months Ended March 31, 2012
 
CCUSA
 
CCAL
 
Eliminations
 
Consolidated
Total
 
CCUSA
 
CCAL
 
Eliminations
 
Consolidated
Total
Net income (loss)
$
10,926

 
$
5,811

 
$

 
$
16,737

 
$
48,145

 
$
2,125

 
$

 
$
50,270

Adjustments to increase (decrease) net income (loss):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asset write-down charges
3,603

 
112

 

 
3,715

 
3,033

 
11

 

 
3,044

Acquisition and integration costs
1,602

 

 

 
1,602

 
1,652

 
28

 

 
1,680

Depreciation, amortization and accretion
179,126

 
7,333

 

 
186,459

 
131,641

 
7,759

 

 
139,400

Amortization of prepaid lease purchase price adjustments
3,863

 

 

 
3,863

 
2,550

 

 

 
2,550

Interest expense and amortization of deferred financing costs
164,369

 
4,445

 
(4,445
)
 
164,369

 
137,459

 
5,337

 
(5,324
)
 
137,472

Gains (losses) on retirement of long-term obligations
35,909

 

 

 
35,909

 
7,068

 

 

 
7,068

Interest income
(203
)
 
(94
)
 

 
(297
)
 
(197
)
 
(157
)
 

 
(354
)
Other income (expense)
(3,819
)
 
3

 
4,445

 
629

 
(4,287
)
 
40

 
5,324

 
1,077

Benefit (provision) for income taxes
15,613

 
2,095

 

 
17,708

 
6,174

 
521

 

 
6,695

Stock-based compensation expense
10,029

 
68

 

 
10,097

 
9,035

 
2,123

 

 
11,158

Adjusted EBITDA
$
421,018

 
$
19,773

 
$

 
$
440,791

 
$
342,273

 
$
17,787

 
$

 
$
360,060


10.
Supplemental Cash Flow Information
 
Three Months Ended March 31,
 
2013
 
2012
Supplemental disclosure of cash flow information:
 
 
 
Interest paid
$
99,871

 
$
123,140

Income taxes paid
2,645

 
884

Supplemental disclosure of non-cash financing activities:
 
 
 
Increase (decrease) in liabilities for purchases of property and equipment
(5,134
)
 
7,782

Conversion of redeemable convertible preferred stock

 
305,180


11.
Subsequent Event
Term Loan
In April 2013, the Company refinanced the outstanding Term Loan B with a new loan pursuant to our existing credit agreement in an aggregate principal amount of $1.58 billion. The terms of the new Term Loan B are substantially the same as the terms of the refinanced Term Loan B, except that (1) the interest rate margin applicable to the new Term Loan B is 50 to 75 basis points (depending on the CCOC's total net leverage ratio determined from time to time in accordance with the credit agreement) less than the interest rate margin of the previously outstanding Term Loan B and (2) the interest rate floor applicable to the new Term Loan B is 25 basis points less than the floor applicable to the refinanced Term Loan B. The amount of such interest rate margin depends on the total net leverage ratio of CCOC.


13


ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the response to Part I, Item 1 of this report and the consolidated financial statements of the Company including the related notes and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" ("MD&A") included in our 2012 Form 10-K. Capitalized terms used but not defined in this Item have the same meaning given to them in our 2012 Form 10-K. Unless this Form 10-Q indicates otherwise or the context requires, the terms "we," "our," "our company," "the company," or "us" as used in this Form 10-Q refer to Crown Castle International Corp. and its subsidiaries.

General Overview
Overview
We own, operate or lease shared wireless infrastructure, including: (1) towers, (2) distributed antenna systems, a type of small cell network, and (3) third party land interests. Our core business is providing access, including space or capacity, to our towers, and to a lesser extent, to our small cell networks and third party land interests via long-term contracts in various forms. Site rental revenues represented 83% of our first quarter 2013 consolidated net revenues, of which 94% was attributable to our CCUSA operating segment. The vast majority of our site rental revenues is of a recurring nature and has been contracted for in a prior year. See our 2012 Form 10-K for a further discussion of our business, including our long-term strategy, growth trends in the wireless communications industry and our wireless infrastructure portfolio.
The following are certain highlights of our business fundamentals as of and for the three months ended March 31, 2013.
Potential growth resulting from wireless network expansion and new entrants
We expect wireless carriers will continue their focus on improving network quality and expanding capacity by adding additional antennas and other equipment on our wireless infrastructure.
We expect existing and potential new wireless carrier demand for our wireless infrastructure will result from (1) next generation technologies, (2) continued development of mobile internet applications, (3) adoption of other emerging and embedded wireless devices, (4) increasing smartphone penetration, (5) wireless carrier focus on expanding coverage and (6) the availability of additional spectrum.
Substantially all of our wireless infrastructure can accommodate additional tenancy, either as currently constructed or with appropriate modifications to the structure.
U.S. wireless carriers continue to invest in their networks.
Our site rental revenues grew $117.9 million, or 24%, from the three months ended March 31, 2012 to the three months ended March 31, 2013. Our site rental revenue growth during the three months ended March 31, 2013 was impacted by:
Our acquisitions in 2012 ("Item 2. MD&A—Consolidated Results of Operations" and note 3 in our 2012 Form 10-K).
The fact that we have effectively pre-sold via a firm contractual commitment a significant portion of the modification of the existing installations relating to certain 4G upgrades. We have done so by increasing the future contracted revenue above that of a typical escalation over a period of time, typically a three to four year period. As a result, for any given period, the increase in cash revenue may not translate into a corresponding increase in reported revenues from the application of straight-line revenue recognition.
We expect that our full year 2013 site rental revenues growth will also be impacted by both of these same items that impacted our 2012 site rental revenues growth, including an approximately 13% expected contribution from the 2012 acquisitions. Additionally, we do not expect that any of the customers' network enhancement deployments and any related non-renewal of customer contracts anticipated in 2014 and 2015, including Sprint's Network Vision and any corresponding non-renewal of iDEN leases, will have a material adverse effect on our operations and cash flows for 2013 and subsequent periods.
Site rental revenues under long-term customer contracts with contractual escalations
Initial terms of five to 15 years with multiple renewal periods at the option of the tenant of five to ten years each.
Weighted-average remaining term of approximately eight years, exclusive of renewals at the customer's option, representing approximately $20 billion of expected future cash inflows.
Revenues predominately from large wireless carriers
Verizon Wireless, AT&T, Sprint Nextel and T-Mobile accounted for 75% of consolidated revenues.

14


The T-Mobile and MetroPCS merger was completed on April 30, 2013. See "Item 1A. Risk Factors" of our 2012 Form 10-K.
Majority of land interests under our towers under long-term control
Approximately 91% and 77% of our site rental gross margin is derived from towers that we own or control for greater than ten and 20 years, respectively. The aforementioned percentages include towers that reside on land interests that are owned in fee or where we have perpetual or long-term easement, which represent approximately 38% of our site rental gross margin.
Relatively fixed wireless infrastructure operating costs
Our wireless infrastructure operating costs tend to increase at approximately the rate of inflation and are not typically influenced by new tenant additions.
Minimal sustaining capital expenditure requirements
Sustaining capital expenditures were $6.9 million, which represented less than 1% percent of net revenues.
Debt portfolio with long-dated maturities extended over multiple years, with the majority of such debt having a fixed rate (see "Item 3. Quantitative and Qualitative Disclosures About Market Risk" for a further discussion of our debt)
71% of our debt has fixed rate coupons.
Our debt service coverage and leverage ratios were comfortably within their respective financial maintenance and cash trap covenants. See "Item 2. MD&A—Liquidity and Capital Resources" for a further discussion of our debt covenants.
Significant cash flows from operations
Net cash provided by operating activities was $286.6 million.
We believe our core business of providing access to our wireless infrastructure can be characterized as a stable cash flow stream, which we expect to grow as a result of future demand for our wireless infrastructure.
Capital allocated to drive long-term shareholder value (per share) (see also "Item 2. MD&A—Liquidity and Capital Resources")
Historical discretionary investments include (in no particular order): purchasing our common stock, acquiring or constructing wireless infrastructure, acquiring land interests under our towers, improving and structurally enhancing our existing wireless infrastructure, and purchasing, repaying or redeeming our debt.
Discretionary investments included:
Discretionary capital expenditures of $109.5 million, including wireless infrastructure improvements in order for sufficient additional site rentals, construction of wireless infrastructure and land purchases.
In April 2013, we refinanced all of the outstanding term loan B, which lowered the interest rate margin by 50 to 75 basis points (depending on the CCOC total net leverage ratio determined from time to time in accordance with the credit agreement) and the interest rate floor by 25 basis points. See note 11 to our condensed consolidated financial statements.
In January 2013, we completed the repurchase and redemption of all the outstanding 9% senior notes and 7.75% secured notes. In addition, we repaid $165 million on our 2012 revolver.





15


Consolidated Results of Operations
The following discussion of our results of operations should be read in conjunction with our condensed consolidated financial statements and our 2012 Form 10-K. The following discussion of our results of operations is based on our condensed consolidated financial statements prepared in accordance with GAAP, which requires us to make estimates and judgments that affect the reported amounts (see "Item 2. MD&A—Accounting and Reporting Matters—Critical Accounting Policies and Estimates" and note 2 to our consolidated financial statements on our 2012 Form 10-K).
Comparison of Consolidated Results
The following information is derived from our historical consolidated statements of operations for the periods indicated.
 
Three Months
Ended
March 31, 2013
 
Three Months
 Ended
 March 31, 2012
 
 
 
Amount
 
Amount
 
Percent
Change(b)
 
(Dollars in thousands)
 
 
Net revenues:
 
 
 
 
 
Site rental
$
615,415

 
$
497,529

 
24
%
Network services and other
124,645

 
54,216

 
130
%
Net revenues
740,060

 
551,745

 
34
%
Operating expenses:
 
 
 
 
 
Costs of operations(a):
 
 
 
 
 
Site rental
177,606

 
122,871

 
45
%
Network services and other
77,377

 
31,521

 
145
%
Total costs of operations
254,983

 
154,392

 
65
%
General and administrative
58,246

 
51,001

 
14
%
Asset write-down charges
3,715

 
3,044

 
*

Acquisition and integration costs
1,602

 
1,680

 
*

Depreciation, amortization and accretion
186,459

 
139,400

 
34
%
Total operating expenses
505,005

 
349,517

 
44
%
Operating income (loss)
235,055

 
202,228

 
16
%
Interest expense and amortization of deferred financing costs
(164,369
)
 
(137,472
)
 
20
%
Gains (losses) on retirement of long-term obligations
(35,909
)
 
(7,068
)
 
 
Interest income
297

 
354

 
 
Other income (expense)
(629
)
 
(1,077
)
 
 
Income (loss) before income taxes
34,445

 
56,965

 
 
Benefit (provision) for income taxes
(17,708
)
 
(6,695
)
 
 
Net income (loss)
16,737

 
50,270

 
 
Less: Net income (loss) attributable to the noncontrolling interest
1,275

 
239

 
 
Net income (loss) attributable to CCIC stockholders
$
15,462

 
$
50,031

 
 
________________
*
Percentage is not meaningful
(a)
Exclusive of depreciation, amortization and accretion shown separately.
(b)
Inclusive of the impact of foreign exchange rate fluctuations. See "Item 2. MD&A—Comparison of Operating Segments—CCAL."

First Quarter 2013 and 2012. Our consolidated results of operations for the first quarter of 2013 and 2012, respectively, consist predominately of our CCUSA segment, which accounted for (1) 94% and 93% of consolidated net revenues, (2) 95% and 94% of consolidated gross margins, and (3) 71% and 97% of net income (loss) attributable to CCIC stockholders. Our operating segment results, including CCUSA, are discussed below (see "Item 2. MD&A—Comparison of Operating Segments"). Our consolidated results of operation for the first quarter of 2013 were impacted by the WCP acquisition, NextG acquisition and T-Mobile acquisition which resulted in (1) an increase to consolidated net revenues of $125.6 million and (2) a net loss of $0.4 million included in net income (loss) attributable to CCIC stockholders, which include the impact of debt assumed in the WCP acquisition and approximately $1.3 million of acquisition and integration expenses, but excludes the interest expense associated with the financing to fund each of these acquisitions.

16


Comparison of Operating Segments
Our reportable operating segments for the first quarter of 2013 are (1) CCUSA, consisting of our U.S. operations, and (2) CCAL, our Australian operations. Our financial results are reported to management and the board of directors in this manner.
See note 9 to our condensed consolidated financial statements for segment results, our definition of Adjusted EBITDA, and a reconciliation of net income (loss) attributable to CCIC stockholders to Adjusted EBITDA (defined below).
Our measurement of profit or loss currently used to evaluate our operating performance and operating segments is earnings before interest, taxes, depreciation, amortization and accretion, as adjusted ("Adjusted EBITDA"). Our measure of Adjusted EBITDA may not be comparable to similarly titled measures of other companies, including companies in the tower sector and other similar providers of wireless infrastructure, and is not a measure of performance calculated in accordance with GAAP. Adjusted EBITDA is discussed further under "Item 2. MD&A—Accounting and Reporting Matters—Non-GAAP Financial Measures."
We define 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 a change in accounting principle, income (loss) from discontinued operations and stock-based compensation expense (see note 9 to our condensed consolidated financial statements). The reconciliation of Adjusted EBITDA to our net income (loss) is set forth in note 9 to our condensed consolidated financial statements. Adjusted EBITDA is not intended as an alternative measure of operating results or cash flows from operations as determined in accordance with GAAP. Adjusted EBITDA is discussed further under "Item 2. MD&A—Accounting and Reporting Matters—Non-GAAP Financial Measures."
CCUSA—First Quarter 2013 and 2012
Net revenues for the first quarter of 2013 increased by $184.0 million, or 36%, from the same period in the prior year. This increase in net revenues resulted from an increase from the same period in the prior year in (1) site rental revenues of $113.1 million, or 24%, and (2) network services and other revenues of $70.9 million, or 151%. This increase in site rental revenues was impacted by the following items, inclusive of straight-line accounting, in no particular order: new tenant additions across our entire portfolio, renewals or extensions of customer contracts, escalations, acquisitions and cancellations of customer contracts. Tenant additions were influenced by the previously mentioned growth in the wireless communications industry.
Site rental gross margins for the first quarter of 2013 increased by $59.5 million, or 17%, from the same period in the prior year. The increase in the site rental gross margins was related to the previously mentioned 24% increase in site rental revenues. Site rental gross margins for the first quarter of 2013 increased primarily as a result of acquisitions. The $59.5 million incremental margin represents 53% of the related increase in site rental revenues, inclusive of the impact of acquisitions.
Network services and other revenues for the first quarter of 2013 increased by $70.9 million, or 151%, and the related gross margin increased by $25.8 million, or 128%, from the same period in the prior year. The increase in our gross margin from our network services and other revenues is a reflection of the volume of activity from carrier network enhancements such as LTE upgrades and the general volatility in the volume and mix of network services work. Our network services business is of a variable nature as these revenues are not under long-term contracts.
General and administrative expenses for the first quarter of 2013 increased by $8.9 million, or approximately 20%, from the same period in the prior year. General and administrative expenses were 8% of net revenues for the first quarter of 2013 and the first quarter of 2012. The increase in general and administrative expenses in nominal dollars was commensurate with the growth in our business as a result of our acquisitions. Typically, our general and administrative expenses do not significantly increase as a result of new tenant additions on our wireless infrastructure.
Adjusted EBITDA for the first quarter of 2013 increased by $78.7 million, or 23%, from the same period in the prior year. Adjusted EBITDA was positively impacted by the growth in our site rental and network services activities and our acquisitions.
Depreciation, amortization and accretion for the first quarter of 2013 increased by $47.5 million, or 36%, from the same period in the prior year. This increase predominately resulted from the fixed asset and intangible asset additions related to the NextG acquisition and T-Mobile acquisition consummated in April 2012 and November 2012, respectively.

Interest expense and amortization of deferred financing costs increased $26.9 million, or 20%, from the first quarter of 2012 to the first quarter of 2013. During full year 2012, we completed several debt transactions, resulting in (1) the lowering our average

17


cost of debt, (2) funding for the WCP acquisition, NextG acquisition and T-Mobile acquisition, (3) the refinancing of certain of our debt and (4) the extension of our debt maturities. During 2013, we redeemed and repaid the remaining outstanding 7.75% secured notes and 9% senior notes. As a result of repurchasing and redeeming certain of our debt during the first quarter of 2013 and the first quarter of 2012, we incurred losses of $35.9 million and $7.1 million, respectively. For a further discussion of our debt, see note 4 to our condensed consolidated financial and see note 6 to our consolidated financial statements in the 2012 Form 10-K.
The benefit (provision) for income taxes for the first quarter of 2013 was a provision of $15.6 million, compared to a provision of $6.2 million for the first quarter of 2012. For the first quarter of 2013, the effective tax rate differs from the federal statutory rate predominately due to state taxes, including the impact of certain subsidiaries without state income tax filing requirements incurring taxable losses for which no state benefit could be recorded.  For the first quarter of 2012, the effective tax rate differs from the federal statutory rate predominately due to our federal deferred tax valuation allowance. See also note 9 to our 2012 Form 10-K.
Net income (loss) attributable to CCIC stockholders for the first quarter of 2013 was net income of $10.9 million compared to net income of $48.4 million for the first quarter of 2012. The change in net income was predominately due to (1) an increase in the losses on retirement of long-term obligations, (2) our acquisitions net of related interest expense to fund such acquisitions, partially offset by (3) growth in our site rental and network service gross margins.
CCAL—First Quarter 2013 and 2012
The increases and decreases between the first quarter of 2013 and the first quarter of 2012 were inclusive of exchange rate fluctuations. The average exchange rate of one Australian dollar expressed in U.S. dollars for the first quarter of 2013 was approximately 1.04, a decrease of 2% from approximately 1.06 for the same period in the prior year. See "Item 3. Quantitative and Qualitative Disclosures About Market Risk."
Total net revenues for the first quarter of 2013 increased by $4.3 million, or 12%, from the same period in the prior year. Site rental revenues for the first quarter of 2013 increased by $4.7 million, or 16%, from the same period in the prior year. Site rental revenues were impacted by various factors, inclusive of straight-line accounting, including in no particular order: tenant additions on our wireless infrastructure, renewals of customer contracts, acquisitions, escalations, exchange rates, and cancellations of customer contracts.
Site rental gross margins increased by $3.7 million, or 18%, for the first quarter of 2013, from $20.5 million, for the first quarter of 2012. Adjusted EBITDA for the first quarter of 2013 increased by $2.0 million, or 11%, from the same period in the prior year. The increases in the site rental gross margin and Adjusted EBITDA were primarily due to the same factors that drove the increase in net revenues.
Net income (loss) attributable to CCIC stockholders for the first quarter of 2013 was net income of $4.5 million, compared to net income of $1.7 million for the first quarter of 2012. The increase in net income was primarily driven by the growth in the site rental business.

Liquidity and Capital Resources
Overview
General.    We believe our core business can be characterized as a stable cash flow stream generated by revenues under long-term contracts (see "Item 2. MD&A—General Overview—Overview"). Since we became a public company in 1998, our cumulative net cash provided by operating activities (net of cash interest payments) has exceeded our sustaining capital expenditures and provided us with cash available for discretionary investments. For the foreseeable future, we expect to continue to generate net cash provided by operating activities that exceeds our capital expenditures and will be available for discretionary investments. In addition to investing net cash provided by operating activities, in certain circumstances, we may also use debt financings and issuances of equity or equity related securities to fund discretionary investments.

We seek to allocate the net cash provided by our operating activities in a manner that will enhance per share operating results. Our historical discretionary investments include (in no particular order): purchasing our common stock, acquiring or constructing wireless infrastructure, acquiring land interests under towers, improving and structurally enhancing our existing wireless infrastructure, and purchasing, repaying or redeeming our debt.

18


We seek to maintain a capital structure that we believe drives long-term stockholder value and optimizes our weighted-average cost of capital. We target a leverage ratio of approximately four to six times Adjusted EBITDA and interest coverage of approximately three times Adjusted EBITDA, subject to various factors such as the availability and cost of capital and the potential long-term return on our discretionary investments. We may choose to increase or decrease our leverage and coverage from these targets for periods of time.  As a result of our financing and investing transactions during 2012, including the T-Mobile acquisition, our CCIC consolidated leverage ratio (see "Item 2. MD&A—Liquidity and Capital Resources—Debt Covenants") is 6.3 times at March 31, 2013. This current CCIC consolidated leverage ratio is below our restrictive covenant of 7.0 times.
We have never declared nor paid any cash dividend on our common stock. Currently, we endeavor to utilize our net cash provided by operating activities to engage in discretionary investments. We seek to maintain flexibility in our discretionary investments with both net cash provided by operating activities and cash available from financing capacity. Periodically, our board of directors assesses the advisability of declaring and paying cash dividends at some point in the future, based on the then-current and anticipated future conditions, including our earnings, net cash provided by operating activities, capital requirements, financial condition, our relative market capitalization, taxable income, taxpayer status, and other factors deemed relevant by the board of directors.
We pay minimal cash income taxes as a result of our net operating loss carryforwards. We have approximately $2.7 billion of federal net operating losses to offset future taxable income. We expect to utilize our federal net operating losses between now and 2017 based on current taxable income projections. We evaluate our options with respect to appropriately managing our tax position on an on-going basis. These options may include a conversion to a REIT, which would require the payment of dividends on our common stock. If we were to convert to a REIT, we expect that certain subsidiaries may be treated as taxable REIT subsidiaries and would continue to be subject to corporate income taxes.
Liquidity Position.    The following is a summary of our capitalization and liquidity position. See "Item 3. Quantitative and Qualitative Disclosures About Market Risk" and note 4 to our condensed consolidated financial statements for additional information regarding our debt.
 
March 31, 2013
 
(In thousands of dollars)
Cash and cash equivalents(a)
$
160,865

Undrawn revolving credit facility availability(b)
412,000

Debt and other long-term obligations
10,836,156

Total equity
2,964,631

________________
(a)
Exclusive of restricted cash.
(b)
Availability at any point in time is subject to certain restrictions based on the maintenance of financial covenants contained in our credit agreement. See "Item 2. MD&A—Liquidity and Capital Resources—Financing Activities" and "Item 2. MD&A—Liquidity and Capital Resources—Debt Covenants."
Over the next 12 months:
We expect that our cash on hand, undrawn revolving credit facility availability and net cash provided by operating activities (net of cash interest payments) should be sufficient to cover our expected (1) debt service obligations of $94.8 million (principal payments) and (2) capital expenditures in excess of $400 million (sustaining and discretionary). As CCIC and CCOC are holding companies, this cash flow from operations is generated by our operating subsidiaries.
We have no debt maturities other than principal payments on amortizing debt. We do not anticipate the need to access the capital markets to refinance our existing debt until at least 2015. See "Item 3. Quantitative and Qualitative Disclosures About Market Risk" for a tabular presentation of our debt maturities as of March 31, 2013.

19


Summary Cash Flow Information
 
Three Months Ended March 31,
 
2013
 
2012
 
Change
 
(In thousands of dollars)
Net cash provided by (used for):
 
 
 
 
 
Operating activities
$
286,626

 
$
162,212

 
$
124,414

Investing activities
(129,016
)
 
(285,173
)
 
156,157

Financing activities
(436,487
)
 
1,104,933

 
(1,541,420
)
Effect of exchange rate changes on cash
(1,622
)
 
1,592

 
(3,214
)
Net increase (decrease) in cash and cash equivalents
$
(280,499
)
 
$
983,564

 
$
(1,264,063
)
Operating Activities
The increase in net cash provided by operating activities for the first three months of 2013 of $124.4 million, or 77%, from first three months of 2012, was primarily due to growth in our core business. Changes in working capital, particularly changes in deferred site rental receivables, deferred rental revenues, prepaid ground leases, restricted cash and accrued interest, can have a significant impact on our net cash from operating activities, largely due to the timing of payments and receipts. We expect to grow our cash flow provided by operating activities in the future (exclusive of movements in working capital) if we realize expected growth in our core business.
Investing Activities
Capital Expenditures.
 
Three Months Ended March 31,
 
2013
 
2012
 
Change
 
(In thousands of dollars)
Discretionary:
 
 
 
 
 
Purchases of land interests
$
15,987

 
$
27,949

 
$
(11,962
)
Wireless infrastructure improvements and other
57,838

 
25,898

 
31,940

Construction of wireless infrastructure
35,662

 
6,986

 
28,676

Sustaining
6,866

 
4,219

 
2,647

Total
$
116,353

 
$
65,052

 
$
51,301

Other than sustaining capital expenditures, which we expect to be approximately $34 million to $38 million for the year ended December 31, 2013, our capital expenditures are discretionary and are made with respect to activities which we believe exhibit sufficient potential to improve our long-term results of operations on a per share basis. We expect to use in excess of $400 million of our cash flow on capital expenditures (sustaining and discretionary) for full year 2013, with approximately 40% of our total capital expenditures targeted for our existing wireless infrastructure related to customer installations and related capacity improvement. Our decisions regarding capital expenditures are influenced by the availability and cost of capital and expected returns on alternative investments.
Capital expenditures for wireless infrastructure improvements typically vary based on (1) the type of work performed on the wireless infrastructure, with initial installations of a new antenna typically requiring greater capital expenditures than a modification to an existing installation, (2) the existing capacity of the wireless infrastructure prior to installation, and (3) changes in structural engineering regulations and our internal structural standards. Wireless infrastructure construction capital expenditures increased from the first three months of 2012 to the same period in 2013 as a result of additional DAS network builds.
Acquisitions.  See note 3 to our condensed consolidated financial statements and notes 3 and 5 to our 2012 Form 10-K for a discussion of our WCP acquisition, NextG acquisition and T-Mobile acquisition.
Financing Activities
We seek to allocate cash generated by our operations in a manner that will enhance per share operating results, which may include various financing activities such as (in no particular order) purchasing our common stock and purchasing or redeeming our debt. During the first three months of 2013, our financing activities predominately related to the redemption and repayment

20


of the remaining 7.75% secured notes and the 9% senior notes. The redemption of the 7.75% secured notes was funded by the release of restricted cash.
Credit Facility. The proceeds of our revolving credit facility may be used for general corporate purposes, which may include the financing of capital expenditures, acquisitions and purchases of our common stock. Typically, we have used our revolving credit facility to fund discretionary investments and not for operating activities such as working capital, which are typically funded by net cash provided by operating activities. As of April 29, 2013, there was $1.1 billion outstanding under our revolving credit facility. During the three months ended March 31, 2013, we repaid a total of $165 million and made no borrowings under the 2012 Revolver. See also note 11 of our condensed consolidated financial statements, regarding the refinancing of our term loan B.
Debt Purchases and Repayments. See note 4 to our condensed consolidated financial statements for a summary of our debt purchases and repayments during the first quarter of 2013, including the gains (losses) on retirement of long-term obligations.
Common Stock Activity.  As of March 31, 2013 and December 31, 2012, we had 293.8 million and 293.2 million common shares outstanding, respectively. During the first three months of 2013, we purchased 0.3 million shares of common stock at an average price of $69.03 per share utilizing $23.6 million in cash.
Debt Covenants
We currently have no financial covenant violations, and based upon our current expectations, we believe our operating results will be sufficient to comply with our debt covenants. The following are the ratios applicable to the financial maintenance, restrictive and cash trap reserve covenants under our debt agreements. See our 2012 Form 10-K for a further discussion of our debt covenants, certain restrictive covenants and factors that are likely to determine our subsidiaries' ability to comply with current and future debt covenants.
Covenant Description(a)
 
Type
 
Debt
 
Current
Covenant
Requirement
 
As of
March 31,
2013
 
Latest Issuance Date
CCIC:
 
 
 
 
 
 
 
 
 
 
Leverage ratio
 
Restrictive
 
7.125% Senior Notes
 
≤7.00
 
6.3
 
6.3
Leverage ratio
 
Restrictive
 
5.25% Senior Notes
 
≤7.00
 
6.3
 
6.5
CCOC:
 
 
 
 
 
 
 
 
 
 
Net leverage ratio
 
Maintenance
 
Credit Agreement
 
≤6.0
 
4.9
 
4.8
Net leverage ratio
 
Restrictive
 
Credit Agreement
 
≤5.5
 
4.9
 
4.8
Interest coverage ratio
 
Maintenance
 
Credit Agreement
 
≥2.5
 
4.8
 
3.9
Tower and third party land interest companies:
 
 
 
 
 
 
 
 
 
 
Debt service coverage ratio
 
Cash Trap
 
2010 Tower Revenue Notes
 
>1.75
 
3.7
 
3.1
Debt service coverage ratio
 
Cash Trap
 
2009 Securitized Notes
 
>1.30
 
3.5
 
2.4
Debt service coverage ratio
 
Cash Trap
 
WCP Securitized Notes
 
≥1.30
 
1.5
 
N/A
________________
(a)
See our 2012 Form 10-K for a discussion of a calculation of each ratio. Failure to comply with the maintenance ratios could result in default under our credit agreement. Failure to comply with the cash trap ratios would require the cash flows generated by the issuers and their subsidiaries to be deposited in a reserve account and not released to us. The 7.125% senior notes and 5.25% senior notes contain restrictive covenants with which CCIC and our restricted subsidiaries must comply, subject to a number of exceptions and qualifications, including restrictions on our ability to incur incremental debt, issue preferred stock, guarantee debt, pay dividends, repurchase our capital stock, use assets as security in other transactions, sell assets or merge with or into other companies, and make certain investments. Certain of these covenants are not applicable if there is no event of default and if the ratio of our Consolidated Debt (as defined in the senior notes indenture) to our Adjusted Consolidated Cash Flows (as defined in the senior notes indenture) is less than 7.0 to 1.0. The credit agreement contains a restrictive covenant relating to CCOC and its restricted subsidiaries' ability to make Restricted Payments (as defined in the credit agreement), including dividends.


21


Accounting and Reporting Matters
Critical Accounting Policies and Estimates
Our critical accounting policies and estimates are those that we believe (1)are most important to the portrayal of our financial condition and results of operations and (2) require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. The critical accounting policies and estimates are not intended to be a comprehensive list of our accounting policies and estimates. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP, with no need for management's judgment. In other cases, management is required to exercise judgment in the application of accounting principles with respect to particular transactions. Our critical accounting policies and estimates as of December 31, 2012 are described in "Item 7. MD&A" and in note 2 of our consolidated financial statements in our 2012 Form 10-K. The critical accounting policies and estimates for the first three months of 2013 have not changed from the critical accounting policies for the year ended December 31, 2012.
Impact of Accounting Standards Issued But Not Yet Adopted and Those Adopted in 2013
No accounting pronouncements adopted during the three months ended March 31, 2013 had a material impact on our condensed consolidated financial statements. No new accounting pronouncements issued during the three months ended March 31, 2013 are expected to have a material impact on our condensed consolidated financial statements.
Non-GAAP Financial Measures
Our measurement of profit or loss currently used to evaluate the operating performance of our operating segments is earnings before interest, taxes, depreciation, amortization and accretion, as adjusted, or Adjusted EBITDA. Our definition of Adjusted EBITDA is set forth in "Item 2. MD&A—Results of Operations—Comparison of Operating Segments." Our measure of Adjusted EBITDA may not be comparable to similarly titled measures of other companies, including companies in the tower sector and other similar providers of wireless infrastructure, and is not a measure of performance calculated in accordance with GAAP. Adjusted EBITDA should not be considered in isolation or as a substitute for operating income or loss, net income or loss, net cash provided by (used for) operating, investing and financing activities or other income statement or cash flow statement data prepared in accordance with GAAP.
We believe Adjusted EBITDA is useful to an investor in evaluating our operating performance because:
it is the primary measure used by our management to evaluate the economic productivity of our operations, including the efficiency of our employees and the profitability associated with their performance, the realization of contract revenues under our long-term contracts, our ability to obtain and maintain our customers and our ability to operate our site rental business effectively;
it is the primary measure of profit and loss used by our management for purposes of making decisions about allocating resources to, and assessing the performance of, our operating segments;
it is similar to the measure of current financial performance generally used in our debt covenant calculations;
although specific definitions may vary, it is widely used in the tower sector and other similar providers of wireless infrastructure to measure operating performance without regard to items such as depreciation, amortization and accretion which can vary depending upon accounting methods and the book value of assets; and
we believe it helps investors meaningfully evaluate and compare the results of our operations (1) from period to period and (2) to our competitors by removing the impact of our capital structure (primarily interest charges from our outstanding debt) and asset base (primarily depreciation, amortization and accretion) from our operating results.
Our management uses Adjusted EBITDA:
with respect to compliance with our debt covenants, which require us to maintain certain financial ratios including, or similar to, Adjusted EBITDA;
as the primary measure of profit and loss for purposes of making decisions about allocating resources to, and assessing the performance of, our operating segments;
as a performance goal in employee annual incentive compensation;
as a measurement of operating performance because it assists us in comparing our operating performance on a consistent basis as it removes the impact of our capital structure (primarily interest charges from our outstanding debt) and asset base (primarily depreciation, amortization and accretion) from our operating results;
in presentations to our board of directors to enable it to have the same measurement of operating performance used by management;
for planning purposes, including preparation of our annual operating budget;

22


as a valuation measure in strategic analyses in connection with the purchase and sale of assets; and
in determining self-imposed limits on our debt levels, including the evaluation of our leverage ratio and interest coverage ratio.
There are material limitations to using a measure such as Adjusted EBITDA, including the difficulty associated with comparing results among more than one company, including our competitors, and the inability to analyze certain significant items, including depreciation and interest expense, that directly affect our net income or loss. Management compensates for these limitations by considering the economic effect of the excluded expense items independently as well as in connection with their analysis of net income (loss).

ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following section updates "Item 7A. Quantitative and Qualitative Disclosures About Market Risk" in our 2012 Form 10-K and should be read in conjunction with that report as well as our condensed consolidated financial statements included in Part 1, Item 1 of this report.
Interest Rate Risk
Our interest rate risk relates primarily to the impact of interest rate movements on the following:
the potential refinancing of our existing debt ($10.8 billion and $11.6 billion outstanding at March 31, 2013 and December 31, 2012, respectively);
our $3.1 billion of floating rate debt at March 31, 2013, represents approximately 29% of our total debt, compared to 29% of our total debt as of December 31, 2012; and
potential future borrowings of incremental debt.
We may refinance our current outstanding indebtedness on or prior to maturity at the then current prevailing market rates which may be higher than our current stated rates, including as a result of potential future increases in risk free rates. We currently have no interest rate swaps hedging any refinancings.
We manage our exposure to market interest rates on our existing debt by controlling the mix of fixed and floating rate debt. As of March 31, 2013, after giving effect to the refinancing of our term loan B in April 2013, we had $3.1 billion of floating rate debt, which included $1.6 billion of debt with a LIBOR floor of 75 basis points per annum. As a result, a hypothetical unfavorable fluctuation in market interest rates on our existing debt of 1/8 of a percent point over a 12 month period would increase our interest expense by approximately $2 million when giving effect to our LIBOR floor and would increase our interest expense by approximately $4 million exclusive of the impact of the LIBOR floor.
The following table provides information about our market risk related to changes in interest rates. The future principal payments and weighted-average interest rates are presented as of March 31, 2013, after giving effect to the refinancing of the term loan B in April 2013. These debt maturities reflect contractual maturity dates and do not consider the impact of the principal payments that commence if the applicable debt is not repaid or refinanced on or prior to the anticipated repayment dates on the tower revenue notes and the WCP Securitized Notes (see footnote (c)). See note 4 to our condensed consolidated financial statements for additional information regarding our debt.
 
Future Principal Payments and Interest Rates by the Debt Instruments' Contractual Year of Maturity
 
2013
 
2014
 
2015
 
2016
 
2017
 
Thereafter
 
Total
 
Fair Value(a)
 
(Dollars in thousands)
Debt:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed rate(c)
$
37,564

 
$
49,398

 
$
49,366

 
$
47,508

 
$
546,529

(e) 
$
6,953,942

(c) 
$
7,684,307

(c) 
$
8,366,105

Average interest rate(b)(c)
4.9
%
 
5.0
%
 
5.0
%
 
7.1
%
 
2.8
%
 
7.8
%
(c) 
7.4
%
(c) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Variable rate
$
30,750

 
$
50,375

 
$
62,875

 
$
66,000

 
$
1,429,000

 
$
1,504,000

 
$
3,143,000

 
$
3,163,617

Average interest rate(d)
2.9
%
 
2.9
%
 
2.8
%
 
2.8
%
 
2.7
%
 
3.3
%
 
3.0
%
 
 
________________
(a)
The fair value of our debt is based on indicative, non-binding quotes from brokers. Quotes from the 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 offers. These fair values are not necessarily indicative of the amount which could be realized in a current market exchange.
(b)
The average interest rate represents the weighted-average stated coupon rate (see footnote (c)).

23



(c)
The impact of principal payments that commence if the applicable debt is not repaid or refinanced on or prior to the anticipated repayment dates are not considered. 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 repayments 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. If the tower revenue notes are not repaid in full by their anticipated repayment dates, the applicable interest rate increases by an additional approximately 5% per annum and monthly principal payments commence using the Excess Cash Flow of the issuers of the tower revenue notes. The tower revenue notes are presented based on their contractual maturity dates between 2035 and 2040 and include the impact of an assumed 5% increase in interest rate that would occur following the anticipated repayment dates but exclude the impact of monthly principal payments that would commence using Excess Cash Flow of the issuers of the tower revenue notes. The full year 2012 Excess Cash Flow of the issuers was approximately $482 million. If the WCP Securitized Notes with a current face value of $291.9 million are not repaid in full by their anticipated repayment dates in 2015, 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 Flow of the Issuers of the WCP Securitized Notes. The WCP Securitized Notes are presented based on their contractual maturity dates in 2040. The full year 2012 Excess Cash Flow of Issuers of the WCP Securitized Notes was approximately $17 million. We currently expect to refinance these notes on or prior to the respective anticipated repayment dates.
(d)
The average variable interest rate is based on the rates currently in effect. 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. After giving effect to the refinancing in April 2013 discussed in note 11, the Term Loan B bears interest at a per annum rate equal to LIBOR (with LIBOR subject to a floor of 75 basis points per annum) plus 2.25% to 2.5%, based on CCOC's total net leverage ratio.
(e)
Predominantly consists of a portion of the 2012 secured notes in an aggregate principal amount of $500 million of 2.381% secured notes due 2017
Foreign Currency Risk
The vast majority of our foreign currency risk is related to the Australian dollar which is the functional currency of CCAL. CCAL represented 6% of our consolidated net revenues and 5% of our operating income for the three months ended March 31, 2013. Over the past year, the Australian dollar has remained nearly constant in value compared to the U.S. dollar. We believe the risk related to our financial instruments (exclusive of inter-company financing deemed a long-term investment) denominated in Australian dollars should not be material to our financial condition.

ITEM 4.
CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The Company conducted an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective in alerting them in a timely manner to material information relating to the Company required to be included in the Company's periodic reports under the Securities Exchange Act of 1934.
Changes in Internal Control Over Financial Reporting
There have been no changes in the Company's internal control over financial reporting during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.


24


PART II—OTHER INFORMATION

ITEM 1A.
RISK FACTORS
There are no material changes to the risk factors discussed in "Item 1A—Risk Factors" in our 2012 Form 10-K.

ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table summarizes information with respect to purchase of our equity securities during the first quarter of 2013:
Period
 
Total Number of Shares Purchased
 
Average Price Paid per Share
 
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
 
Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
 
 
(In thousands)
 
 
 
 
 
 
January 1 - January 31, 2013
 

 
$

 

 

February 1 - February 28, 2013
 
341

 
69.03

 

 

March 1 - March 31, 2013
 
1

 
71.79

 

 

Total
 
342

 
$
69.03

 

 

We paid $23.6 million in cash to effect these purchases. The shares shown in the table above represent shares withheld in connection with employees' tax withholding liabilities related to the vesting of restricted stock awards during the three months ended March 31, 2013.


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ITEM 6.
EXHIBITS
Exhibit No.
 
Description
 
 
 
(a) 3.1
 
Composite Certificate of Incorporation of Crown Castle International Corp.

 
 
 
(a) 3.2
 
Composite By-laws of Crown Castle International Corp.

 
 
 
 
 
 
(b) 10.1
 
2013 EMT Annual Incentive Plan
 
 
 
(b) 10.2
 
Summary of Non-Employee Director Compensation
 
 
 
(c) 10.3
 
Amendment No. 3 to Credit Agreement dated as of April 19, 2013, among Crown Castle International Corp. (“Company”), Crown Castle Operating Company (“Borrower”), certain subsidiaries of the Borrower, the lenders party thereto and The Royal Bank of Scotland plc (“RBS”), as administrative agent, to the Credit Agreement dated as of January 31, 2012, among the Company, the Borrower, the lenders and issuing banks from time to time party thereto, RBS, as administrative agent, and Morgan Stanley Senior Funding Inc., as co-documentation agent
 
 
 
31.1
 
Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002
 
 
 
31.2
 
Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002
 
 
 
32.1
 
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002
 
 
 
101.INS
 
XBRL Instance Document
 
 
 
101.SCH
 
XBRL Taxonomy Extension Schema Document
 
 
 
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document
 
 
 
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
 
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document
 
 
 
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document
________________
(a)
Incorporated by reference to the exhibit previously filed by the Registrant on Form S-3 (Registration No. 333-180526) on April 3, 2012.
(b)
Incorporated by reference to the exhibit previously filed by the Registrant on Form 8-K (File No. 001-16441) on February 27, 2013.
(c)
Incorporated by reference to the exhibit previously filed by the Registrant on Form 8-K (File No. 001-16441) on April 24, 2013.


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
CROWN CASTLE INTERNATIONAL CORP.
 
 
 
 
Date:
May 3, 2013
 
By:
/s/ Jay A. Brown
 
 
 
 
Jay A. Brown
 
 
 
 
Senior Vice President,
 
 
 
 
Chief Financial Officer and Treasurer
 
 
 
 
(Principal Financial Officer)
 
 
 
 
Date:
May 3, 2013
 
By:
/s/ Rob A. Fisher
 
 
 
 
Rob A. Fisher
 
 
 
 
Vice President and Controller
 
 
 
 
(Principal Accounting Officer)
 

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