CrownCastle 10Q 093011
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________
 
FORM 10-Q
____________________________________
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2011
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period              to             

Commission File Number 001-16441
____________________________________
CROWN CASTLE INTERNATIONAL
CORP.
(Exact name of registrant as specified in its charter)
 
Delaware
76-0470458
(State or other jurisdiction
of incorporation or organization)
(I.R.S. Employer
Identification No.)
 
 
1220 Augusta Drive, Suite 500, Houston, Texas 77057-2261
(Address of principal executives office) (Zip Code)
(713) 570-3000
(Registrant's telephone number, including area code)
____________________________________
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

 
Large accelerated filer
x
 
Accelerated filer
o
 
 
Non-accelerated filer
o
 
Smaller reporting company
o
 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  o    No  x

Number of shares of common stock outstanding at October 28, 2011: 284,496,166
 
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES

INDEX

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


Cautionary Language Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements that are based on our management's expectations as of the filing date of this report with the SEC. Statements that are not historical facts are hereby identified as forward-looking statements. In addition, words such as "estimate," "anticipate," "project," "plan," "intend," "believe," "expect," "likely," "predicted" and similar expressions are intended to identify forward-looking statements. Such statements include plans, projections and estimates contained in "Part I—Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Part I—Item 3. Quantitative and Qualitative Disclosures About Market Risk" herein. Such forward-looking statements include (1) expectations regarding anticipated growth in the wireless communication industry, carriers' investments in their networks, new tenant additions, cancellations of customer contracts and demand for our towers, including the potential impact of AT&T's definitive agreement to acquire T-Mobile, (2) availability of cash flows and liquidity for, and plans regarding, future discretionary investments including capital expenditures, (3) anticipated growth in our future revenues, margins, Adjusted EBITDA and operating cash flows, and (4) expectations regarding the credit markets, our availability and cost of capital, and our ability to service our debt and comply with debt covenants.
Such forward-looking statements are subject to certain risks, uncertainties and assumptions, including prevailing market conditions, risk factors described under "Part II—Item 1A. Risk Factors" herein and in "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2010 ("2010 Form 10-K") and other factors. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those expected.
 



1
PART I—FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS

CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands of dollars, except share amounts)
 
September 30,
2011
 
December 31,
2010
 
(Unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
75,524

 
$
112,531

Restricted cash
223,573

 
221,015

Receivables, net
64,762

 
59,912

Prepaid expenses
77,926

 
65,856

Deferred income tax assets
53,345

 
59,098

Deferred site rental receivables and other current assets, net
27,150

 
26,733

Total current assets
522,280

 
545,145

Property and equipment, net of accumulated depreciation of $3,708,238 and $3,451,475, respectively
4,864,400

 
4,893,651

Goodwill
2,031,949

 
2,029,296

Other intangible assets, net of accumulated amortization of $757,794 and $636,433, respectively
2,211,643

 
2,313,929

Deferred site rental receivables, long-term prepaid rent, deferred financing costs and other assets, net
812,943

 
687,508

Total assets
$
10,443,215

 
$
10,469,529

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
29,655

 
$
39,649

Accrued interest
55,266

 
65,191

Deferred revenues
174,906

 
202,123

Other accrued liabilities
83,395

 
105,235

Current maturities of debt and other obligations
33,612

 
28,687

Total current liabilities
376,834

 
440,885

Debt and other long-term obligations
6,903,074

 
6,750,207

Deferred income tax liabilities
67,613

 
66,686

Deferred ground lease payable and other liabilities
477,232

 
450,176

Total liabilities
7,824,753

 
7,707,954

 
 
 
 
Commitments and contingencies (note 8)

 

Redeemable convertible preferred stock, $0.1 par value; 20,000,000 shares authorized; shares issued and outstanding: September 30, 2011—6,111,000 and December 31, 2010—6,361,000; stated net of unamortized issue costs; mandatory redemption and aggregate liquidation value: September 30, 2011—$305,550 and December 31, 2010—$318,050
304,810

 
316,581

CCIC stockholders' equity:
 
 
 
Common stock, $.01 par value; 600,000,000 shares authorized; shares issued and outstanding: September 30, 2011—284,496,080 and December 31, 2010—290,826,284
2,845

 
2,908

Additional paid-in capital
5,306,679

 
5,581,525

Accumulated other comprehensive income (loss)
(140,602
)
 
(178,978
)
Accumulated deficit
(2,855,860
)
 
(2,960,082
)
Total CCIC stockholders' equity
2,313,062

 
2,445,373

Noncontrolling interest
590

 
(379
)
Total equity
2,313,652

 
2,444,994

Total liabilities and equity
$
10,443,215

 
$
10,469,529

 
See notes to condensed consolidated financial statements.

2
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS) (Unaudited)
(In thousands of dollars, except per share amounts)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2011
 
2010
 
2011
 
2010
Net revenues:
 
 
 
 
 
 
 
Site rental
$
468,920

 
$
437,079

 
$
1,382,219

 
$
1,253,582

Network services and other
44,963

 
44,811

 
131,039

 
128,762

Net revenues
513,883

 
481,890

 
1,513,258

 
1,382,344

Operating expenses:
 
 
 
 
 
 
 
Costs of operations(a):
 
 
 
 
 
 
 
Site rental
121,759

 
116,233

 
361,317

 
345,453

Network services and other
25,083

 
26,767

 
78,213

 
82,990

General and administrative
42,922

 
41,420

 
128,925

 
121,449

Asset write-down charges
3,090

 
4,429

 
13,696

 
8,588

Acquisition and integration costs
617

 
867

 
1,661

 
1,139

Depreciation, amortization and accretion
138,523

 
136,218

 
413,987

 
403,512

Total operating expenses
331,994

 
325,934

 
997,799

 
963,131

Operating income (loss)
181,889

 
155,956

 
515,459

 
419,213

Interest expense and amortization of deferred financing costs
(127,119
)
 
(123,196
)
 
(380,288
)
 
(364,322
)
Gains (losses) on purchases and redemptions of debt
—

 
(71,933
)
 
—

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

 
(104,421
)
 
—

 
(292,295
)
Interest and other income (expense)
(562
)
 
847

 
(4,887
)
 
985

Income (loss) before income taxes
54,208

 
(142,747
)
 
130,284

 
(374,786
)
Benefit (provision) for income taxes
(2,825
)
 
7,597

 
(7,763
)
 
22,622

Net income (loss)
51,383

 
(135,150
)
 
122,521

 
(352,164
)
Less: Net income (loss) attributable to the noncontrolling interest
105

 
(141
)
 
355

 
(351
)
Net income (loss) attributable to CCIC stockholders
51,278

 
(135,009
)
 
122,166

 
(351,813
)
Dividends on preferred stock and losses on purchases of preferred stock
(7,541
)
 
(5,201
)
 
(17,944
)
 
(15,604
)
Net income (loss) attributable to CCIC stockholders after deduction of dividends on preferred stock and losses on purchases of preferred stock
$
43,737

 
$
(140,210
)
 
$
104,222

 
$
(367,417
)
 
 
 
 
 
 
 
 
Net income (loss)
$
51,383

 
$
(135,150
)
 
$
122,521

 
$
(352,164
)
Other comprehensive income (loss):
 
 
 
 
 
 
 
Available-for-sale securities, net of tax of $0, $0, $0 and $0, respectively:
 
 
 
 
 
 
 
Unrealized gains (losses) on available-for-sale securities, net of taxes
—

 
(1,265
)
 
(7,537
)
 
158

Derivative instruments net of taxes of $0, $(909), $0 and $(14,124), respectively:
 
 
 
 
 
 
 
Net change in fair value of cash flow hedging instruments, net of taxes
(43
)
 
(17,562
)
 
(893
)
 
(139,108
)
Amounts reclassified into results of operations, net of taxes
17,986

 
16,266

 
53,834

 
38,946

Foreign currency translation adjustments
(16,816
)
 
26,108

 
(6,662
)
 
17,097

Comprehensive income (loss)
52,510

 
(111,603
)
 
161,263

 
(435,071
)
Less: Comprehensive income (loss) attributable to the noncontrolling interest
88

 
(196
)
 
721

 
(241
)
Comprehensive income (loss) attributable to CCIC stockholders
$
52,422

 
$
(111,407
)
 
$
160,542

 
$
(434,830
)
Net income (loss) attributable to CCIC common stockholders, after deduction of dividends on preferred stock and losses on purchases of preferred stock, per common share:
 
 
 
 
 
 
 
Basic
$
0.16

 
$
(0.49
)
 
$
0.37

 
$
(1.28
)
Diluted
$
0.15

 
$
(0.49
)
 
$
0.36

 
$
(1.28
)
Weighted-average common shares outstanding (in thousands):
 
 
 
 
 
 
 
Basic
282,031
 
286,119

 
284,770
 
286,883
Diluted
283,899
 
286,119

 
286,868
 
286,883
________________
(a)
Exclusive of depreciation, amortization and accretion shown separately.

See notes to condensed consolidated financial statements.

3
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(In thousands of dollars)
 
Nine Months Ended September 30,
 
2011
 
2010
Cash flows from operating activities:
 
 
 
Net income (loss)
$
122,521

 
$
(352,164
)
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
 
 
 
Depreciation, amortization and accretion
413,987

 
403,512

Gains (losses) on purchases and redemptions of long-term debt
—

 
138,367

Amortization of deferred financing costs and other non-cash interest
77,221

 
59,734

Stock-based compensation expense
24,937

 
26,185

Asset write-down charges
13,696

 
8,588

Deferred income tax benefit (provision)
6,684

 
(34,279
)
Income (expense) from forward-starting interest rate swaps
—

 
292,295

Other adjustments
4,848

 
818

Changes in assets and liabilities, excluding the effects of acquisitions:
 
 
 
Increase (decrease) in accrued interest
(9,925
)
 
(14,930
)
Increase (decrease) in accounts payable
(9,713
)
 
(5,309
)
Increase (decrease) in deferred revenues, deferred ground lease payables, other accrued liabilities and
     other liabilities
(18,231
)
 
11,891

Decrease (increase) in receivables
(5,318
)
 
(7,295
)
Decrease (increase) in prepaid expenses, deferred site rental receivables, long-term prepaid rent,
     restricted cash and other assets
(165,433
)
 
(119,758
)
Net cash provided by (used for) operating activities
455,274

 
407,655

Cash flows from investing activities:
 
 
 
Payments for acquisitions of businesses, net of cash acquired
(17,997
)
 
(126,972
)
Capital expenditures
(265,115
)
 
(148,274
)
Other investing activities, net
(14,375
)
 
(23,212
)
Net cash provided by (used for) investing activities
(297,487
)
 
(298,458
)
Cash flows from financing activities:
 
 
 
Proceeds from issuance of long-term debt
—

 
3,450,000

Proceeds from issuance of capital stock
1,523

 
16,310

Principal payments on long-term debt and other long-term obligations
(26,026
)
 
(18,282
)
Purchases and redemptions of long-term debt
—

 
(3,541,312
)
Purchases of capital stock
(301,369
)
 
(146,908
)
Purchases of preferred stock
(15,002
)
 
—

Borrowings under revolving credit agreement
273,000

 
—

Payments under revolving credit agreement
(125,000
)
 
—

Payments for financing costs
(82
)
 
(58,729
)
Payments for forward-starting interest rate swap settlements
—

 
(266,870
)
Net (increase) decrease in restricted cash
12,153

 
9,467

Dividends on preferred stock
(14,713
)
 
(14,909
)
Net cash provided by (used for) financing activities
(195,516
)
 
(571,233
)
Effect of exchange rate changes on cash
722

 
(131
)
Net increase (decrease) in cash and cash equivalents
(37,007
)
 
(462,167
)
Cash and cash equivalents at beginning of period
112,531

 
766,146

Cash and cash equivalents at end of period
$
75,524

 
$
303,979


See notes to condensed consolidated financial statements.

4
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND EQUITY
(In thousands of dollars, except share amounts) (Unaudited)

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

 
$
317,045

 
287,099,439

 
$
2,871

 
$
5,407,010

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

 
$
2,368,792

Issuances of capital stock, net of forfeitures
—

 
—

 
88,793

 
1

 
765

 
—

 
—

 
—

 
766

Purchases and retirement of capital stock
—

 
—

 
(2,692,152
)
 
(27
)
 
(108,779
)
 
—

 
—

 
—

 
(108,806
)
Purchases and retirement of preferred stock and losses on purchases of preferred stock
(250,000
)
 
(12,464
)
 
—

 
—

 
—

 
—

 
(2,538
)
 
—

 
(2,538
)
Stock-based compensation expense
—

 
—

 
—

 
—

 
7,683

 
—

 
—

 
—

 
7,683

Other comprehensive income (loss)(a)
—

 
—

 
—

 
—

 
—

 
1,144

 
—

 
(17
)
 
1,127

Dividends on preferred stock and amortization of issue costs
—

 
229

 
—

 
—

 
—

 
—

 
(5,003
)
 
—

 
(5,003
)
Acquisition of noncontrolling interest
—

 
—

 
—

 
—

 
—

 
—

 
—

 
248

 
248

Net income (loss)
—

 
—

 
—

 
—

 
—

 
—

 
51,278

 
105

 
51,383

Balance, September 30, 2011
6,111,000

 
$
304,810

 
284,496,080

 
$
2,845

 
$
5,306,679

 
$
(140,602
)
 
$
(2,855,860
)
 
$
590

 
$
2,313,652


 
 
 
 
 
CCIC Stockholders
 
 
 
 
 
Redeemable Convertible Preferred Stock
 
Common Stock
 
 
 
 
 
 
 
 
 
 
 
Shares
 
Amount
 
Shares
 
($.01 Par)
 
Additional
Paid-In
Capital
 
AOCI
 
Accumulated
Deficit
 
Noncontrolling
Interest
 
Total
Balance, July 1, 2010
6,361,000

 
$
316,117

 
290,250,963

 
$
2,903

 
$
5,565,554

 
$
(230,843
)
 
$
(2,855,543
)
 
$
(201
)
 
$
2,481,870

Issuances of capital stock, net of forfeitures
—

 
—

 
667,576

 
6

 
7,907

 
—

 
—

 
—

 
7,913

Purchases and retirement of capital stock
—

 
—

 
(571
)
 
—

 
(24
)
 
—

 
—

 
—

 
(24
)
Stock-based compensation expense
—

 
—

 
—

 
—

 
8,042

 
—

 
—

 
—

 
8,042

Other comprehensive income (loss)(a)
—

 
—

 
—

 
—

 
—

 
23,602

 
—

 
(55
)
 
23,547

Dividends on preferred stock and amortization of issue costs
—

 
232

 
—

 
—

 
—

 
—

 
(5,201
)
 
—

 
(5,201
)
Net income (loss)
—

 
—

 
—

 
—

 
—

 
—

 
(135,009
)
 
(141
)
 
(135,150
)
Balance, September 30, 2010
6,361,000

 
$
316,349

 
290,917,968

 
$
2,909

 
$
5,581,479

 
$
(207,241
)
 
$
(2,995,753
)
 
$
(397
)
 
$
2,380,997

___________________________
(a)
See the statement of operations and other comprehensive income (loss) for the allocation of the components of "other comprehensive income (loss)."

5

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

 
$
316,581

 
290,826,284

 
$
2,908

 
$
5,581,525

 
$
(178,978
)
 
$
(2,960,082
)
 
$
(379
)
 
$
2,444,994

Issuances of capital stock, net of forfeitures
—

 
—

 
1,000,308

 
10

 
1,513

 
—

 
—

 
—

 
1,523

Purchases and retirement of capital stock
—

 
—

 
(7,330,512
)
 
(73
)
 
(301,296
)
 
—

 
—

 
—

 
(301,369
)
Purchases and retirement of preferred stock and losses on purchases of preferred stock
(250,000
)
 
(12,464
)
 
—

 
—

 
—

 
—

 
(2,538
)
 
—

 
(2,538
)
Stock-based compensation expense
—

 
—

 
—

 
—

 
24,937

 
—

 
—

 
—

 
24,937

Other comprehensive income (loss)(a)
—

 
—

 
—

 
—

 
—

 
38,376

 
—

 
366

 
38,742

Dividends on preferred stock and amortization of issue costs
—

 
693

 
—

 
—

 
—

 
—

 
(15,406
)
 
—

 
(15,406
)
Acquisition of noncontrolling interest
—

 
—

 
—

 
—

 
—

 
—

 
—

 
248

 
248

Net income (loss)
—

 
—

 
—

 
—

 
—

 
—

 
122,166

 
355

 
122,521

Balance, September 30, 2011
6,111,000

 
$
304,810

 
284,496,080

 
$
2,845

 
$
5,306,679

 
$
(140,602
)
 
$
(2,855,860
)
 
$
590

 
$
2,313,652


 
 
 
 
 
CCIC Stockholders
 
 
 
 
 
Redeemable Convertible Preferred Stock
 
Common Stock
 
 
 
 
 
 
 
 
 
 
 
Shares
 
Amount
 
Shares
 
($.01 Par)
 
Additional
Paid-In
Capital
 
AOCI
 
Accumulated
Deficit
 
Noncontrolling
Interest
 
Total
Balance January 1, 2010
6,361,000

 
$
315,654

 
292,729,684

 
$
2,927

 
$
5,685,874

 
$
(124,224
)
 
$
(2,628,336
)
 
$
(156
)
 
$
2,936,085

Issuances of capital stock, net of forfeitures
—

 
—

 
2,022,024

 
20

 
16,290

 
—

 
—

 
—

 
16,310

Purchases and retirement of capital stock
—

 
—

 
(3,833,740
)
 
(38
)
 
(146,870
)
 
—

 
—

 
—

 
(146,908
)
Stock-based compensation expense
—

 
—

 
—

 
—

 
26,185

 
—

 
—

 
—

 
26,185

Other comprehensive income (loss)(a)
—

 
—

 
—

 
—

 
—

 
(83,017
)
 
—

 
110

 
(82,907
)
Dividends on preferred stock and amortization of issue costs
—

 
695

 
—

 
—

 
—

 
—

 
(15,604
)
 
—

 
(15,604
)
Net income (loss)
—

 
—

 
—

 
—

 
—

 
—

 
(351,813
)
 
(351
)
 
(352,164
)
Balance, September 30, 2010
6,361,000

 
$
316,349

 
290,917,968

 
$
2,909

 
$
5,581,479

 
$
(207,241
)
 
$
(2,995,753
)
 
$
(397
)
 
$
2,380,997

___________________________
(a)
See the statement of operations and other comprehensive income (loss) for the allocation of the components of "other comprehensive income (loss)."
See notes to condensed consolidated financial statements.

6
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited
(Tabular dollars in thousands, except per share amounts)

1.
General
The information contained in the following notes to the consolidated financial statements is condensed from that which would appear in the annual consolidated financial statements; accordingly, the consolidated financial statements included herein should be reviewed in conjunction with the consolidated financial statements for the fiscal year ended December 31, 2010, and related notes thereto, included in the 2010 Form 10-K filed by Crown Castle International Corp. ("CCIC") with the SEC. All references to the "Company" include CCIC and its subsidiary companies unless otherwise indicated or the context indicates otherwise.
The Company owns, operates and leases towers. The Company's primary business is the renting of antenna space to wireless communication companies via long-term contracts. To a lesser extent, the Company also provides certain network services relating to its towers, primarily consisting of installation services, as well as the following additional services: site acquisition, architectural and engineering, zoning and permitting, other construction and other services related to network development. The Company conducts its operations through tower portfolios in the United States, including Puerto Rico, and Australia.
Basis of Presentation
The condensed consolidated financial statements included herein are unaudited; however, they include all adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are necessary to present fairly the consolidated financial position of the Company at September 30, 2011, and the consolidated results of operations and the consolidated cash flows for the three and nine months ended September 30, 2011 and 2010. The year end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. Accounting measurements at interim dates inherently involve greater reliance on estimates than at year end. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the entire year.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

2.
Summary of Significant Accounting Policies
The significant accounting policies used in the preparation of the Company's consolidated financial statements are disclosed in the Company's 2010 Form 10-K, other than changes related to goodwill impairment testing discussed below.
New Accounting Pronouncements
No accounting pronouncements adopted during the nine months ended September 30, 2011 had a material impact on the Company's consolidated financial statements. No new accounting pronouncements issued during the nine months ended September 30, 2011 but not yet adopted are expected to have a material impact on the Company's consolidated financial statements.
In September 2011, the Financial Accounting Standards Board ("FASB") issued amended guidance on goodwill impairment testing. The amended guidance permits an entity to first perform a qualitative assessment to determine whether it is "more likely than not" that the fair value of a reporting unit is less than its carrying amount. If it is concluded that it is "more likely than not" that the fair value of a reporting unit is less than its carrying amount, it is then necessary to perform the two-step goodwill impairment test described in the 2010 Form 10-K. Otherwise, the two-step goodwill impairment test is not required. The Company adopted this amended guidance effective September 30, 2011, prior to performing its annual goodwill impairment test and, as such, anticipates performing the qualitative assessment in connection with the annual goodwill impairment test during the fourth quarter of 2011.


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


3.
Debt and Other Obligations
 
Original
Issue Date
 
Contractual
Maturity Date
 
Outstanding
Balance as of
September 30, 2011
 
Outstanding
Balance as of
December 31, 2010
 
Stated Interest
Rate as of
September 30, 2011(a)
 
Bank debt - variable rate:
 
 
 
 
 
 
 
 
 
 
Revolver
Jan. 2007
 
Sept. 2013
 
$
305,000

(b)
$
157,000

 
2.4
%
(c)
2007 Term Loans
Jan./March 2007
 
March 2014
 
620,750

 
625,625

 
1.7
%
(c)
Total bank debt
 
 
 
 
925,750

 
782,625

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

 
1,900,000

 
5.8
%
(d)
August 2010 Tower Revenue Notes
Aug. 2010
 
2035 - 2040
(d)
1,550,000

 
1,550,000

 
4.5
%
(d)
2009 Securitized Notes
July 2009
 
2019/2029
(e)
220,870

 
233,085

 
7.0
%
 
Total securitized debt
 
 
 
 
3,670,870

 
3,683,085

 
 
 
High yield bonds - fixed rate:
 
 
 
 
 
 
 
 
 
 
9% Senior Notes
Jan. 2009
 
Jan. 2015
 
814,456

 
804,971

 
9.0
%
(f)
7.75% Secured Notes
April 2009
 
May 2017
 
978,191

 
975,913

 
7.8
%
(g)
7.125% Senior Notes
Oct. 2009
 
Nov. 2019
 
497,856

 
497,712

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

 
51

 
7.5
%
 
Total high yield bonds
 
 
 
 
2,290,554

 
2,278,647

 
 
 
Other:
 
 
 
 
 
 
 
 
 
 
Capital leases and other obligations
Various
 
Various
(i)
49,512

 
34,537

 
Various

(i)
Total debt and other obligations
 
 
 
 
6,936,686

 
6,778,894

 
 
 
Less: current maturities and short-term debt and other current obligations
 
 
 
 
33,612

 
28,687

 
 
 
Non-current portion of long-term debt and other long-term obligations
 
 
 
 
$
6,903,074

 
$
6,750,207

 
 
 
________________
(a)
Represents the weighted-average stated interest rate.
(b)
In June 2011, CCOC amended the senior secured revolving credit facility ("Revolver") to increase the aggregate revolving commitment availability by $50.0 million to a total revolving commitment availability of $450.0 million, subject to certain restrictions based on the maintenance of financial covenants in the 2007 Credit Agreement. As of September 30, 2011, the undrawn availability under the Revolver is $145.0 million.
(c)
The Revolver bears interest at a rate per annum, at the election of CCOC, equal to (i) the greater of the prime rate of The Royal Bank of Scotland plc and the Federal Funds Effective Rate plus 0.5%, plus a credit spread ranging from 1.0% to 1.4% or (ii) LIBOR plus a credit spread ranging from 2.0% to 2.4%, in each case based on the Company's consolidated leverage ratio. The 2007 Term Loans bear interest at a rate per annum, at CCOC's election, equal to (i) the greater of the prime rate of The Royal Bank of Scotland plc and the Federal Funds Effective Rate plus 0.5% or (ii) LIBOR plus 1.5%.
(d)
If the respective series of the January 2010 Tower Revenue Notes and August 2010 Tower Revenue Notes are not paid in full on or prior to 2015, 2017 and 2020, as applicable, then Excess Cash Flow (as defined in the indenture) of the issuers (of such notes) will be used to repay principal of the applicable series and class of the 2010 Tower Revenue Notes, and additional interest (by an additional approximately 5% per annum) will accrue on the respective 2010 Tower Revenue Notes. The January 2010 Tower Revenue Notes consist of three series of notes with principal amounts of $300.0 million, $350.0 million and $1.3 billion, having anticipated repayment dates in 2015, 2017 and 2020, respectively. The August 2010 Tower Revenue Notes consist of three series of notes with principal amounts of $250.0 million, $300.0 million and $1.0 billion, having anticipated repayment dates in 2015, 2017 and 2020, respectively.
(e)
The 2009 Securitized Notes consist of $150.9 million of principal as of September 30, 2011 that amortizes through 2019, and $70.0 million of principal as of September 30, 2011 that amortizes during the period beginning in 2019 and ending in 2029.
(f)
The effective yield is approximately 11.3%, inclusive of the discount.
(g)
The effective yield is approximately 8.2%, inclusive of the discount.
(h)
The effective yield is approximately 7.2%, inclusive of the discount.
(i)
The Company's capital leases and other obligations bear interest rates up to 9% and mature in periods ranging from less than one year to approximately 20 years.


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


Interest Expense and Amortization of Deferred Financing Costs
The components of "interest expense and amortization of deferred financing costs" are as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2011
 
2010
 
2011
 
2010
Interest expense on debt obligations
$
101,380

 
$
101,012

 
$
303,067

 
$
304,588

Amortization of deferred financing costs
3,790

 
3,825

 
11,266

 
11,705

Amortization of discounts on long-term debt
4,074

 
3,666

 
11,907

 
10,716

Amortization of interest rate swaps
17,986

 
14,400

 
53,834

 
36,225

Other, net of capitalized interest
(111
)
 
293

 
214

 
1,088

Total
$
127,119

 
$
123,196

 
$
380,288

 
$
364,322


4.
Income Taxes
During the nine months ended September 30, 2011 and 2010, the Company's provision for federal income taxes was reduced by a partial reversal of the valuation allowance on the Company's federal deferred tax assets, as a result of utilizing net operating losses that previously had a full valuation allowance. In addition, the first nine months of 2010 included $16.5 million of federal tax benefits recorded predominately as a result of discrete events, including the acquisition of NewPath. For the nine months ended September 30, 2011 and 2010, the effective tax rate differed from the federal statutory rate predominately due to the Company's federal deferred tax valuation allowances. During the third quarter of 2011, the IRS completed an examination of the Company's U.S federal tax return for the 2009 tax year with no material adjustments.

5.
Fair Value Disclosures

 
September 30, 2011
 
December 31, 2010
 
Carrying
 Amount
 
Fair
Value
 
Carrying
 Amount
 
Fair
Value
Assets:
 
 
 
 
 
 
 
Cash and cash equivalents
$
75,524

 
$
75,524

 
$
112,531

 
$
112,531

Restricted cash, current and non-current
228,573

 
228,573

 
226,015

 
226,015

Liabilities:
 
 
 
 
 
 
 
Long-term debt and other obligations
6,936,686

 
7,413,440

 
6,778,894

 
7,121,156

Interest rate swaps(a)
1,436

 
1,436

 
5,198

 
5,198

________________
(a)
Variable to fixed interest rate swaps hedging a portion of the 2007 Term Loans until December 2011 with a notional value of $600.0 million.
The fair value of cash and cash equivalents and restricted cash approximate the carrying value. The Company determines fair value of its debt securities based on indicative quotes (that is non-binding quotes) from brokers that require judgment to interpret market information including implied credit spreads for similar borrowings on recent trades or bid/ask prices or quotes from active markets if available. The fair value of interest rate swaps is determined using the income approach and is predominately based on observable interest rates and yield curves and, to a lesser extent, the Company's and the contract counterparty's credit risk. There were no changes since December 31, 2010 in the Company's valuation techniques used to measure fair values.
As of September 30, 2011, the fair value of the Company's cash and cash equivalents and restricted cash is measured on a recurring basis and are classified as Level 1 fair value measurements. The following table is a summary of the activity during the nine months ended September 30, 2010 for interest rate swap liabilities previously classified as Level 3 fair value measurements. During the nine months ended September 30, 2011, all interest rate swap liabilities were classified as Level 2 fair value measurements.


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


 
Fair Value Measurement
Using Significant Unobservable
 Inputs (Level 3)
 
Interest Rate Swaps, Net
 
Three Months Ended
 September 30, 2010
 
Nine Months
 Ended
 September 30, 2010
Beginning balance
$
359,716

 
$
300,040

Settlements
(35,609
)
 
(271,283
)
Less: Total (gains) losses:


 
 
Included in earnings(a)
102,416

 
288,922

Included in other comprehensive income (loss)
16,794

 
125,638

Ending balance
$
443,317

 
$
443,317

________________
(a)
Includes $93.8 million and $203.2 million, respectively, for the three and nine months ended September 30, 2010, of losses that are attributable to the change in unrealized gains or losses relating to liabilities still held at the reporting date.

6.
Per Share Information
Basic net income (loss) attributable to CCIC common stockholders, after deduction of dividends on preferred stock, per common share excludes dilution and is computed by dividing net income (loss) attributable to CCIC stockholders after deduction of dividends on preferred stock and losses on purchases of preferred stock, by the weighted-average number of common shares outstanding during the period. Diluted net income (loss) attributable to CCIC common stockholders, after deduction of dividends on preferred stock and losses on purchases of preferred stock, per common share is computed by dividing net income (loss) attributable to CCIC stockholders after deduction of dividends on preferred stock and losses on purchases of preferred stock, by the weighted-average number of common shares outstanding during the period plus any potential dilutive common share equivalents, including shares issuable (1) upon exercise of stock options and the vesting of restricted stock awards as determined under the treasury stock method and (2) upon conversion of the Company's preferred stock, as determined under the if-converted method. The Company's restricted stock awards are considered participating securities and may be included in the computation pursuant to the two-class method. However, the Company does not present the two-class method when there is no difference between the per share amount under the two-class method and the treasury stock method.
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2011
 
2010
 
2011
 
2010
Net income (loss) attributable to CCIC stockholders
$
51,278

 
$
(135,009
)
 
$
122,166

 
$
(351,813
)
Dividends on preferred stock and losses on purchases of preferred stock
(7,541
)
 
(5,201
)
 
(17,944
)
 
(15,604
)
Net income (loss) attributable to CCIC common stockholders after deduction of dividends on preferred stock and losses on purchases of preferred stock for basic and diluted computations
$
43,737

 
$
(140,210
)
 
$
104,222

 
$
(367,417
)
Weighted-average number of common shares outstanding (in thousands):
 
 
 
 
 
 
 
Basic weighted-average number of common stock outstanding
282,031

 
286,119

 
284,770

 
286,883

Effect of assumed dilution from potential common shares relating to stock options and restricted stock awards
1,868

 
—

 
2,098

 
—

Diluted weighted-average number of common shares outstanding
283,899

 
286,119

 
286,868

 
286,883

Net income (loss) attributable to CCIC common stockholders after deduction of dividends on preferred stock and losses on purchases of preferred stock, per common share:
 
 
 
 
 
 
 
Basic
$
0.16

 
$
(0.49
)
 
$
0.37

 
$
(1.28
)
Diluted
$
0.15

 
$
(0.49
)
 
$
0.36

 
$
(1.28
)
 For both the three and nine months ended September 30, 2011, 0.9 million restricted stock awards were excluded from the dilutive common shares because certain stock price hurdles would not have been achieved assuming that September 30, 2011 was the end of the contingency period. For the three and nine months ended September 30, 2010, all of the CCIC stock options and unvested restricted stock awards are excluded from dilutive common shares because the net impact is anti-dilutive. In addition, for the three and nine months ended September 30, 2011, 8.3 million shares reserved for issuance upon conversion of the 6.25%

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


convertible preferred stock and for the three and nine months ended September 30, 2010, 8.6 million shares reserved for issuance upon conversion of the 6.25% convertible preferred stock, respectively, are excluded from dilutive common shares because the impact is anti-dilutive as determined under the if-converted method. See note 10.

7.
Leases
Tenant Contracts
The following table is an updated summary of the rental cash payments owed to the Company, as a lessor, by tenants pursuant to contractual agreements in effect as of September 30, 2011. Generally, the Company's contracts with its tenants provide for (1) annual escalations and multiple renewal periods at the tenant's option and (2) only limited termination rights at the tenant's option through the current term. As of September 30, 2011, the weighted-average remaining term of tenant contracts is approximately 9 years, exclusive of renewals at the tenant's option. The tenants' rental payments included in the table below are through the current terms with a maximum current term of 20 years and do not assume exercise of tenant renewal options.
 
Three Months Ending December 31,
 
Years Ending December 31,
 
2011
 
2012
 
2013
 
2014
 
2015
 
Thereafter
 
Total
Tenant Contracts
$
404,017

 
$
1,604,622

 
$
1,573,313

 
$
1,542,603

 
$
1,485,123

 
$
10,268,644

 
$
16,878,322


8.
Commitments and Contingencies
The Company is involved in various claims, lawsuits and proceedings arising in the ordinary course of business. While there are uncertainties inherent in the ultimate outcome of such matters and it is impossible to presently determine the ultimate costs or losses that may be incurred, if any, management believes the resolution of such uncertainties and the incurrence of such costs should not have a material adverse effect on the Company's consolidated financial position or results of operations.

9.
Operating Segments
The Company's reportable operating segments are (1) CCUSA, primarily consisting of the Company's U.S. tower operations and (2) CCAL, the Company's Australian tower operations. Financial results for the Company are reported to management and the board of directors in this manner.
The measurement of profit or loss currently used by management to evaluate the results of operations for the Company and its operating segments is earnings before interest, taxes, depreciation, amortization and accretion, as adjusted ("Adjusted EBITDA"). The Company defines Adjusted EBITDA as net income (loss) plus restructuring charges (credits), asset write-down charges, acquisition and integration costs, depreciation, amortization and accretion, interest expense and amortization of deferred financing costs, gains (losses) on purchases and redemptions of debt, net gain (loss) on interest rate swaps, impairment of available-for-sale securities, interest and other income (expense), benefit (provision) for income taxes, cumulative effect of change in accounting principle, income (loss) from discontinued operations and stock-based compensation expense. Adjusted EBITDA is not intended as an alternative measure of operating results or cash flow from operations (as determined in accordance with GAAP), and the Company's measure of Adjusted EBITDA may not be comparable to similarly titled measures of other companies. There are no significant revenues resulting from transactions between the Company's operating segments. Inter-company borrowings and related interest between segments are eliminated to reconcile segment results and assets to the consolidated basis.

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



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

 
$
27,783

 
$
—

 
$
468,920

 
$
414,265

 
$
22,814

 
$
—

 
$
437,079

Network services and other
40,853

 
4,110

 
—

 
44,963

 
42,544

 
2,267

 
—

 
44,811

Net revenues
481,990

 
31,893

 
—

 
513,883

 
456,809

 
25,081

 
—

 
481,890

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

 
8,916

 
—

 
121,759

 
108,966

 
7,267

 
—

 
116,233

Network services and other
22,713

 
2,370

 
—

 
25,083

 
25,192

 
1,575

 
—

 
26,767

General and administrative
37,295

 
5,627

 
—

 
42,922

 
37,495

 
3,925

 
—

 
41,420

Asset write-down charges
3,165

 
(75
)
 
—

 
3,090

 
4,325

 
104

 
—

 
4,429

Acquisition and integration costs
617

 
—

 
—

 
617

 
867

 
—

 
—

 
867

Depreciation, amortization and accretion
130,878

 
7,645

 
—

 
138,523

 
129,169

 
7,049

 
—

 
136,218

Total operating expenses
307,511

 
24,483

 
—

 
331,994

 
306,014

 
19,920

 
—

 
325,934

Operating income (loss)
174,479

 
7,410

 
—

 
181,889

 
150,795

 
5,161

 
—

 
155,956

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

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

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

 
—

 
—

 
—

 
(71,933
)
 
—

 
—

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

 
—

 
—

 
—

 
(104,421
)
 
—

 
—

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

 
126

 
(5,755
)
 
(562
)
 
5,789

 
135

 
(5,077
)
 
847

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

 
(2,825
)
 
8,096

 
(499
)
 
—

 
7,597

Net income (loss)
50,166

 
1,217

 
—

 
51,383

 
(134,579
)
 
(571
)
 
—

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

 
—

 
105

 
—

 
(141
)
 
—

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

 
$
971

 
$
—

 
$
51,278

 
$
(134,579
)
 
$
(430
)
 
$
—

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

 
$
4,296

 
$
—

 
$
148,425

 
$
53,423

 
$
3,086

 
$
—

 
$
56,509

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

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


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

 
$
80,985

 
$
—

 
$
1,382,219

 
$
1,186,276

 
$
67,306

 
$
—

 
$
1,253,582

Network services and other
118,534

 
12,505

 
—

 
131,039

 
121,665

 
7,097

 
—

 
128,762

Net revenues
1,419,768

 
93,490

 
—

 
1,513,258

 
1,307,941

 
74,403

 
—

 
1,382,344

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

 
25,896

 
—

 
361,317

 
324,660

 
20,793

 
—

 
345,453

Network services and other
70,246

 
7,967

 
—

 
78,213

 
77,984

 
5,006

 
—

 
82,990

General and administrative
113,594

 
15,331

 
—

 
128,925

 
109,335

 
12,114

 
—

 
121,449

Asset write-down charges
13,452

 
244

 
—

 
13,696

 
8,461

 
127

 
—

 
8,588

Acquisition and integration costs
1,661

 
—

 
—

 
1,661

 
1,139

 
—

 
—

 
1,139

Depreciation, amortization and accretion
391,342

 
22,645

 
—

 
413,987

 
382,418

 
21,094

 
—

 
403,512

Total operating expenses
925,716

 
72,083

 
—

 
997,799

 
903,997

 
59,134

 
—

 
963,131

Operating income (loss)
494,052

 
21,407

 
—

 
515,459

 
403,944

 
15,269

 
—

 
419,213

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

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

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

 
—

 
—

 
—

 
(138,367
)
 
—

 
—

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

 
—

 
—

 
—

 
(292,295
)
 
—

 
—

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

 
365

 
(17,189
)
 
(4,887
)
 
15,068

 
210

 
(14,293
)
 
985

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

 
(7,763
)
 
24,025

 
(1,403
)
 
—

 
22,622

Net income (loss)
119,949

 
2,572

 
—

 
122,521

 
(350,860
)
 
(1,304
)
 
—

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

 
—

 
355

 
—

 
(351
)
 
—

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

 
$
2,076

 
$
—

 
$
122,166

 
$
(350,860
)
 
$
(953
)
 
$
—

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

 
$
8,660

 
$
—

 
$
265,115

 
$
140,875

 
$
7,399

 
$
—

 
$
148,274

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


13
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 and nine months ended September 30, 2011 and 2010.
 
Three Months Ended September 30, 2011
 
Three Months Ended September 30, 2010
 
CCUSA
 
CCAL
 
Eliminations
 
Consolidated
Total
 
CCUSA
 
CCAL
 
Eliminations
 
Consolidated
Total
Net income (loss)
$
50,166

 
$
1,217

 
$
—

 
$
51,383

 
$
(134,579
)
 
$
(571
)
 
$
—

 
$
(135,150
)
Adjustments to increase (decrease) net income (loss):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asset write-down charges
3,165

 
(75
)
 
—

 
3,090

 
4,325

 
104

 
—

 
4,429

Acquisition and integration costs
617

 
—

 
—

 
617

 
867

 
—

 
—

 
867

Depreciation, amortization and accretion
130,878

 
7,645

 
—

 
138,523

 
129,169

 
7,049

 
—

 
136,218

Interest expense and amortization of deferred financing costs
127,119

 
5,755

 
(5,755
)
 
127,119

 
122,905

 
5,368

 
(5,077
)
 
123,196

Gains (losses) on purchases and redemptions of debt
—

 
—

 
—

 
—

 
71,933

 
—

 
—

 
71,933

Net gain (loss) on interest rate swaps
—

 
—

 
—

 
—

 
104,421

 
—

 
—

 
104,421

Interest and other income (expense)
(5,067
)
 
(126
)
 
5,755

 
562

 
(5,789
)
 
(135
)
 
5,077

 
(847
)
Benefit (provision) for income taxes
2,261

 
564

 
—

 
2,825

 
(8,096
)
 
499

 
—

 
(7,597
)
Stock-based compensation expense
7,683

 
596

 
—

 
8,279

 
8,042

 
625

 
—

 
8,667

Adjusted EBITDA
$
316,822

 
$
15,576

 
$
—

 
$
332,398

 
$
293,198

 
$
12,939

 
$
—

 
$
306,137


 
Nine Months Ended September 30, 2011
 
Nine Months Ended September 30, 2010
 
CCUSA
 
CCAL
 
Eliminations
 
Consolidated
Total
 
CCUSA
 
CCAL
 
Eliminations
 
Consolidated
Total
Net income (loss)
$
119,949

 
$
2,572

 
$
—

 
$
122,521

 
$
(350,860
)
 
$
(1,304
)
 
$
—

 
$
(352,164
)
Adjustments to increase (decrease) net income (loss):
 
 
 
 
 
 
 
 


 


 


 
 
Asset write-down charges
13,452

 
244

 
—

 
13,696

 
8,461

 
127

 
—

 
8,588

Acquisition and integration costs
1,661

 
—

 
—

 
1,661

 
1,139

 
—

 
—

 
1,139

Depreciation, amortization and accretion
391,342

 
22,645

 
—

 
413,987

 
382,418

 
21,094

 
—

 
403,512

Interest expense and amortization of deferred financing costs
379,964

 
17,513

 
(17,189
)
 
380,288

 
363,235

 
15,380

 
(14,293
)
 
364,322

Gains (losses) on purchases and redemptions of debt
—

 
—

 
—

 
—

 
138,367

 
—

 
—

 
138,367

Net gain (loss) on interest rate swaps
—

 
—

 
—

 
—

 
292,295

 
—

 
—

 
292,295

Interest and other income (expense)
(11,937
)
 
(365
)
 
17,189

 
4,887

 
(15,068
)
 
(210
)
 
14,293

 
(985
)
Benefit (provision) for income taxes
6,076

 
1,687

 
—

 
7,763

 
(24,025
)
 
1,403

 
—

 
(22,622
)
Stock-based compensation expense
24,937

 
1,874

 
—

 
26,811

 
26,185

 
1,835

 
—

 
28,020

Adjusted EBITDA
$
925,444

 
$
46,170

 
$
—

 
$
971,614

 
$
822,147

 
$
38,325

 
$
—

 
$
860,472



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


10.
Stock-Based Compensation
Restricted Stock Awards
 
Number of Shares
 
(In thousands of shares)
Shares outstanding at January 1, 2011
4,297

Shares granted(a)
886

Shares vested(b)
(1,580
)
Shares forfeited
(60
)
Shares outstanding at September 30, 2011
3,543

__________________
(a)
Weighted-average grant-date fair value of $37.04 per share and a weighted-average requisite service period of 2.5 years. The awards with market conditions included an expected volatility of 48% in the Monte Carlo simulation used to measure grant-date fair value.
(b)
Fair value on vesting date of $68.8 million.
During the nine months ended September 30, 2011, the Company granted 0.5 million shares of restricted stock awards that time vest over a three-year or five-year period. During the nine months ended September 30, 2011, the Company granted 0.4 million shares of restricted stock awards ("2011 Performance Awards") which may vest on the third anniversary of the grant date subject to a market condition based upon the Company's common stock price.
The Company recognized stock-based compensation expense related to restricted stock awards of $23.6 million and $24.9 million for the nine months ended September 30, 2011 and 2010, respectively. The unrecognized compensation expense (net of estimated forfeitures) related to restricted stock awards as of September 30, 2011 is $32.5 million.

11.
Supplemental Cash Flow Information
 
Nine Months Ended September 30,
 
2011
 
2010
Supplemental disclosure of cash flow information:
 
 
 
Interest paid
$
312,992

 
$
319,519

Income taxes paid
4,343

 
3,037

Supplemental disclosure of non-cash financing activities:
 
 
 
Increase (decrease) in the fair value of forward-starting interest rate swaps
—

 
(114,157
)
Assets acquired through capital leases and installment sales
20,213

 
10,737


15
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 2010 Form 10-K. Capitalized terms used but not defined in this Item have the same meaning given to them in our 2010 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
As of September 30, 2011, we owned, leased or managed approximately 23,800 towers for wireless communications, including distributed antenna system ("DAS") networks. Revenues generated from our core site rental business represented 91% of our third quarter 2011 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 2010 Form 10-K for a further discussion of our business, including our long-term strategy, growth trends in the wireless communications industry and our tower portfolio.
The following are certain highlights of our business fundamentals as of and for the nine months ended September 30, 2011.
•
Potential growth resulting from wireless network expansion and new entrants (see also the discussion below of wireless industry reports)
◦
We expect wireless carriers will continue their focus on improving network quality and expanding capacity by adding additional antennas and other equipment on our towers.
◦
We expect existing and potential new wireless carrier demand for our towers 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, and (5) wireless carrier focus on expanding voice and data coverage.
◦
Substantially all of our towers can accommodate, either as currently constructed or with appropriate modifications to the tower, additional tenants.
◦
U.S. wireless carriers continue to invest in their networks.
◦
We expect our site rental revenues will grow approximately 9% from the full year 2010 to 2011 and approximately 5% from the full year 2011 to 2012. We expect our new tenant additions, inclusive of the estimated impact from Sprint as it deploys network enhancements (referred to as Network Vision), will result in an approximately 5% year-over-year growth in site rental revenues for each of 2011 and 2012. Our 2012 site rental revenue growth expectations do not assume any net contribution to growth from the existing base of business as the increase attributable to lease escalations and straight-line impact of renewals is expected to be offset by higher levels of expected cancellation of customer contracts.
•
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 nine years, exclusive of renewals at the customer's option, representing approximately $17 billion of expected future cash inflows.
•
Revenues predominately from large wireless carriers
◦
Verizon Wireless, AT&T, Sprint Nextel and T-Mobile accounted for 74% of consolidated net revenues.
•
Majority of land under our towers under long-term control
◦
Approximately 90% and 72% 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 that is owned in fee or where we have perpetual or long-term easements, which represent approximately 35% of our site rental gross margin.
•
Relatively fixed tower operating costs with high incremental margins and cash flows on organic revenue growth
◦
Our tower operating costs tend to increase at approximately the rate of inflation and are not typically influenced by new tenant additions.
◦
Our incremental margin on additional site rental revenues represents 88% of the related increase in site rental revenues.
•
Minimal sustaining capital expenditure requirements

16
◦
Sustaining capital expenditures were $14.1 million, which represented less than 1% of net revenues.
•
Debt portfolio with long-dated maturities extended over multiple years, with virtually all of such debt having a fixed rate (see "Item 3. Quantitative and Qualitative Disclosures About Market Risk" for a further discussion of our debt)
◦
87% of our debt has fixed rate coupons.
◦
Our debt service coverage and leverage ratios were comfortably within their respective covenant requirements. 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 $455.3 million.
◦
We believe our site rental business can be characterized as a stable cash flow stream, which we expect to grow as a result of future demand for our towers.
•
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 own common stock, acquiring towers, acquiring land under towers, selectively constructing towers, improving and structurally enhancing our existing towers, and purchasing or redeeming our debt or preferred stock.
◦
Discretionary investments included: (1) the purchase of 7.3 million shares of common stock for $301.4 million and (2) $251.0 million in capital expenditures.
The following is a discussion of certain recent events and growth trends which may impact our business and strategy or the U.S. wireless communications industry:
•
In March 2011, AT&T entered into a definitive agreement to acquire T-Mobile, subject to regulatory approval and other closing conditions. In August 2011, the U.S. Department of Justice ("DOJ") filed a complaint against AT&T alleging the proposed acquisition of T-Mobile by AT&T would substantially lessen competition and likely raise prices. AT&T disputes the allegations and intends to continue discussions with the DOJ to address its concerns. For the third quarter of 2011, AT&T and T-Mobile accounted for 23% and 11%, respectively, of our consolidated net revenues. As of September 30, 2011, AT&T and T-Mobile are co-resident on approximately 4,000 of our towers. Net revenues from T-Mobile on these approximately 4,000 towers represent approximately 6% of our consolidated net revenues during the first nine months of 2011. The weighted-average remaining current term on all of our contractual agreements with AT&T and T-Mobile is approximately 12 and seven years, respectively. If consummated, in whole or in part, this potential acquisition could result in decreased revenues and reduced or delayed demand for our towers and network services as a result of the anticipated integration of these networks and consolidation of duplicate or overlapping parts of the networks. We expect that any termination of customer contracts as a result of the potential acquisition would be spread over multiple years as existing contracts expire. See "Part II—Item 1A. Risk Factors."
•
Consumers have increased their use of wireless voice and data services according to recent U.S. wireless industry reports.
◦
U.S. wireless data service revenues grew 22% year-over-year to reach $16.2 billion in the second quarter of 2011;(a) 
◦
The number of wireless subscriber connections in the U.S. now exceeds the total amount of the U.S. population with a wireless penetration of 104%;(b) 
◦
During the first half of 2011, U.S. wireless data traffic surged 111% year-over-year;(b) and
◦
In the U.S., 43% of mobile consumers have a smartphone as of August 2011(c) and the number of active smartphones increased 67% year-over-year during the first half of 2011.(b) 
_________________
(a)
Source: Chetan Sharma Consulting
(b)
Source: CTIA
(c)
Source: Nielsen



17
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 2010 Form 10-K. The following discussion of our results of operations is based on our 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 2010 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 September 30, 2011
 
Three Months Ended September 30, 2010
 
 
 
Amount
 
Percent
of Net
Revenues
 
Amount
 
Percent
of Net
Revenues
 
Percent
Change(b)
 
(Dollars in thousands)
Net revenues:
 
 
 
 
 
 
 
 
 
Site rental
$
468,920

 
91
%
 
$
437,079

 
91
%
 
7
 %
Network services and other
44,963

 
9
%
 
44,811

 
9
%
 
—
 %
Net revenues
513,883

 
100
%
 
481,890

 
100
%
 
7
 %
Operating expenses:
 
 
 
 
 
 
 
 
 
Costs of operations(a):
 
 
 
 
 
 
 
 
 
Site rental
121,759

 
26
%
 
116,233

 
27
%
 
5
 %
Network services and other
25,083

 
56
%
 
26,767

 
60
%
 
(6
)%
Total costs of operations
146,842

 
29
%
 
143,000

 
30
%
 
3
 %
General and administrative
42,922

 
8
%
 
41,420

 
9
%
 
4
 %
Asset write-down charges
3,090

 
1
%
 
4,429

 
1
%
 
*

Acquisition and integration costs
617

 
—

 
867

 
—

 
*

Depreciation, amortization and accretion
138,523

 
27
%
 
136,218

 
28
%
 
2
 %
Total operating expenses
331,994

 
65
%
 
325,934

 
68
%
 
2
 %
Operating income (loss)
181,889

 
35
%
 
155,956

 
32
%
 
17
 %
Interest expense and amortization of deferred financing costs
(127,119
)
 
 
 
(123,196
)
 
 
 
 
Gains (losses) on purchases and redemption of debt
—

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

 
 
 
(104,421
)
 
 
 
 
Interest and other income (expense)
(562
)
 
 
 
847

 
 
 
 
Income (loss) before income taxes
54,208

 
 
 
(142,747
)
 
 
 
 
Benefit (provision) for income taxes
(2,825
)
 
 
 
7,597

 
 
 
 
Net income (loss)
51,383

 
 
 
(135,150
)
 
 
 
 
Less: Net income (loss) attributable to the noncontrolling interest
105

 
 
 
(141
)
 
 
 
 
Net income (loss) attributable to CCIC stockholders
$
51,278

 
 
 
$
(135,009
)
 
 
 
 
________________
*
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"

18
 
Nine Months Ended September 30, 2011
 
Nine Months Ended September 30, 2010
 
 
 
Amount
 
Percent
of Net
Revenues
 
Amount
 
Percent
of Net
Revenues
 
Percent
Change(b)
 
(Dollars in thousands)
Net revenues:
 
 
 
 
 
 
 
 
 
Site rental
$
1,382,219

 
91
%
 
$
1,253,582

 
91
%
 
10
 %
Network services and other
131,039

 
9
%
 
128,762

 
9
%
 
2
 %
Net revenues
1,513,258

 
100
%
 
1,382,344

 
100
%
 
9
 %
Operating expenses:
 
 
 
 
 
 
 
 
 
Costs of operations(a):
 
 
 
 
 
 
 
 
 
Site rental
361,317

 
26
%
 
345,453

 
28
%
 
5
 %
Network services and other
78,213

 
60
%
 
82,990

 
64
%
 
(6
)%
Total costs of operations
439,530

 
29
%
 
428,443

 
31
%
 
3
 %
General and administrative
128,925

 
9
%
 
121,449

 
9
%
 
6
 %
Asset write-down charges
13,696

 
1
%
 
8,588

 
1
%
 
*

Acquisition and integration costs
1,661

 
—

 
1,139

 
—

 
*

Depreciation, amortization and accretion
413,987

 
27
%
 
403,512

 
29
%
 
3
 %
Total operating expenses
997,799

 
66
%
 
963,131

 
70
%
 
4
 %
Operating income (loss)
515,459

 
34
%
 
419,213

 
30
%
 
23
 %
Interest expense and amortization of deferred financing costs
(380,288
)
 
 
 
(364,322
)
 
 
 
 
Gains (losses) on purchases and redemption of debt
—

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

 
 
 
(292,295
)
 
 
 
 
Interest and other income (expense)
(4,887
)
 
 
 
985

 
 
 
 
Income (loss) before income taxes
130,284

 
 
 
(374,786
)
 
 
 
 
Benefit (provision) for income taxes
(7,763
)
 
 
 
22,622

 
 
 
 
Net income (loss)
122,521

 
 
 
(352,164
)
 
 
 
 
Less: Net income (loss) attributable to the noncontrolling interest
355

 
 
 
(351
)
 
 
 
 
Net income (loss) attributable to CCIC stockholders
$
122,166

 
 
 
$
(351,813
)
 
 
 
 
________________
*
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"

Third Quarter 2011 and 2010. Our consolidated results of operations for the third quarter of 2011 and 2010, respectively, consist predominately of our CCUSA segment, which accounted for (1) 94% and 95% of consolidated net revenues, (2) 94% and 95% of consolidated gross margins, and (3) 98% and 100% of net income (loss) attributable to CCIC stockholders. Nearly all of the increase in site rental revenues resulted from towers we owned as of September 30, 2010. Our operating segment results, including CCUSA, are discussed below (see "Item 2. MD&A—Comparison of Operating Segments").

First Nine Months of 2011 and 2010. Our consolidated results of operations for the first nine months of 2011 and 2010, respectively, consist predominately of our CCUSA segment, which accounted for (1) 94% and 95% of consolidated net revenues, (2) 94% and 95% of consolidated gross margins, and (3) 98% and 100% of net income (loss) attributable to CCIC stockholders. Nearly all of the increase in site rental revenues resulted from towers we owned as of September 30, 2010. Our operating segment results, including CCUSA, are discussed below (see "Item 2. MD&A—Comparison of Operating Segments").


19
Comparison of Operating Segments
Our reportable operating segments for the third quarter of 2011 are (1) CCUSA, primarily consisting of our U.S. tower operations, and (2) CCAL, our Australian tower 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.
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. Our measure of Adjusted EBITDA may not be comparable to similarly titled measures of other companies, including companies in the tower sector, 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."
CCUSA—Third Quarter 2011 and 2010
Net revenues for the third quarter of 2011 increased by $25.2 million, or 6%, from the same period in the prior year. This increase in net revenues primarily resulted from an increase in site rental revenues of $26.9 million, or 6%, for the same period. 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, 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 third quarter of 2011 increased by $23.0 million, or 8%, from the same period in the prior year. The increase in the site rental gross margins was related to the previously mentioned 6% increase in site rental revenues. Site rental gross margins for the third quarter of 2011 increased primarily as a result of the high incremental margins associated with tenant additions given the relatively fixed costs to operate a tower. The $23.0 million incremental margin represents 86% of the related increase in site rental revenues.
Network services and other revenues for the third quarter of 2011 decreased by $1.7 million, or 4%, and the related gross margin increased by $0.8 million, or 5%, from the same period in the prior year. The increase in our network services and other gross margin is a reflection of the general volatility in the volume and mix of such work. Our network services business is of a variable nature as these services are not under long-term contracts. The increase in the gross margin percentage on the network services and other revenues relates to a larger percentage of higher margin site development services as a percentage of total network services and other revenues.
General and administrative expenses for the third quarter of 2011 decreased by $0.2 million, or less than 1%, from the same period in the prior year. General and administrative expenses are inclusive of stock-based compensation charges as discussed further in note 10 to our condensed consolidated financial statements. General and administrative expenses were 8% of net revenues for both the third quarter of 2011 and 2010. Typically, our general and administrative expenses do not significantly increase as a result of the co-location of additional tenants on our towers.
Adjusted EBITDA for the third quarter of 2011 increased by $23.6 million, or 8%, from the same period in the prior year. Adjusted EBITDA was positively impacted by the growth in our site rental business, including the high incremental site rental margin on the tenant additions and cost containment.
Depreciation, amortization and accretion for the third quarter of 2011 increased by $1.7 million, or 1%, from the same period in the prior year. This increase is consistent with the insignificant movement in our fixed assets and intangible assets between the third quarter of 2011 and the third quarter of 2010.
In order to extend the maturities of our debt portfolio, during the third quarter of 2010 we repaid all $1.3 billion of the outstanding face value of the 2006 tower revenue notes using cash from our issuance of the August 2010 tower revenue notes. As a result of purchasing and early retiring the 2006 tower revenue notes, we incurred a net loss of $71.9 million, inclusive of make whole payments. The increase in interest expense and amortization of deferred financing costs of $4.2 million, or 3%, from the third quarter of 2010 to 2011 predominately resulted from a $3.6 million increase in the amortization of interest rate swaps primarily related to the loss on the swaps hedging the refinancing of the 2006 tower revenue notes. During the third quarter of 2010, we recorded losses on interest rate swaps of $104.4 million, which predominately resulted from an increase in the liability for those swaps not subject to hedge accounting due to changes in the LIBOR yield curve. All of our forward-starting swaps were settled during 2010, so no further losses associated with these swaps should be recorded. For a further discussion of the debt refinancing and the interest rate swaps, see notes 6 and 7 to our consolidated financial statements in the 2010 Form 10-K.

20
The benefit (provision) for income taxes for the third quarter of 2011 was a provision of $2.3 million compared to a benefit of $8.1 million for the third quarter of 2010. During the third quarter of 2011 and 2010, our provision for federal income taxes was reduced by a partial reversal of the valuation allowance on our deferred tax assets, as a result of utilizing net operating losses that previously had a full valuation allowance. In addition, the third quarter of 2010 included $9.7 million of federal tax benefits recorded predominately as a result of discrete events, including the acquisition of NewPath. For the third quarter of 2011 and 2010, the effective tax rate differs from the federal statutory rate predominately due to our federal deferred tax valuation allowance.
Net income (loss) attributable to CCIC stockholders for the third quarter of 2011 was income of $50.3 million. Net income (loss) attributable to CCIC stockholders for the third quarter of 2010 was a loss of $134.6 million, inclusive of (1) net losses on interest rate swaps of $104.4 million and (2) net losses from purchases and early retirement of debt of $71.9 million. The change from net loss to net income was predominately due to (1) the previously mentioned charges and (2) growth in our site rental business.
CCUSA—First Nine Months of 2011 and 2010
Net revenues for the first nine months of 2011 increased by $111.8 million, or 9%, from the same period in the prior year. This increase in net revenues primarily resulted from an increase in site rental revenues of $115.0 million, or 10%, for the same period. 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, 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 nine months of 2011 increased by $104.2 million, or 12%, from the same period in the prior year. The increase in the site rental gross margins was related to the previously mentioned 10% increase in site rental revenues. Site rental gross margins for the first nine months of 2011 increased primarily as a result of the high incremental margins associated with tenant additions given the relatively fixed costs to operate a tower. The $104.2 million incremental margin represents 91% of the related increase in site rental revenues.
Network services and other revenues for the first nine months of 2011 decreased by $3.1 million, or 3%, and the related gross margin increased by $4.6 million, or 11%, from the same period in the prior year. The increase in our network services and other gross margin is a reflection of the general volatility in the volume and mix of such work. Our network services business is of a variable nature as these services are not under long-term contracts. The increase in the gross margin percentage on the network services and other revenues relates to a larger percentage of higher margin site development services as a percentage of total network services and other revenues.
General and administrative expenses for the first nine months of 2011 increased by $4.3 million, or 4%, from the same period in the prior year. General and administrative expenses are inclusive of stock-based compensation charges as discussed further in note 10 to our condensed consolidated financial statements. General and administrative expenses primarily increased related to our DAS networks driven by our acquisition of NewPath in 2010. General and administrative expenses were 8% of net revenues for the first nine months of both 2011 and 2010. Typically, our general and administrative expenses do not significantly increase as a result of the co-location of additional tenants on our towers.
Adjusted EBITDA for the first nine months of 2011 increased by $103.3 million, or 13%, from the same period in the prior year. Adjusted EBITDA was positively impacted by the growth in our site rental business, including the high incremental site rental margin on the tenant additions and cost containment.
Depreciation, amortization and accretion for the first nine months of 2011 increased by $8.9 million, or 2%, from the same period in the prior year. This increase is consistent with the insignificant movement in our fixed assets and intangible assets between the third quarter of 2011 and the third quarter of 2010.
During the first nine months of 2010, we repaid or purchased $3.4 billion of face value debt using cash from our issuances of debt in order to extend the maturities of our debt portfolio. As a result of purchasing and early retiring certain of our debt, we incurred a net loss of $138.4 million, inclusive of make whole payments. The increase in interest expense and amortization of deferred financing costs of $16.7 million, or 5%, from the first nine months of 2010 to 2011 predominately resulted from a $17.6 million increase in the amortization of interest rate swaps primarily related to the loss on the swaps hedging the refinancing of the 2006 tower revenue notes. During the first nine months of 2010, we recorded losses on interest rate swaps of $292.3 million, which predominately resulted from an increase in the liability for those swaps not subject to hedge accounting due to changes in the LIBOR yield curve. All of our forward-starting swaps were settled during 2010, so no further losses associated with these swaps should be recorded. For a further discussion of the debt refinancing and the interest rate swaps, see notes 6 and 7 to our consolidated financial statements in the 2010 Form 10-K.
The benefit (provision) for income taxes for the first nine months of 2011 was a provision of $6.1 million compared to a

21
benefit of $24.0 million for the first nine months of 2010. During the first nine months of 2011 and 2010, our provision for federal income taxes was reduced by a partial reversal of the valuation allowance on our deferred tax assets, as a result of utilizing net operating losses that previously had a full valuation allowance. In addition, the first nine months of 2010 included $16.5 million of federal tax benefits recorded predominately as a result of discrete events, including the acquisition of NewPath. For the first nine months of 2011 and 2010, the effective tax rate differs from the federal statutory rate predominately due to our federal deferred tax valuation allowance.
Net income (loss) attributable to CCIC stockholders for the first nine months of 2011 was income of $120.1 million. Net income (loss) attributable to CCIC stockholders for the first nine months of 2010 was a loss of $350.9 million inclusive of (1) net losses on interest rate swaps of $292.3 million and (2) net losses from purchases and early retirement of debt of $138.4 million. The change from net loss to net income was predominately due to (1) the previously mentioned charges and (2) growth in our site rental business.
CCAL—Third Quarter 2011 and 2010
The increases and decreases between the third quarter of 2011 and 2010 were inclusive of exchange rate fluctuations. The average exchange rate of one Australian dollar expressed in U.S. dollars for the third quarter of 2011 was approximately 1.05, an increase of 17% from approximately 0.90 for the same period in the prior year. See "Item 3. Quantitative and Qualitative Disclosures About Market Risk."
Total net revenues for the third quarter of 2011 increased by $6.8 million, or 27%, from the same period in the prior year. Site rental revenues for the third quarter of 2011 increased by $5.0 million, or 22%, from the same period in the prior year. The increase in the exchange rate positively impacted net revenues and site rental revenues by approximately $4.5 million and $3.9 million, respectively, and accounted for an increase of 18% and 17%, respectively, for the third quarter of 2011 from the same period in the prior year. Site rental revenues were also impacted by various other factors, inclusive of straight-line accounting, including, in no particular order, tenant additions on our towers, renewals of customer contracts, escalations and cancellations of customer contracts. Net revenues were also impacted by a $1.8 million increase in network services and other revenues.
Site rental gross margins increased by $3.3 million, or 21%, for the third quarter of 2011, from $15.5 million, for the third quarter of 2010. Adjusted EBITDA for the third quarter of 2011 increased by $2.6 million, or 20%, from the same period in the prior year. The increases in the site rental gross margin and Adjusted EBITDA were primarily due to exchange rate fluctuations.
Net income (loss) attributable to CCIC stockholders for the third quarter of 2011 was net income of $1.0 million, compared to a net loss of $0.4 million for the third quarter of 2010. The change from net loss to net income was primarily driven by the previously mentioned increase in net revenues.
CCAL—First Nine Months of 2011 and 2010
The increases and decreases between the first nine months of 2011 and 2010 were inclusive of exchange rate fluctuations. The average exchange rate of one Australian dollar expressed in U.S. dollars for the third quarter of 2011 was approximately 1.04, an increase of 16% from approximately 0.90 for the same period in the prior year. See "Item 3. Quantitative and Qualitative Disclosures About Market Risk."
Total net revenues for the first nine months of 2011 increased by $19.1 million, or 26%, from the same period in the prior year. Site rental revenues for the first nine months of 2011 increased by $13.7 million, or 20%, from the same period in the prior year. The increase in the exchange rate positively impacted net revenues and site rental revenues by approximately $12.9 million and $11.1 million, respectively, and accounted for an increase of 17% and 17%, respectively, for the first nine months of 2011 from the same period in the prior year. Site rental revenues were also impacted by various other factors, inclusive of straight-line accounting, including, in no particular order, tenant additions on our towers, renewals of customer contracts, escalations and cancellations of customer contracts. Net revenues were also impacted by a $5.4 million increase in network services and other revenues.
Site rental gross margins increased by $8.6 million, or 18%, for the first nine months of 2011, from $46.5 million for the first nine months of 2010. Adjusted EBITDA for the first nine months of 2011 increased by $7.8 million, or 20%, from the same period in the prior year. The increases in site rental gross margin and Adjusted EBITDA were primarily due to exchange rate fluctuations.
Net income (loss) attributable to CCIC stockholders for the first nine months of 2011 was net income of $2.1 million, compared to a net loss of $1.0 million for the first nine months of 2010. The change from net loss to net income was primarily driven by the previously mentioned increase in net revenues.

22
Liquidity and Capital Resources
Overview
General.    We believe our site rental business can be characterized as a stable cash flow stream generated under long-term contracts (see "Item 2. MD&A—General Overview—Overview"). Since we became a public company in 1998, our cash provided by operating activities (net of cash interest payments) has exceeded our sustaining capital expenditures. For the foreseeable future, we expect to continue to generate cash provided by operating activities that will be available for discretionary investments. In addition to investing cash provided by operating activities we may also, in certain circumstances, use debt financings and issuances of equity or equity related securities to fund discretionary investments.

We seek to allocate the cash produced by our operations in a manner that will enhance per share operating results. Our historical discretionary investments include (in no particular order): purchasing our common stock, acquiring towers, acquiring land under towers, selectively constructing towers, improving and structurally enhancing our existing towers, and purchasing or redeeming our debt or preferred stock. We have never declared or paid any cash dividend on our common stock. It is our current policy to retain our cash provided by operating activities to engage in discretionary investments. Periodically, we assess the future declaration and payment of cash dividends, if any, based on the then-current conditions, including our earnings, cash provided by operating activities, capital requirements, financial condition, our relative market capitalization, taxable income, taxpayer status, and other factors deemed relevant by our board of directors.
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 five 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. Based on market conditions, cost of capital and opportunities, we may choose to increase or decrease our leverage and coverage from these targets for periods of time.  Anticipated future growth in site rental cash flows and corresponding increases in Adjusted EBITDA should reduce our leverage ratio.  Conversely, as our cash flow and Adjusted EBITDA grow, we may seek to increase our debt in nominal dollars to maintain or achieve a certain targeted leverage.
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 3 to our condensed consolidated financial statements for additional information regarding our debt.
 
September 30, 2011
 
(In thousands of dollars)
Cash and cash equivalents(a)
$
75,524

Undrawn revolver availability(b)
145,000

Debt and other long-term obligations
6,936,686

Redeemable preferred stock
304,810

Total equity
2,313,652

________________
(a)
Exclusive of $228.6 million 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, cash flows from operating activities (net of cash interest payments) and undrawn revolver availability should be sufficient to cover our expected (1) debt service obligations of $33.6 million (principal repayments), (2) capital expenditures of roughly $300 million (sustaining and discretionary) and (3) redemption of our 6.25% convertible preferred stock in August 2012, if not converted prior to redemption. As CCIC is a holding company, our cash flow from operations is generated by our operating subsidiaries.
Over the next 12 months, we have no debt maturities other than nominal principal payments on amortizing debt. We may utilize cash flow from operations to repay some or all of the $305.0 million outstanding under our revolver prior to its maturity in September 2013. We do not anticipate the need to access the capital markets to refinance our existing debt until at least 2014 when our term loans mature ($620.8 million outstanding as of September 30, 2011). Our 6.25% convertible preferred stock requires redemption in August 2012 of approximately $306 million plus any unpaid dividends on that preferred stock. Prior to August 2012, the holders of the 6.25% convertible preferred stock may convert the preferred stock into an aggregate 8.3 million common shares at a conversion price of $36.875 per share of common stock. If our common stock price were to remain at or above current levels, we anticipate that the vast majority of the 6.25% convertible preferred stock will be converted into common shares prior to August 2012, since it would be in the holder's economic interest to so convert. If the 6.25% convertible preferred stock is still outstanding at August 2012, we may choose to fund the August 2012 redemption by any combination of the following: using cash

23
on hand, borrowing under our revolver, accessing the capital markets and using cash generated from operations. In addition, we may utilize our right to convert the preferred stock if our common stock trades at or above a specific threshold ($44.25 per share for 20 out of 30 consecutive trading days). We may also make purchases of the preferred stock using cash prior to August 2012. See "Item 3. Quantitative and Qualitative Disclosures About Market Risk" for a tabular presentation of our debt maturities as of September 30, 2011.
Summary Cash Flow Information
 
Nine Months Ended September 30,
 
2011
 
2010
 
Change
 
(In thousands of dollars)
Net cash provided by (used for):
 
 
 
 
 
Operating activities
$
455,274

 
$
407,655

 
$
47,619

Investing activities
(297,487
)
 
(298,458
)
 
971

Financing activities
(195,516
)
 
(571,233
)
 
375,717

Effect of exchange rate changes on cash
722

 
(131
)
 
853

Net increase (decrease) in cash and cash equivalents
$
(37,007
)
 
$
(462,167
)
 
$
425,160

Operating Activities
The increase in net cash provided by operating activities for the first nine months of 2011 of $47.6 million, or 12%, from 2010, was primarily due to growth in our core site rental 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 site rental business.
Investing Activities
Capital Expenditures.    
 
Nine Months Ended September 30,
 
2011
 
2010
 
Change
 
(In thousands of dollars)
Discretionary:
 
 
 
 
 
Land purchases
$
163,837

 
$
77,088

 
$
86,749

Tower improvements and other
55,105

 
47,517

 
7,588

Construction of towers
32,061

 
9,094

 
22,967

Sustaining
14,112

 
14,575

 
(463
)
Total
$
265,115

 
$
148,274

 
$
116,841

Other than sustaining capital expenditures, which we expect to be approximately $22 million to $27 million for the year ended December 31, 2012, 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 roughly $300 million of our cash flow on capital expenditures (sustaining and discretionary) over the next 12 months, with less than one-third of our total capital expenditures targeted for our existing tower assets 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.
During the third quarter of 2011, land purchases were $111.0 million and included $87.7 million for perpetual easements and other interests purchased in a single transaction. Total consideration for this single transaction was $89.3 million. Tower improvement capital expenditures typically vary based on (1) the type of work performed on the towers, with the installation of a new antenna typically requiring greater capital expenditures than a modification to an existing installation and (2) the existing capacity of the tower prior to installation. Tower construction capital expenditures increased from the first nine months of 2010 to the same period in 2011 as a result of additional DAS network builds.
Financing Activities
We seek to allocate cash produced 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

24
our debt or preferred stock. During the first nine months of 2011, our financing activities predominately related to net borrowings under our revolver and discretionary purchases of our common stock.
Revolving Credit Agreement. The proceeds of our revolver may be used for general corporate purposes, which may include the financing of capital expenditures, acquisitions and purchases of our common stock and preferred stock. Typically, we use our revolver to fund discretionary investments and not for operating activities such as working capital, which are typically funded by cash flows from operations. In June 2011, CCOC amended the revolver to increase the aggregate revolving commitment availability by $50.0 million to $450.0 million. The following table summarizes our borrowing activity under our revolver during the three and nine months ended September 30, 2011.
 
Three Months Ended September 30, 2011
 
Nine Months Ended September 30, 2011
 
(In thousands of dollars)
Maximum month-end balance during the period
$
305,000

 
$
305,000

Average daily balance
239,087

 
174,187

Outstanding at the end of the period
305,000

 
305,000

Weighted average interest rate based on average daily balance during the period
2.4
%
 
2.4
%
Weighted average interest rate on balance outstanding at the end of the period
2.4
%
 
2.4
%
Common Stock and Preferred Stock Activity.    As of September 30, 2011 and December 31, 2010, we had 284.5 million and 290.8 million common shares outstanding, respectively. During the first nine months of 2011, we purchased 7.3 million shares of common stock at an average price of $41.11 per share utilizing $301.4 million in cash. During the first nine months of 2011, we paid $15.0 million to purchase a portion of our 6.25% convertible preferred stock reducing our potential common shares by 0.3 million.
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 is the financial maintenance covenants under our debt agreements, exclusive of cash trap reserve covenants. See our 2010 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.
 
Debt
 
Current Covenant
Requirement
 
As of
September 30, 2011(d)
 
At Inception(d)
Consolidated Leverage Ratio(a)
Credit Agreement
 
≤7.50
 
5.2

 
8.9

Consolidated Interest Coverage Ratio(b)(c)
Credit Agreement
 
≥2.00
 
3.2

 
1.9

________________
(a)
For consolidated CCIC, this ratio is calculated as the ratio of Consolidated Total Debt (as defined in the credit agreement and calculated in accordance with GAAP) to Consolidated Adjusted EBITDA (as defined in the credit agreement) for the most recent completed quarter multiplied by four; at inception, the covenant requirement was less than 9.25 and decreased thereafter in accordance with the credit agreement. Consolidated Adjusted EBITDA is calculated in the same manner as Adjusted EBITDA used in our segment reporting, which is discussed further in "Item 2. MD&A—Accounting and Reporting Matters—Non-GAAP Financial Measures" and note 9 to our condensed consolidated financial statements.
(b)
For consolidated CCIC, this ratio is calculated as the ratio of Consolidated Adjusted EBITDA for the most recent completed quarter multiplied by four to Consolidated Pro forma Debt Service (as defined in the credit agreement). Consolidated Pro Form Debt Service is calculated as interest to be paid over the succeeding 12 months on the principal balance of debt then outstanding based on the then current interest rate for such debt.
(c)
In addition, the credit agreement contains covenants related to the debt service coverage ratios of 2.00, 1.75 and 1.75, respectively, for the 2010 tower revenue notes, 2009 securitized notes and 7.75% secured notes, which are calculated in substantially the same manner as the covenants in the respective debt agreements discussed under the cash trap reserve covenants below. These covenants in the credit agreement are more stringent than the cash trap covenants in the respective debt agreements.
(d)
The covenant requirement ratios have become more stringent since the inception date in accordance with the credit agreement. The covenant requirement ratios were in compliance with the credit agreement at the date of inception.
The following are the ratios applicable to the cash trap reserve covenants under our debt agreements that could require the cash flows generated by the issuers and their subsidiaries to be deposited in a reserve account and not released to us.
 
Debt
 
Current Covenant
Requirement(a)
 
As of
September 30, 2011

 
At Inception
Debt Service Coverage Ratio(b)
2010 Tower Revenue Notes
 
>1.75
 
3.5

 
3.1

Debt Service Coverage Ratio(b)
2009 Securitized Notes
 
>1.30
 
2.9

 
2.4

Consolidated Fixed Charge Coverage Ratio(b)
7.75% Secured Notes
 
>1.35
 
3.0

 
2.5

________________
(a)
The 2009 securitized notes and 2010 tower revenue notes also have amortization coverage thresholds of 1.15 and 1.45, respectively, which could result in applying current and future cash in the reserve account to prepay the debt with applicable prepayment consideration. For the 7.75% secured notes, if the

25
Consolidated Fixed Charge Coverage Ratio is equal to or less than 1.20 and the aggregate amount of cash deposited in the reserve account exceeds $100.0 million, the issuing subsidiaries will be required to commence an offer to purchase the 7.75% secured notes using the cash in the reserve account. See note (b) below for a discussion of the calculation of the Debt Service Coverage Ratio and Consolidated Fixed Charge Coverage Ratio.
(b)
The Debt Service Coverage Ratio and Consolidated Fixed Charge Coverage Ratio are both calculated as site rental revenue (in accordance with GAAP), less: (1) cost of operations (in accordance with GAAP), (2) straight-line rental revenues, (3) straight-line ground lease expenses, (4) management fees, and (5) sustaining capital expenditures, using the results for the previous 12 months then ended to the amount of interest to be paid over the succeeding 12 months per the terms of the respective debt agreement.

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, 2010 are described in "Item 7. MD&A" and in note 2 of our consolidated financial statements in our 2010 Form 10-K. The critical accounting policies and estimates for the first nine months of 2011 have not changed from the critical accounting policies for the year ended December 31, 2010, other than changes related to the goodwill impairment test. See "Item 2. MD&A—Accounting and Reporting Matters—Impact of Accounting Standards Issued But Not Yet Adopted and Those Adopted in 2011" for additional information regarding the changes related to goodwill impairment testing.
In the future, AT&T's potential acquisition of T-Mobile may trigger a review of our long-lived assets for impairment. See also "Item 2. MD&A—General Overview—Overview" for a discussion of AT&T's potential acquisition of T-Mobile.
Impact of Accounting Standards Issued But Not Yet Adopted and Those Adopted in 2011
No accounting pronouncements adopted during the nine months ended September 30, 2011 had a material impact on our consolidated financial statements. No new accounting pronouncements issued during the nine months ended September 30, 2011 are expected to have a material impact on our consolidated financial statements.
In September 2011, the Financial Accounting Standards Board ("FASB") issued an amendment to the guidance on goodwill impairment testing. The amended guidance permits an entity to first perform a qualitative assessment to determine whether it is "more likely than not" that the fair value of a reporting unit is less than its carrying amount. If it is concluded that it is "more likely than not" that the fair value of a reporting unit is less than its carrying amount, it is then necessary to perform the two-step goodwill impairment test described in the 2010 Form 10-K. Otherwise, the two-step goodwill impairment test is not required. We have adopted this amended guidance effective September 30, 2011 prior to performing our annual goodwill impairment test and, as such, anticipate performing the qualitative assessment in connection with the annual goodwill impairment test during the fourth quarter of 2011.
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 note 9 to our condensed consolidated financial statements. Our measure of Adjusted EBITDA may not be comparable to similarly titled measures of other companies, including companies in the tower sector, 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, cash flows 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 to measure operating performance without

26
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;
•
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 2010 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;
•
our $925.8 million of floating rate debt representing approximately 13% of total debt, of which $600.0 million has been fixed until December 2011 through interest rate swaps; and
•
potential future borrowings of incremental debt.
The following tables provide information about our market risk related to changes in interest rates. The future principal payments and weighted-average interest rates are presented as of September 30, 2011. 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 (see footnote (c)). See note 3 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
 
2011
 
2012
 
2013
 
2014
 
2015
 
Thereafter
 
Total
 
Fair Value(a)
 
(Dollars in thousands)
Debt:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed rate(c)
$
5,844

 
$
25,733

 
$
25,017

 
$
24,810

 
$
891,672

 
$
5,114,650

(c)
$
6,087,726

(c)
$
6,509,416

Average interest rate(b)(c)
5.7
%
 
5.4
%
 
5.6
%
 
5.7
%
 
8.9
%
 
9.3
%
(c)
9.2
%
(c)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Variable rate
$
1,625

 
$
6,500

 
$
311,500

 
$
606,125

 
$
—

 
$
—

 
$
925,750

 
$
904,024

Average interest rate(d)
1.7
%
 
1.7
%
 
2.4
%
 
1.7
%
 
—

 
—

 
2.0
%
 
 
________________
(a)
The fair value of our debt is based on indicative quotes (that is, non-binding quotes) from brokers that require judgment to interpret market information,

27
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)).
(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 anticipated repayment dates are 2015, 2017 and 2020, as applicable, for the 2010 tower revenue notes. 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 2010 Excess Cash Flow of the issuers was approximately $425.0 million.
(d)
The interest rate represents the weighted-average rate currently in effect and excludes the impact of interest rate swaps. We have effectively fixed the interest rate on $600.0 million of debt at approximately 1.3% (plus the applicable credit spread) through an interest rate swap until December 2011.
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 4% of our operating income for the nine months ended September 30, 2011. Over the past year and five years, the Australian dollar has strengthened by 1% and 31%, respectively, against 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.

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PART II—OTHER INFORMATION

ITEM 1A.
RISK FACTORS
You should carefully consider the risk factor below, as well as the other information contained in this document and our 2010 Form 10-K, including additional risk factors discussed in "Item 1A. Risk Factors" in our 2010 Form 10-K. The following risk factor is included below to update this specific risk factor from the Form 10-K with the respect to certain matters relating to AT&T's potential acquisition of T-Mobile.
A substantial portion of our revenues is derived from a small number of customers, and the loss, consolidation or financial instability of any of our limited number of customers may materially decrease revenues and reduce demand for our towers and network services.
For the nine months ended September 30, 2011, approximately 74% of our consolidated net revenues was derived from AT&T, Verizon Wireless, Sprint and T-Mobile, which represented 23%, 20%, 20% and 11%, respectively, of our consolidated net revenues. The loss of any one of our large customers as a result of bankruptcy, insolvency, consolidation, roaming, joint development, resale agreements by our customers, merger with other customers of ours or otherwise may result in (1) a material decrease in our revenues, (2) uncollectible account receivables, (3) an impairment of our deferred site rental receivables, tower assets, site rental contracts and customer relationships intangible assets, and (4) other adverse effects to our business. We cannot guarantee that contracts with our major customers will not be terminated or that these customers will renew their contracts with us.
Consolidation among our customers will likely result in duplicate or overlapping parts of networks, which may result in a reduction of cell sites and impact revenues from our towers. In addition, consolidation may result in a reduction in such customers' future capital expenditures in the aggregate because their expansion plans may be similar. Any industry consolidation could decrease the demand for our towers, which in turn may result in a reduction in our revenues and cash flows.
Recent examples of consolidation include Verizon Wireless acquiring Alltel in 2009. In addition, Sprint merged with Nextel in August 2005, resulting in their use of two separate wireless technologies. During 2010, Sprint announced Network Vision, a multi-year network enhancement to improve network speed, quality, efficiency and consolidate their multiple network technologies, including the elimination of their narrow-band push-to-talk network, referred to as iDEN. Sprint expects the Network Vision deployment to reach 250 million people by the end of 2013. These plans may result in Sprint not renewing certain contracts with us.
In March 2011, AT&T entered into a definitive agreement to acquire T-Mobile, subject to regulatory approval and other closing conditions. If consummated, this potential acquisition could decrease revenues and reduce or delay demand for our towers and network services, as a result of the anticipated integration of these networks and related duplicate or overlapping parts of the networks. See "Item 2. MD&A—General Overview" and "Item 2—MD&A—Accounting and Reporting Matters."

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 third quarter of 2011:
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)
 
 
 
 
 
 
July 1 - July 31, 2011
 
710

 
$
41.95

 
—

 
—

August 1 - August 31, 2011
 
1,976

 
39.86

 
—

 
—

September 1 - September 30, 2011
 
6

 
42.06

 
—

 
—

Total
 
2,692

 
$
40.42

 
—

 
—

We paid $108.8 million in cash to effect these purchases. Virtually all of these purchases were made in the open market. In addition to the common stock purchases shown in the table above, in the third quarter of 2011 we paid $15.0 million to purchase a portion of our 6.25% Convertible Preferred Stock reducing our potential common shares by 0.3 million.

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ITEM 6.
EXHIBITS

Exhibit No.
 
Description
 
 
 
(a) 3.1
 
Amended and Restated Certificate of Incorporation of Crown Castle International Corp., dated May 24, 2007
 
 
 
(b) 3.2
 
Certificate of Amendment of Amended and Restated Certificate of Incorporation of Crown Castle International Corp., effective May 24, 2011
 
 
 
(a) 3.3
 
Amended and Restated By-laws of Crown Castle International Corp., dated May 24, 2007
 
 
 
(b) 3.4
 
Amendment to Amended and Restated By-Laws of Crown Castle International Corp., effective May 24, 2011
 
 
 
 
 
 
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 8-K (Registration No. 001-16441) on May 30, 2007.
(b)
Incorporated by reference to the exhibit previously filed by the Registrant on Form 8-K (Registration No. 001-16441) on May 26, 2011.




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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:
November 3, 2011
 
By:
/s/    Jay A. Brown     
 
 
 
 
Jay A. Brown
 
 
 
 
Senior Vice President,
 
 
 
 
Chief Financial Officer and Treasurer
 
 
 
 
(Principal Financial Officer)
 
 
 
 
Date:
November 3, 2011
 
By:
/s/    Rob A. Fisher        
 
 
 
 
Rob A. Fisher
 
 
 
 
Vice President and Controller
 
 
 
 
(Principal Accounting Officer)
 

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