x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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) |
Large accelerated filer | x | Accelerated filer | o | |||
Non-accelerated filer | o | Smaller reporting company | o |
Page | |||
ITEM 1. | |||
ITEM 2. | |||
ITEM 3. | |||
ITEM 4. | |||
ITEM 1A. | |||
ITEM 6. | |||
ITEM 1. | FINANCIAL STATEMENTS |
September 30, 2012 | December 31, 2011 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 118,903 | $ | 80,120 | |||
Restricted cash | 273,305 | 252,368 | |||||
Receivables, net | 141,399 | 77,258 | |||||
Prepaid expenses | 104,646 | 80,529 | |||||
Deferred income tax assets | 78,937 | 85,385 | |||||
Deferred site rental receivables and other current assets, net | 60,186 | 23,492 | |||||
Total current assets | 777,376 | 599,152 | |||||
Deferred site rental receivables, net | 804,231 | 621,103 | |||||
Property and equipment, net of accumulated depreciation of $4,140,879 and $3,824,136, respectively | 5,380,541 | 4,861,227 | |||||
Goodwill | 2,801,161 | 2,035,390 | |||||
Other intangible assets, net | 2,368,650 | 2,178,182 | |||||
Long-term prepaid rent, deferred financing costs and other assets, net | 604,460 | 250,042 | |||||
Total assets | $ | 12,736,419 | $ | 10,545,096 | |||
LIABILITIES AND EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 48,373 | $ | 32,055 | |||
Accrued interest | 54,587 | 65,392 | |||||
Deferred revenues and below-market tenant leases | 220,744 | 167,238 | |||||
Other accrued liabilities | 120,020 | 104,904 | |||||
Current maturities of debt and other obligations | 88,093 | 32,517 | |||||
Total current liabilities | 531,817 | 402,106 | |||||
Debt and other long-term obligations | 8,295,071 | 6,853,182 | |||||
Deferred income tax liabilities | 96,735 | 97,562 | |||||
Below-market tenant leases, deferred ground lease payable and other liabilities | 869,991 | 500,350 | |||||
Total liabilities | 9,793,614 | 7,853,200 | |||||
Commitments and contingencies (note 11) | |||||||
Redeemable convertible preferred stock, $0.1 par value; 20,000,000 shares authorized; shares issued and outstanding: September 30, 2012—0 and December 31, 2011—6,111,000; stated net of unamortized issue costs; mandatory redemption and aggregate liquidation value: September 30, 2012—$0 and December 31, 2011—$305,550 | — | 305,032 | |||||
CCIC stockholders' equity: | |||||||
Common stock, $.01 par value; 600,000,000 shares authorized; shares issued and outstanding: September 30, 2012—293,161,069 and December 31, 2011—284,449,372 | 2,932 | 2,844 | |||||
Additional paid-in capital | 5,615,263 | 5,312,342 | |||||
Accumulated other comprehensive income (loss) | (71,633 | ) | (116,996 | ) | |||
Accumulated deficit | (2,606,485 | ) | (2,811,945 | ) | |||
Total CCIC stockholders' equity | 2,940,077 | 2,386,245 | |||||
Noncontrolling interest | 2,728 | 619 | |||||
Total equity | 2,942,805 | 2,386,864 | |||||
Total liabilities and equity | $ | 12,736,419 | $ | 10,545,096 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Net revenues: | |||||||||||||||
Site rental | $ | 538,761 | $ | 468,920 | $ | 1,553,878 | $ | 1,382,219 | |||||||
Network services and other | 82,576 | 44,963 | 204,715 | 131,039 | |||||||||||
Net revenues | 621,337 | 513,883 | 1,758,593 | 1,513,258 | |||||||||||
Operating expenses: | |||||||||||||||
Costs of operations(a): | |||||||||||||||
Site rental | 135,314 | 121,759 | 389,756 | 361,317 | |||||||||||
Network services and other | 50,029 | 25,083 | 121,812 | 78,213 | |||||||||||
General and administrative | 55,862 | 42,922 | 153,941 | 128,925 | |||||||||||
Asset write-down charges | 1,560 | 3,090 | 8,250 | 13,696 | |||||||||||
Acquisition and integration costs | 2,937 | 617 | 12,112 | 1,661 | |||||||||||
Depreciation, amortization and accretion | 154,867 | 138,523 | 446,749 | 413,987 | |||||||||||
Total operating expenses | 400,569 | 331,994 | 1,132,620 | 997,799 | |||||||||||
Operating income (loss) | 220,768 | 181,889 | 625,973 | 515,459 | |||||||||||
Interest expense and amortization of deferred financing costs | (144,949 | ) | (127,119 | ) | (427,361 | ) | (380,288 | ) | |||||||
Gains (losses) on retirement of long-term obligations | — | — | (14,586 | ) | — | ||||||||||
Interest income | 291 | 175 | 1,027 | 554 | |||||||||||
Other income (expense) | (632 | ) | (737 | ) | (3,958 | ) | (5,441 | ) | |||||||
Income (loss) before income taxes | 75,478 | 54,208 | 181,095 | 130,284 | |||||||||||
Benefit (provision) for income taxes | (32,300 | ) | (2,825 | ) | 29,437 | (7,763 | ) | ||||||||
Net income (loss) | 43,178 | 51,383 | 210,532 | 122,521 | |||||||||||
Less: Net income (loss) attributable to the noncontrolling interest | 1,133 | 105 | 2,443 | 355 | |||||||||||
Net income (loss) attributable to CCIC stockholders | 42,045 | 51,278 | 208,089 | 122,166 | |||||||||||
Dividends on preferred stock | — | (7,541 | ) | (2,629 | ) | (17,944 | ) | ||||||||
Net income (loss) attributable to CCIC stockholders after deduction of dividends on preferred stock | $ | 42,045 | $ | 43,737 | $ | 205,460 | $ | 104,222 | |||||||
Net income (loss) | $ | 43,178 | $ | 51,383 | $ | 210,532 | $ | 122,521 | |||||||
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 | — | — | — | (7,537 | ) | ||||||||||
Derivative instruments, net of taxes of $5,705, $0, $11,415 and $0, respectively: | |||||||||||||||
Net change in fair value of cash flow hedging instruments, net of taxes | — | (43 | ) | — | (893 | ) | |||||||||
Amounts reclassified into results of operations, net of taxes | 10,594 | 17,986 | 37,541 | 53,834 | |||||||||||
Foreign currency translation adjustments | 6,876 | (16,816 | ) | 7,120 | (6,662 | ) | |||||||||
Total other comprehensive income (loss) | 17,470 | 1,127 | 44,661 | 38,742 | |||||||||||
Comprehensive income (loss) | 60,648 | 52,510 | 255,193 | 161,263 | |||||||||||
Less: Comprehensive income (loss) attributable to the noncontrolling interest | 1,171 | 88 | 1,741 | 721 | |||||||||||
Comprehensive income (loss) attributable to CCIC stockholders | $ | 59,477 | $ | 52,422 | $ | 253,452 | $ | 160,542 | |||||||
Net income (loss) attributable to CCIC common stockholders, after deduction of dividends on preferred stock, per common share: | |||||||||||||||
Basic | $ | 0.14 | $ | 0.16 | $ | 0.71 | $ | 0.37 | |||||||
Diluted | $ | 0.14 | $ | 0.15 | $ | 0.71 | $ | 0.36 | |||||||
Weighted-average common shares outstanding (in thousands): | |||||||||||||||
Basic | 290,762 | 282,031 | 288,775 | 284,770 | |||||||||||
Diluted | 292,098 | 283,899 | 290,527 | 286,868 |
(a) | Exclusive of depreciation, amortization and accretion shown separately. |
Nine Months Ended September 30, | |||||||
2012 | 2011 | ||||||
Cash flows from operating activities: | |||||||
Net income (loss) | $ | 210,532 | $ | 122,521 | |||
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: | |||||||
Depreciation, amortization and accretion | 446,749 | 413,987 | |||||
Gains (losses) on retirement of long-term obligations | 14,586 | — | |||||
Amortization of deferred financing costs and other non-cash interest | 74,269 | 77,221 | |||||
Stock-based compensation expense | 33,573 | 24,937 | |||||
Asset write-down charges | 8,250 | 13,696 | |||||
Deferred income tax benefit (provision) | (35,140 | ) | 6,684 | ||||
Other adjustments | 13 | 4,848 | |||||
Changes in assets and liabilities, excluding the effects of acquisitions: | |||||||
Increase (decrease) in accrued interest | (11,525 | ) | (9,925 | ) | |||
Increase (decrease) in accounts payable | (494 | ) | (9,713 | ) | |||
Increase (decrease) in deferred revenues, deferred ground lease payables, other accrued liabilities and other liabilities | 31,230 | (18,231 | ) | ||||
Decrease (increase) in receivables | (44,213 | ) | (5,318 | ) | |||
Decrease (increase) in prepaid expenses, deferred site rental receivables, long-term prepaid rent, restricted cash and other assets | (203,372 | ) | (165,433 | ) | |||
Net cash provided by (used for) operating activities | 524,458 | 455,274 | |||||
Cash flows from investing activities: | |||||||
Payments for acquisitions of businesses, net of cash acquired | (1,236,238 | ) | (17,997 | ) | |||
Capital expenditures | (283,386 | ) | (265,115 | ) | |||
Other investing activities, net | 1,244 | (14,375 | ) | ||||
Net cash provided by (used for) investing activities | (1,518,380 | ) | (297,487 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from issuance of long-term debt | 2,100,000 | — | |||||
Proceeds from issuance of capital stock | 239 | 1,523 | |||||
Principal payments on debt and other long-term obligations | (59,579 | ) | (26,026 | ) | |||
Purchases and redemptions of long-term debt | (699,486 | ) | — | ||||
Purchases of capital stock | (35,984 | ) | (301,369 | ) | |||
Purchases of preferred stock | — | (15,002 | ) | ||||
Borrowings under revolving credit agreement | — | 273,000 | |||||
Payments under revolving credit facility | (251,000 | ) | (125,000 | ) | |||
Payments for financing costs | (40,255 | ) | (82 | ) | |||
Net (increase) decrease in restricted cash | 19,533 | 12,153 | |||||
Dividends on preferred stock | (2,481 | ) | (14,713 | ) | |||
Net cash provided by (used for) financing activities | 1,030,987 | (195,516 | ) | ||||
Effect of exchange rate changes on cash | 1,718 | 722 | |||||
Net increase (decrease) in cash and cash equivalents | 38,783 | (37,007 | ) | ||||
Cash and cash equivalents at beginning of period | 80,120 | 112,531 | |||||
Cash and cash equivalents at end of period | $ | 118,903 | $ | 75,524 |
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, 2012 | — | $ | — | 293,038,013 | $ | 2,930 | $ | 5,599,106 | $ | (89,065 | ) | $ | (2,648,530 | ) | $ | 1,557 | $ | 2,865,998 | |||||||||||||||
Stock-based compensation related activity, net of forfeitures | — | — | 127,860 | 2 | 16,468 | — | — | — | 16,470 | ||||||||||||||||||||||||
Purchases and retirement of capital stock | — | — | (4,804 | ) | — | (311 | ) | — | — | — | (311 | ) | |||||||||||||||||||||
Other comprehensive income (loss)(a) | — | — | — | — | — | 17,432 | — | 38 | 17,470 | ||||||||||||||||||||||||
Disposition of noncontrolling interest | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Net income (loss) | — | — | — | — | — | — | 42,045 | 1,133 | 43,178 | ||||||||||||||||||||||||
Balance, September 30, 2012 | — | $ | — | 293,161,069 | $ | 2,932 | $ | 5,615,263 | $ | (71,633 | ) | $ | (2,606,485 | ) | $ | 2,728 | $ | 2,942,805 |
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 | |||||||||||||||
Stock-based compensation related activity, net of forfeitures | — | — | 88,793 | 1 | 8,448 | — | — | — | 8,449 | ||||||||||||||||||||||||
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 | ) | ||||||||||||||||||||
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 |
(a) | See the statement of operations and other comprehensive income (loss) for the allocation of the components of "other comprehensive income (loss)." |
CCIC Stockholders | |||||||||||||||||||||||||||||||||
Redeemable Convertible Preferred Stock | Common Stock | ||||||||||||||||||||||||||||||||
Shares | Amount | Shares | ($.01 Par) | Additional Paid-In Capital | AOCI | Accumulated Deficit | Noncontrolling Interest | Total | |||||||||||||||||||||||||
Balance, January 1, 2012 | 6,111,000 | $ | 305,032 | 284,449,372 | $ | 2,844 | $ | 5,312,342 | $ | (116,996 | ) | $ | (2,811,945 | ) | $ | 619 | $ | 2,386,864 | |||||||||||||||
Stock-based compensation related activity, net of forfeitures | — | — | 1,124,969 | 12 | 33,801 | — | — | — | 33,813 | ||||||||||||||||||||||||
Conversion of redeemable convertible preferred stock into common stock | (6,111,000 | ) | (305,180 | ) | 8,285,905 | 83 | 305,097 | — | — | — | 305,180 | ||||||||||||||||||||||
Purchases and retirement of capital stock | — | — | (699,177 | ) | (7 | ) | (35,977 | ) | — | — | — | (35,984 | ) | ||||||||||||||||||||
Other comprehensive income (loss)(a) | — | — | — | — | — | 45,363 | — | (702 | ) | 44,661 | |||||||||||||||||||||||
Dividends on preferred stock and amortization of issue costs | — | 148 | — | — | — | — | (2,629 | ) | — | (2,629 | ) | ||||||||||||||||||||||
Disposition of noncontrolling interest | — | — | — | — | — | — | — | 368 | 368 | ||||||||||||||||||||||||
Net income (loss) | — | — | — | — | — | — | 208,089 | 2,443 | 210,532 | ||||||||||||||||||||||||
Balance, September 30, 2012 | — | $ | — | 293,161,069 | $ | 2,932 | $ | 5,615,263 | $ | (71,633 | ) | $ | (2,606,485 | ) | $ | 2,728 | $ | 2,942,805 |
CCIC Stockholders | |||||||||||||||||||||||||||||||||
Redeemable Convertible Preferred Stock | Common Stock | ||||||||||||||||||||||||||||||||
Shares | Amount | Shares | ($.01 Par) | Additional Paid-In Capital | AOCI | Accumulated Deficit | Noncontrolling Interest | Total | |||||||||||||||||||||||||
Balance, January 1, 2011 | 6,361,000 | $ | 316,581 | 290,826,284 | $ | 2,908 | $ | 5,581,525 | $ | (178,978 | ) | $ | (2,960,082 | ) | $ | (379 | ) | $ | 2,444,994 | ||||||||||||||
Stock-based compensation related activity, net of forfeitures | — | — | 1,000,308 | 10 | 26,450 | — | — | — | 26,460 | ||||||||||||||||||||||||
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 | ) | ||||||||||||||||||||
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 |
(a) | See the statement of operations and other comprehensive income (loss) for the allocation of the components of "other comprehensive income (loss)." |
1. | General |
2. | Summary of Significant Accounting Policies |
3. | Acquisitions |
Preliminary Purchase Price Allocation | |||||||
Presented September 30, 2012 | Presented June 30, 2012 | ||||||
Current assets | $ | 73,851 | $ | 74,246 | |||
Property and equipment | 520,361 | 515,984 | |||||
Goodwill | 697,448 | 682,148 | |||||
Other intangible assets, net | 195,000 | 195,000 | |||||
Other assets | 4,251 | 4,251 | |||||
Current liabilities | (104,083 | ) | (86,433 | ) | |||
Below-market tenant leases and other non-current liabilities | (337,806 | ) | (330,045 | ) | |||
Deferred income tax liabilities | (51,304 | ) | (57,433 | ) | |||
Net assets acquired | $ | 997,718 | $ | 997,718 |
Nine Months Ended September 30, | ||||||||
2012 | 2011 | |||||||
Net revenues | $ | 1,793,787 | $ | 1,600,528 | ||||
Net income (loss) | $ | 190,451 | $ | 97,899 | (a) | |||
Basic net income (loss) attributable to CCIC common stockholders, after deduction of dividends on preferred stock, per common share | $ | 0.64 | $ | 0.28 | ||||
Diluted net income (loss) attributable to CCIC common stockholders, after deduction of dividends on preferred stock, per common share | $ | 0.64 | $ | 0.28 |
(a) | Inclusive of $46.3 million in NextG stock-based compensation charges and $15.7 million in acquisition and integration costs incurred by NextG. |
4. | Goodwill and Intangible Assets |
• | the acquired and in-process DAS have low average tenancy, which the Company believes provides an opportunity to co-locate additional tenants on those systems; |
• | the Company believes that the economics associated with DAS are similar to the economics associated with the Company's towers, whereby expected increases in revenues from additional tenants on existing DAS are expected to result in high incremental margins due to relatively fixed operating costs; |
• | the Company believes the demand for tenants to co-locate on DAS will be driven by the continued growth trends in the wireless communication industry as wireless carriers continue to focus on improving network quality and expanding capacity; |
• | the Company believes the acquired DAS are well-positioned to benefit from the anticipated growth in the wireless industry with their previously mentioned locations in the ten largest metropolitan statistical areas in the U.S.; and |
• | other intangibles not qualified for separate recognition, including the assembled work force. |
As of September 30, 2012 | As of December 31, 2011 | ||||||||||||||||||||||
Gross Carrying Value | Accumulated Amortization | Net Book Value | Gross Carrying Value | Accumulated Amortization | Net Book Value | ||||||||||||||||||
Site rental contracts and customer relationships | $ | 3,112,773 | $ | (865,227 | ) | $ | 2,247,546 | $ | 2,823,832 | $ | (748,850 | ) | $ | 2,074,982 | |||||||||
Other intangible assets | 181,477 | (60,373 | ) | 121,104 | 152,375 | (49,175 | ) | 103,200 | |||||||||||||||
Total | $ | 3,294,250 | $ | (925,600 | ) | $ | 2,368,650 | $ | 2,976,207 | $ | (798,025 | ) | $ | 2,178,182 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
2012 | 2012 | |||||||||||
Amount | Weighted-Average Amortization Period | Amount(a) | Weighted-Average Amortization Period | |||||||||
(In years) | (In years) | |||||||||||
Site rental contracts and customer relationships | $ | 20,481 | 20.0 | $ | 288,045 | 23.3 | ||||||
Other intangible assets | — | — | 30,440 | 18.8 | ||||||||
Total | $ | 20,481 | 20.0 | $ | 318,485 | 22.9 |
(a) | $94.5 million related to the WCP Acquisition. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
Classification | 2012 | 2011 | 2012 | 2011 | |||||||||||
Depreciation, amortization and accretion | $ | 42,970 | $ | 39,977 | $ | 125,496 | $ | 119,212 | |||||||
Site rental costs of operations | 763 | 857 | 2,326 | 2,852 | |||||||||||
Total amortization expense | $ | 43,733 | $ | 40,834 | $ | 127,822 | $ | 122,064 |
Three Months Ended December 31, | Years Ending December 31, | ||||||||||||||||||
2012 | 2013 | 2014 | 2015 | 2016 | |||||||||||||||
Estimated annual amortization | $ | 42,592 | $ | 164,517 | $ | 161,186 | $ | 155,572 | $ | 155,544 |
Three Months Ended December 31, | Years Ending December 31, | ||||||||||||||||||
2012 | 2013 | 2014 | 2015 | 2016 | |||||||||||||||
Estimated annual amortization | $ | 7,132 | $ | 28,518 | $ | 28,479 | $ | 27,578 | $ | 26,791 |
5. | Debt and Other Obligations |
Original Issue Date | Contractual Maturity Date | Outstanding Balance as of September 30, 2012 | Outstanding Balance as of December 31, 2011 | Stated Interest Rate as of September 30, 2012(a) | |||||||||||
Bank debt - variable rate: | |||||||||||||||
Revolver | Jan. 2007 | Sept. 2013 | $ | — | $ | 251,000 | N/A | ||||||||
2012 Revolver | Jan. 2012 | Jan. 2017 | — | (b) | — | N/A | (c) | ||||||||
2007 Term Loans | Jan./March 2007 | March 2014 | — | 619,125 | N/A | ||||||||||
2012 Term Loans | Jan. 2012 | 2017/2019 | 2,075,500 | — | 3.7 | % | (c) | ||||||||
Total bank debt | 2,075,500 | 870,125 | |||||||||||||
Securitized debt - fixed rate: | |||||||||||||||
January 2010 Tower Revenue Notes | Jan. 2010 | 2035 - 2040 | (d) | 1,900,000 | 1,900,000 | 5.7 | % | (d) | |||||||
August 2010 Tower Revenue Notes | Aug. 2010 | 2035 - 2040 | (d) | 1,550,000 | 1,550,000 | 4.5 | % | (d) | |||||||
2009 Securitized Notes | July 2009 | 2019/2029 | (e) | 203,001 | 216,431 | 7.0 | % | ||||||||
WCP Securitized Notes | Nov. 2010 | Nov. 2040 | (f) | 328,764 | (f) | — | 5.4 | % | (g) | ||||||
Total securitized debt | 3,981,765 | 3,666,431 | |||||||||||||
High yield bonds - fixed rate: | |||||||||||||||
9% Senior Notes | Jan. 2009 | Jan. 2015 | 792,753 | 817,799 | 9.0 | % | (h) | ||||||||
7.75% Secured Notes | Apr. 2009 | May 2017 | 946,648 | 978,983 | 7.8 | % | (i) | ||||||||
7.125% Senior Notes | Nov. 2009 | Nov. 2019 | 498,056 | 497,904 | 7.1 | % | (j) | ||||||||
7.5% Senior Notes | Dec. 2003 | Dec. 2013 | — | 51 | N/A | ||||||||||
Total high yield bonds | 2,237,457 | 2,294,737 | |||||||||||||
Other: | |||||||||||||||
Capital leases and other obligations | Various | Various | (k) | 88,442 | 54,406 | Various | (k) | ||||||||
Total debt and other obligations | 8,383,164 | 6,885,699 | |||||||||||||
Less: current maturities and short-term debt and other current obligations | 88,093 | 32,517 | |||||||||||||
Non-current portion of long-term debt and other long-term obligations | $ | 8,295,071 | $ | 6,853,182 |
(a) | Represents the weighted-average stated interest rate. |
(b) | As of September 30, 2012, the undrawn availability under the $1.0 billion senior secured revolving credit facility ("2012 Revolver") is $1.0 billion. |
(c) | The 2012 Revolver and the Term Loan A bear interest at a per annum rate equal to LIBOR plus 2.0% to 2.75%, based on CCOC's total net leverage ratio. Term Loan B bears interest at a per annum rate equal to LIBOR plus 3.0% (with LIBOR subject to a floor of 1% per annum). The Company pays a commitment fee of 0.4% per annum on the undrawn available amount under the 2012 Revolver. |
(d) | If the respective series of the January 2010 Tower Revenue Notes and August 2010 Tower Revenue Notes are not paid in full on or prior to 2015, 2017 and 2020, as applicable, then Excess Cash Flow (as defined in the indenture) of the issuers (of such notes) will be used to repay principal of the applicable series and class of the 2010 Tower Revenue Notes, and additional interest (of approximately 5% per annum) will accrue on the respective 2010 Tower Revenue Notes. The January 2010 Tower Revenue Notes consist of three series of notes with principal amounts of $300.0 million, $350.0 million and $1.3 billion, having anticipated repayment dates in 2015, 2017 and 2020, respectively. The August 2010 Tower Revenue Notes consist of three series of notes with principal amounts of $250.0 million, $300.0 million and $1.0 billion, having anticipated repayment dates in 2015, 2017 and 2020, respectively. |
(e) | The 2009 Securitized Notes consist of $133.0 million of principal as of September 30, 2012 that amortizes through 2019, and $70.0 million of principal as of September 30, 2012 that amortizes during the period beginning in 2019 and ending in 2029. |
(f) | The WCP securitized notes ("WCP Securitized Notes") were assumed in connection with the WCP Acquisition. The WCP Securitized Notes include a fair value adjustment that increased the debt carrying value by $13.3 million as of September 30, 2012. The anticipated repayment date is 2015 for each class of the debt assumed in connection with the WCP Acquisition. |
(g) | The effective yield is approximately 4.0%, inclusive of the fair value adjustment. |
(h) | The effective yield is approximately 11.3%, inclusive of the discount. |
(i) | The effective yield is approximately 8.2%, inclusive of the discount. |
(j) | The effective yield is approximately 7.2%, inclusive of the discount. |
(k) | The Company's capital leases and other obligations bear interest rates up to 10% and mature in periods ranging from less than 1 year to approximately 20 years. |
Three Months Ended December 31, | Years Ending December 31, | Unamortized Adjustments, Net | Total Debt and Other Obligations Outstanding | ||||||||||||||||||||||||||||||||
2012 | 2013 | 2014 | 2015 | 2016 | Thereafter | Total Cash Obligations | |||||||||||||||||||||||||||||
Scheduled contractual maturities | $ | 19,839 | $ | 89,795 | $ | 99,336 | $ | 941,179 | $ | 113,198 | $ | 7,163,572 | $ | 8,426,919 | $ | (43,755 | ) | $ | 8,383,164 |
Nine Months Ended September 30, 2012 | |||||||||||
Principal Amount | Cash Paid(a) | Gains (Losses)(c) | |||||||||
Revolver | $ | 251,000 | $ | 251,000 | $ | (1,445 | ) | ||||
2007 Term Loans | 619,125 | 619,125 | (1,893 | ) | |||||||
9% Senior Notes | 37,257 | 41,334 | (6,517 | ) | |||||||
7.75% Secured Notes(b) | 35,488 | 39,027 | (4,731 | ) | |||||||
Total | $ | 942,870 | $ | 950,486 | $ | (14,586 | ) |
(a) | Exclusive of accrued interest. |
(b) | These debt purchases were made by CCIC rather than by the subsidiaries that issued the debt, because of restrictions upon the subsidiaries that issued the debt; as a result, the debt remains outstanding at the Company's subsidiaries. |
(c) | Inclusive of an aggregate $7.0 million related to the write-off of deferred financing costs and discounts. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Interest expense on debt obligations | $ | 119,460 | $ | 101,380 | $ | 353,702 | $ | 303,067 | |||||||
Amortization of deferred financing costs | 5,293 | 3,790 | 15,383 | 11,266 | |||||||||||
Amortization of adjustments on long-term debt | 4,447 | 4,074 | 11,171 | 11,907 | |||||||||||
Amortization of interest rate swaps | 16,300 | 17,986 | 48,957 | 53,834 | |||||||||||
Other, net of capitalized interest | (551 | ) | (111 | ) | (1,852 | ) | 214 | ||||||||
Total | $ | 144,949 | $ | 127,119 | $ | 427,361 | $ | 380,288 |
6. | Income Taxes |
7. | Redeemable Convertible Preferred Stock |
8. | Fair Value Disclosures |
Level in Fair Value Hierarchy | September 30, 2012 | December 31, 2011 | |||||||||||||||
Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||||||
Assets: | |||||||||||||||||
Cash and cash equivalents | 1 | $ | 118,903 | $ | 118,903 | $ | 80,120 | $ | 80,120 | ||||||||
Restricted cash, current and non-current | 1 | 278,305 | 278,305 | 257,368 | 257,368 | ||||||||||||
Liabilities: | |||||||||||||||||
Long-term debt and other obligations | 2 | 8,383,164 | 9,172,056 | 6,885,699 | 7,355,652 |
9. | Per Share Information |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Net income (loss) attributable to CCIC stockholders | $ | 42,045 | $ | 51,278 | $ | 208,089 | $ | 122,166 | |||||||
Dividends on preferred stock | — | (7,541 | ) | (2,629 | ) | (17,944 | ) | ||||||||
Net income (loss) attributable to CCIC common stockholders after deduction of dividends on preferred stock for basic and diluted computations | $ | 42,045 | $ | 43,737 | $ | 205,460 | $ | 104,222 | |||||||
Weighted-average number of common shares outstanding (in thousands): | |||||||||||||||
Basic weighted-average number of common stock outstanding | 290,762 | 282,031 | 288,775 | 284,770 | |||||||||||
Effect of assumed dilution from potential common shares relating to stock options and restricted stock awards | 1,336 | 1,868 | 1,752 | 2,098 | |||||||||||
Diluted weighted-average number of common shares outstanding | 292,098 | 283,899 | 290,527 | 286,868 | |||||||||||
Net income (loss) attributable to CCIC common stockholders after deduction of dividends on preferred stock, per common share: | |||||||||||||||
Basic | $ | 0.14 | $ | 0.16 | $ | 0.71 | $ | 0.37 | |||||||
Diluted | $ | 0.14 | $ | 0.15 | $ | 0.71 | $ | 0.36 |
10. | Leases |
Three Months Ended December 31, | Years Ending December 31, | ||||||||||||||||||||||||||
2012 | 2013 | 2014 | 2015 | 2016 | Thereafter | Total | |||||||||||||||||||||
Tenant Contracts | $ | 455,837 | $ | 1,836,870 | $ | 1,727,539 | $ | 1,733,702 | $ | 1,686,631 | $ | 11,199,498 | $ | 18,640,077 |
11. | Commitments and Contingencies |
12. | Operating Segments |
Three Months Ended September 30, 2012 | Three Months Ended September 30, 2011 | ||||||||||||||||||||||||||||||
CCUSA | CCAL | Eliminations | Consolidated Total | CCUSA | CCAL | Eliminations | Consolidated Total | ||||||||||||||||||||||||
Net revenues: | |||||||||||||||||||||||||||||||
Site rental | $ | 507,247 | $ | 31,514 | $ | — | $ | 538,761 | $ | 441,137 | $ | 27,783 | $ | — | $ | 468,920 | |||||||||||||||
Network services and other | 78,287 | 4,289 | — | 82,576 | 40,853 | 4,110 | — | 44,963 | |||||||||||||||||||||||
Net revenues | 585,534 | 35,803 | — | 621,337 | 481,990 | 31,893 | — | 513,883 | |||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||||||
Costs of operations:(a) | |||||||||||||||||||||||||||||||
Site rental | 126,059 | 9,255 | — | 135,314 | 112,843 | 8,916 | — | 121,759 | |||||||||||||||||||||||
Network services and other | 46,592 | 3,437 | — | 50,029 | 22,713 | 2,370 | — | 25,083 | |||||||||||||||||||||||
General and administrative | 50,461 | 5,401 | — | 55,862 | 37,295 | 5,627 | — | 42,922 | |||||||||||||||||||||||
Asset write-down charges | 1,518 | 42 | — | 1,560 | 3,165 | (75 | ) | — | 3,090 | ||||||||||||||||||||||
Acquisition and integration costs | 2,937 | — | — | 2,937 | 617 | — | — | 617 | |||||||||||||||||||||||
Depreciation, amortization and accretion | 147,186 | 7,681 | — | 154,867 | 130,878 | 7,645 | — | 138,523 | |||||||||||||||||||||||
Total operating expenses | 374,753 | 25,816 | — | 400,569 | 307,511 | 24,483 | — | 331,994 | |||||||||||||||||||||||
Operating income (loss) | 210,781 | 9,987 | — | 220,768 | 174,479 | 7,410 | — | 181,889 | |||||||||||||||||||||||
Interest expense and amortization of deferred financing costs | (144,949 | ) | (4,478 | ) | 4,478 | (144,949 | ) | (127,119 | ) | (5,755 | ) | 5,755 | (127,119 | ) | |||||||||||||||||
Gains (losses) on retirement of long-term obligations | — | — | — | — | — | — | — | — | |||||||||||||||||||||||
Interest income | 210 | 81 | — | 291 | 25 | 150 | — | 175 | |||||||||||||||||||||||
Other income (expense) | 3,825 | 21 | (4,478 | ) | (632 | ) | 5,042 | (24 | ) | (5,755 | ) | (737 | ) | ||||||||||||||||||
Benefit (provision) for income taxes | (31,864 | ) | (436 | ) | — | (32,300 | ) | (2,261 | ) | (564 | ) | — | (2,825 | ) | |||||||||||||||||
Net income (loss) | 38,003 | 5,175 | — | 43,178 | 50,166 | 1,217 | — | 51,383 | |||||||||||||||||||||||
Less: Net income (loss) attributable to the noncontrolling interest | — | 1,133 | — | 1,133 | (141 | ) | 246 | — | 105 | ||||||||||||||||||||||
Net income (loss) attributable to CCIC stockholders | $ | 38,003 | $ | 4,042 | $ | — | $ | 42,045 | $ | 50,307 | $ | 971 | $ | — | $ | 51,278 | |||||||||||||||
Capital expenditures | $ | 117,830 | $ | 5,860 | $ | — | $ | 123,690 | $ | 144,129 | $ | 4,296 | $ | — | $ | 148,425 | |||||||||||||||
Total assets (at quarter end) | $ | 12,669,983 | $ | 354,992 | $ | (288,556 | ) | $ | 12,736,419 |
(a) | Exclusive of depreciation, amortization and accretion shown separately. |
Nine Months Ended September 30, 2012 | Nine Months Ended September 30, 2011 | ||||||||||||||||||||||||||||||
CCUSA | CCAL | Eliminations | Consolidated Total | CCUSA | CCAL | Eliminations | Consolidated Total | ||||||||||||||||||||||||
Net revenues: | |||||||||||||||||||||||||||||||
Site rental | $ | 1,463,126 | $ | 90,752 | $ | — | $ | 1,553,878 | $ | 1,301,234 | $ | 80,985 | $ | — | $ | 1,382,219 | |||||||||||||||
Network services and other | 187,304 | 17,411 | — | 204,715 | 118,534 | 12,505 | — | 131,039 | |||||||||||||||||||||||
Net revenues | 1,650,430 | 108,163 | — | 1,758,593 | 1,419,768 | 93,490 | — | 1,513,258 | |||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||||||
Costs of operations:(a) | |||||||||||||||||||||||||||||||
Site rental | 363,066 | 26,690 | — | 389,756 | 335,421 | 25,896 | — | 361,317 | |||||||||||||||||||||||
Network services and other | 110,240 | 11,572 | — | 121,812 | 70,246 | 7,967 | — | 78,213 | |||||||||||||||||||||||
General and administrative | 135,655 | 18,286 | — | 153,941 | 113,594 | 15,331 | — | 128,925 | |||||||||||||||||||||||
Asset write-down charges | 8,197 | 53 | — | 8,250 | 13,452 | 244 | — | 13,696 | |||||||||||||||||||||||
Acquisition and integration costs | 12,058 | 54 | — | 12,112 | 1,661 | — | — | 1,661 | |||||||||||||||||||||||
Depreciation, amortization and accretion | 423,620 | 23,129 | — | 446,749 | 391,342 | 22,645 | — | 413,987 | |||||||||||||||||||||||
Total operating expenses | 1,052,836 | 79,784 | — | 1,132,620 | 925,716 | 72,083 | — | 997,799 | |||||||||||||||||||||||
Operating income (loss) | 597,594 | 28,379 | — | 625,973 | 494,052 | 21,407 | — | 515,459 | |||||||||||||||||||||||
Interest expense and amortization of deferred financing costs | (427,349 | ) | (14,815 | ) | 14,803 | (427,361 | ) | (379,964 | ) | (17,513 | ) | 17,189 | (380,288 | ) | |||||||||||||||||
Gains (losses) on retirement of long-term obligations | (14,586 | ) | — | — | (14,586 | ) | — | — | — | — | |||||||||||||||||||||
Interest income | 665 | 362 | — | 1,027 | 166 | 388 | — | 554 | |||||||||||||||||||||||
Other income (expense) | 10,869 | (24 | ) | (14,803 | ) | (3,958 | ) | 11,771 | (23 | ) | (17,189 | ) | (5,441 | ) | |||||||||||||||||
Benefit (provision) for income taxes | 30,883 | (1,446 | ) | — | 29,437 | (6,076 | ) | (1,687 | ) | — | (7,763 | ) | |||||||||||||||||||
Net income (loss) | 198,076 | 12,456 | — | 210,532 | 119,949 | 2,572 | — | 122,521 | |||||||||||||||||||||||
Less: Net income (loss) attributable to the noncontrolling interest | (268 | ) | 2,711 | — | 2,443 | (141 | ) | 496 | — | 355 | |||||||||||||||||||||
Net income (loss) attributable to CCIC stockholders | $ | 198,344 | $ | 9,745 | $ | — | $ | 208,089 | $ | 120,090 | $ | 2,076 | $ | — | $ | 122,166 | |||||||||||||||
Capital expenditures | $ | 268,730 | $ | 14,656 | $ | — | $ | 283,386 | $ | 256,455 | $ | 8,660 | $ | — | $ | 265,115 | |||||||||||||||
Total assets (at quarter end) | $ | 12,669,983 | $ | 354,992 | $ | (288,556 | ) | $ | 12,736,419 |
(a) | Exclusive of depreciation, amortization and accretion shown separately. |
Three Months Ended September 30, 2012 | Three Months Ended September 30, 2011 | ||||||||||||||||||||||||||||||
CCUSA | CCAL | Eliminations | Consolidated Total | CCUSA | CCAL | Eliminations | Consolidated Total | ||||||||||||||||||||||||
Net income (loss) | $ | 38,003 | $ | 5,175 | $ | — | $ | 43,178 | $ | 50,166 | $ | 1,217 | $ | — | $ | 51,383 | |||||||||||||||
Adjustments to increase (decrease) net income (loss): | |||||||||||||||||||||||||||||||
Asset write-down charges | 1,518 | 42 | — | 1,560 | 3,165 | (75 | ) | — | 3,090 | ||||||||||||||||||||||
Acquisition and integration costs | 2,937 | — | — | 2,937 | 617 | — | — | 617 | |||||||||||||||||||||||
Depreciation, amortization and accretion | 147,186 | 7,681 | — | 154,867 | 130,878 | 7,645 | — | 138,523 | |||||||||||||||||||||||
Amortization of prepaid lease purchase price adjustments | 3,858 | — | 3,858 | — | — | — | — | ||||||||||||||||||||||||
Interest expense and amortization of deferred financing costs | 144,949 | 4,478 | (4,478 | ) | 144,949 | 127,119 | 5,755 | (5,755 | ) | 127,119 | |||||||||||||||||||||
Gains (losses) on retirement of long-term obligations | — | — | — | — | — | — | — | — | |||||||||||||||||||||||
Interest income | (210 | ) | (81 | ) | — | (291 | ) | (25 | ) | (150 | ) | — | (175 | ) | |||||||||||||||||
Other income (expense) | (3,825 | ) | (21 | ) | 4,478 | 632 | (5,042 | ) | 24 | 5,755 | 737 | ||||||||||||||||||||
Benefit (provision) for income taxes | 31,864 | 436 | — | 32,300 | 2,261 | 564 | — | 2,825 | |||||||||||||||||||||||
Stock-based compensation expense | 16,308 | (126 | ) | — | 16,182 | 7,683 | 596 | — | 8,279 | ||||||||||||||||||||||
Adjusted EBITDA | $ | 382,588 | $ | 17,584 | $ | — | $ | 400,172 | $ | 316,822 | $ | 15,576 | $ | — | $ | 332,398 |
Nine Months Ended September 30, 2012 | Nine Months Ended September 30, 2011 | ||||||||||||||||||||||||||||||
CCUSA | CCAL | Eliminations | Consolidated Total | CCUSA | CCAL | Eliminations | Consolidated Total | ||||||||||||||||||||||||
Net income (loss) | $ | 198,076 | $ | 12,456 | $ | — | $ | 210,532 | $ | 119,949 | $ | 2,572 | $ | — | $ | 122,521 | |||||||||||||||
Adjustments to increase (decrease) net income (loss): | |||||||||||||||||||||||||||||||
Asset write-down charges | 8,197 | 53 | — | 8,250 | 13,452 | 244 | — | 13,696 | |||||||||||||||||||||||
Acquisition and integration costs | 12,058 | 54 | — | 12,112 | 1,661 | — | — | 1,661 | |||||||||||||||||||||||
Depreciation, amortization and accretion | 423,620 | 23,129 | — | 446,749 | 391,342 | 22,645 | — | 413,987 | |||||||||||||||||||||||
Amortization of prepaid lease purchase price adjustments | 10,301 | — | — | 10,301 | — | — | — | — | |||||||||||||||||||||||
Interest expense and amortization of deferred financing costs | 427,349 | 14,815 | (14,803 | ) | 427,361 | 379,964 | 17,513 | (17,189 | ) | 380,288 | |||||||||||||||||||||
Gains (losses) on retirement of long-term obligations | 14,586 | — | — | 14,586 | — | — | — | — | |||||||||||||||||||||||
Interest income | (665 | ) | (362 | ) | — | (1,027 | ) | (166 | ) | (388 | ) | — | (554 | ) | |||||||||||||||||
Other income (expense) | (10,869 | ) | 24 | 14,803 | 3,958 | (11,771 | ) | 23 | 17,189 | 5,441 | |||||||||||||||||||||
Benefit (provision) for income taxes | (30,883 | ) | 1,446 | — | (29,437 | ) | 6,076 | 1,687 | — | 7,763 | |||||||||||||||||||||
Stock-based compensation expense | 33,413 | 1,951 | — | 35,364 | 24,937 | 1,874 | — | 26,811 | |||||||||||||||||||||||
Adjusted EBITDA | $ | 1,085,183 | $ | 53,566 | $ | — | $ | 1,138,749 | $ | 925,444 | $ | 46,170 | $ | — | $ | 971,614 |
13. | Stock-Based Compensation |
Number of Shares | ||
(In thousands of shares) | ||
Shares outstanding at January 1, 2012 | 3,403 | |
Shares granted(a) | 966 | |
Shares vested(b) | (1,971 | ) |
Shares forfeited | (51 | ) |
Shares outstanding at September 30, 2012 | 2,347 |
(a) | Weighted-average grant-date fair value of $38.65 per share and a weighted-average requisite service period of 2.5 years. The awards with market conditions included an expected volatility of 31% in the Monte Carlo simulation used to measure grant-date fair value. |
(b) | Fair value on vesting date of $101.5 million. |
14. | Supplemental Cash Flow Information |
Nine Months Ended September 30, | |||||||
2012 | 2011 | ||||||
Supplemental disclosure of cash flow information: | |||||||
Interest paid | $ | 364,507 | $ | 312,992 | |||
Income taxes paid | 3,092 | 4,343 | |||||
Supplemental disclosure of non-cash financing activities: | |||||||
Assets acquired through capital leases and installment sales | 21,139 | 20,213 | |||||
Conversion of redeemable convertible preferred stock (note 7) | 305,180 | — |
15. | Subsequent Event |
ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
• | 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 wireless infrastructure. |
◦ | We expect existing and potential new wireless carrier demand for our wireless infrastructure will result from (1) next generation technologies, (2) continued development of mobile internet applications, (3) adoption of other emerging and embedded wireless devices, (4) increasing smartphone penetration, and (5) wireless carrier focus on improving coverage and capacity. |
◦ | Substantially all of our wireless infrastructure can accommodate additional tenancy, either as currently constructed or with appropriate modifications to the structure. |
◦ | U.S. wireless carriers continue to invest in their networks. |
◦ | We expect our site rental revenues will grow approximately 13% from full year 2011 to full year 2012. We expect our new tenant additions will contribute in excess of 12% to the year-over-year growth in site rental revenues from full year 2011 to full year 2012. We have effectively pre-sold via a firm contractual commitment a significant portion of the modification of the existing installations relating to certain 4G upgrades. We have done so by increasing the future contracted revenue above that of a typical escalation over a period of time, typically a three to four year period. As a result, for any given period, the increase in cash revenue may not translate into a corresponding increase in reported revenues from the application of straight-line revenue recognition. Our 2012 site rental revenue growth expectations assume approximately 1%, net contribution to growth from the existing base of business (which has historically contributed approximately 2% to 4% per annum to our site rental revenue growth) as the increase attributable to lease escalations and straight-line impact of renewals is expected to be offset by the timing of expected cancellation of customer contracts due to prior wireless carrier consolidation. We do not expect any of our customers' network enhancement deployments and any related non-renewal of customer contracts, including Sprint's Network Vision and corresponding iDEN leases, will have a material adverse effect on our operations and cash flows for 2012 and subsequent periods. |
• | Site rental revenues under long-term customer contracts with contractual escalations |
◦ | Initial terms of five to 15 years with multiple renewal periods at the option of the tenant of five to ten years each. |
◦ | Weighted-average remaining term of approximately nine years, exclusive of renewals at the customer's option, representing approximately $19 billion of expected future cash inflows. |
• | Revenues predominately from large wireless carriers |
◦ | Verizon Wireless, AT&T, Sprint Nextel and T-Mobile accounted for 72% of consolidated revenues. |
• | Majority of land interests under our towers under long-term control |
◦ | Approximately 90% and 73% of our site rental gross margin is derived from towers that we own or control for greater than ten and 20 years, respectively. The aforementioned percentages include towers that reside on land interests that are owned in fee or where we have perpetual or long-term easements in the land and other property interests, which represent approximately 34% of our site rental gross margin. |
• | Relatively fixed wireless infrastructure operating costs with high incremental margins and cash flows on organic revenue growth |
◦ | Our wireless infrastructure 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 83% of the related increase in site rental revenues. |
• | Minimal sustaining capital expenditure requirements |
◦ | Sustaining capital expenditures were $19.0 million, which represented less than one percent of net revenues. |
• | Debt portfolio with long-dated maturities extended over multiple years, with the vast majority of such debt having a fixed rate (see "Item 3. Quantitative and Qualitative Disclosures About Market Risk" for a further discussion of our debt) |
◦ | 79% of our debt has a fixed interest rate. |
◦ | Our debt service coverage and leverage ratios were comfortably within their respective financial maintenance and cash trap covenants. See "Item 2. MD&A—Liquidity and Capital Resources" and "Item 2. MD&A—General Overview—Proposed T-Mobile Transaction" for a further discussion of our debt covenants. |
• | Significant cash flows from operations |
◦ | Net cash provided by operating activities was $524.5 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 wireless infrastructure. |
• | Capital allocated to drive long-term shareholder value (per share) (see also "Item 2. MD&A—Liquidity and Capital Resources") |
◦ | Historical discretionary investments include (in no particular order): purchasing our own common stock, acquiring or constructing wireless infrastructure, acquiring land interests under our towers, improving and structurally enhancing our existing wireless infrastructure, and purchasing or redeeming our debt. |
◦ | Discretionary investments included: (1) the acquisitions of WCP and NextG for an aggregate purchase price of approximately $1.5 billion, (2) $264.4 million in capital expenditures, (3) the purchase of 0.7 million shares of common stock for $36.0 million, and (4) the purchase of $72.7 million of face value of debt using $80.4 million. |
◦ | In April 2012, we closed on the acquisition of NextG for approximately $1.0 billion in cash, subject to certain adjustments. |
◦ | In January 2012, we acquired certain subsidiaries of WCP for a purchase price of $214.7 million, including $39.2 million of restricted cash and excluding the assumption of $336.3 million (after fair value adjustments) of debt. Upon closing the WCP Acquisition in January 2012, WCP held various contracts with wireless site owners, including approximately 2,300 ground lease related assets. |
◦ | In January 2012, we refinanced and repaid our credit facility and term loans with the proceeds of a $3.1 billion senior secured credit facility; the proceeds of such credit facility were also used to fund the cash consideration of the WCP Acquisition and NextG Acquisition. |
◦ | In October 2012, we issued $1.65 billion in aggregate principal amount of 5.25% Senior Notes. We expect to use the net proceeds to partially fund the Proposed T-Mobile Transaction. |
• | In October 2012, T-Mobile entered into a definitive agreement to acquire Metro PCS, subject to regulatory approval and other closing conditions. For the first nine months of 2012, T-Mobile and Metro PCS accounted for 11% and 3%, respectively, of our consolidated net revenues. As of September 30, 2012, T-Mobile and Metro PCS are co-residents on approximately 985 of our towers. Net revenues from Metro PCS on these approximately 985 towers represent approximately 2% of our consolidated net revenues for the first nine months of 2012. The weighted-average remaining current term on all of our contractual agreements with T-Mobile and Metro PCS is approximately ten and six 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 |
• | Consumers have increased their use of wireless data services according to recent U.S. wireless industry reports. |
◦ | U.S. mobile data traffic grew 104% from July 2011 to June 2012;(a) |
◦ | The number of smartphones in the U.S. grew 39% from July 2011 to June 2012, reaching 130.8 million. The number of wireless enabled tablets, laptops and modems in the U.S. reached 21.6 million in June 2012, which is a growth of 42% from the prior year;(a) |
◦ | Smartphones accounted for 24% of total mobile data traffic in the U.S. at the end of 2011 and are expected to account for 60% in 2016;(b) and |
◦ | While 4G connections represent only 0.2% of mobile connections, they account for 6% of mobile data traffic. In 2011, a 4G connection generated 28 times more mobile data traffic on average than a non-4G connection.(b) |
(a) | Source: CTIA |
(b) | Source: Cisco |
Three Months Ended September 30, 2012 | Three Months Ended September 30, 2011 | |||||||||||||||
Amount | Percent of Net Revenues | Amount | Percent of Net Revenues | Percent Change(b) | ||||||||||||
(Dollars in thousands) | ||||||||||||||||
Net revenues: | ||||||||||||||||
Site rental | $ | 538,761 | 87 | % | $ | 468,920 | 91 | % | 15 | % | ||||||
Network services and other | 82,576 | 13 | % | 44,963 | 9 | % | 84 | % | ||||||||
Net revenues | 621,337 | 100 | % | 513,883 | 100 | % | 21 | % | ||||||||
Operating expenses: | ||||||||||||||||
Costs of operations(a): | ||||||||||||||||
Site rental | 135,314 | 25 | % | 121,759 | 26 | % | 11 | % | ||||||||
Network services and other | 50,029 | 61 | % | 25,083 | 56 | % | 99 | % | ||||||||
Total costs of operations | 185,343 | 30 | % | 146,842 | 29 | % | 26 | % | ||||||||
General and administrative | 55,862 | 9 | % | 42,922 | 8 | % | 30 | % | ||||||||
Asset write-down charges | 1,560 | — | 3,090 | 1 | % | * | ||||||||||
Acquisition and integration costs | 2,937 | — | 617 | — | * | |||||||||||
Depreciation, amortization and accretion | 154,867 | 25 | % | 138,523 | 27 | % | 12 | % | ||||||||
Total operating expenses | 400,569 | 64 | % | 331,994 | 65 | % | 21 | % | ||||||||
Operating income (loss) | 220,768 | 36 | % | 181,889 | 35 | % | 21 | % | ||||||||
Interest expense and amortization of deferred financing costs | (144,949 | ) | (127,119 | ) | ||||||||||||
Gains (losses) on retirement of long-term obligations | — | — | ||||||||||||||
Interest income | 291 | 175 | ||||||||||||||
Other income (expense) | (632 | ) | (737 | ) | ||||||||||||
Income (loss) before income taxes | 75,478 | 54,208 | ||||||||||||||
Benefit (provision) for income taxes | (32,300 | ) | (2,825 | ) | ||||||||||||
Net income (loss) | 43,178 | 51,383 | ||||||||||||||
Less: Net income (loss) attributable to the noncontrolling interest | 1,133 | 105 | ||||||||||||||
Net income (loss) attributable to CCIC stockholders | $ | 42,045 | $ | 51,278 |
* | 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." |
Nine Months Ended September 30, 2012 | Nine Months Ended September 30, 2011 | |||||||||||||||
Amount | Percent of Net Revenues | Amount | Percent of Net Revenues | Percent Change(b) | ||||||||||||
(Dollars in thousands) | ||||||||||||||||
Net revenues: | ||||||||||||||||
Site rental | $ | 1,553,878 | 88 | % | $ | 1,382,219 | 91 | % | 12 | % | ||||||
Network services and other | 204,715 | 12 | % | 131,039 | 9 | % | 56 | % | ||||||||
Net revenues | 1,758,593 | 100 | % | 1,513,258 | 100 | % | 16 | % | ||||||||
Operating expenses: | ||||||||||||||||
Costs of operations(a): | ||||||||||||||||
Site rental | 389,756 | 25 | % | 361,317 | 26 | % | 8 | % | ||||||||
Network services and other | 121,812 | 60 | % | 78,213 | 60 | % | 56 | % | ||||||||
Total costs of operations | 511,568 | 29 | % | 439,530 | 29 | % | 16 | % | ||||||||
General and administrative | 153,941 | 9 | % | 128,925 | 9 | % | 19 | % | ||||||||
Asset write-down charges | 8,250 | — | 13,696 | 1 | % | * | ||||||||||
Acquisition and integration costs | 12,112 | 1 | % | 1,661 | — | * | ||||||||||
Depreciation, amortization and accretion | 446,749 | 25 | % | 413,987 | 27 | % | 8 | % | ||||||||
Total operating expenses | 1,132,620 | 64 | % | 997,799 | 66 | % | 14 | % | ||||||||
Operating income (loss) | 625,973 | 36 | % | 515,459 | 34 | % | 21 | % | ||||||||
Interest expense and amortization of deferred financing costs | (427,361 | ) | (380,288 | ) | ||||||||||||
Gains (losses) on retirement of long-term obligations | (14,586 | ) | — | |||||||||||||
Interest income | 1,027 | 554 | ||||||||||||||
Other income (expense) | (3,958 | ) | (5,441 | ) | ||||||||||||
Income (loss) before income taxes | 181,095 | 130,284 | ||||||||||||||
Benefit (provision) for income taxes | 29,437 | (7,763 | ) | |||||||||||||
Net income (loss) | 210,532 | 122,521 | ||||||||||||||
Less: Net income (loss) attributable to the noncontrolling interest | 2,443 | 355 | ||||||||||||||
Net income (loss) attributable to CCIC stockholders | $ | 208,089 | $ | 122,166 |
* | 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." |
September 30, 2012 | |||
(In thousands of dollars) | |||
Cash and cash equivalents(a) (c) | $ | 1,749,903 | |
Undrawn revolving credit facility availability(b) (c) | 1,000,000 | ||
Debt and other long-term obligations | 10,033,164 | ||
Total equity | 2,942,805 |
(a) | Exclusive of restricted cash. |
(b) | Availability at any point in time is subject to certain restrictions based on the maintenance of financial covenants contained in our credit agreement. See "Item 2. MD&A—Liquidity and Capital Resources—Financing Activities" and "Item 2. MD&A—Liquidity and Capital Resources—Debt Covenants." |
(c) | See our discussion of the Proposed T-Mobile Transaction in the "Item 2. MD&A—General Overview." |
• | We expect that our cash on hand, undrawn revolving credit facility availability and net cash provided by operating activities (net of cash interest payments) should be sufficient to cover our expected (1) debt service obligations of $88.1 million (principal payments), (2) capital expenditures in excess of $350 million (sustaining and discretionary), and (3) the Proposed T-Mobile Transaction. As CCIC and CCOC are holding companies, this cash flow from operations is generated by our operating subsidiaries. |
• | We have no debt maturities other than principal payments on amortizing debt. We do not anticipate the need to access the capital markets to refinance our existing debt until at least 2015. See "Item 3. Quantitative and Qualitative Disclosures About Market Risk" for a tabular presentation of our debt maturities as of September 30, 2012. |
Nine Months Ended September 30, | |||||||||||
2012 | 2011 | Change | |||||||||
(In thousands of dollars) | |||||||||||
Net cash provided by (used for): | |||||||||||
Operating activities | $ | 524,458 | $ | 455,274 | $ | 69,184 | |||||
Investing activities | (1,518,380 | ) | (297,487 | ) | (1,220,893 | ) | |||||
Financing activities | 1,030,987 | (195,516 | ) | 1,226,503 | |||||||
Effect of exchange rate changes on cash | 1,718 | 722 | 996 | ||||||||
Net increase (decrease) in cash and cash equivalents | $ | 38,783 | $ | (37,007 | ) | $ | 75,790 |
Nine Months Ended September 30, | |||||||||||
2012 | 2011 | Change | |||||||||
(In thousands of dollars) | |||||||||||
Discretionary: | |||||||||||
Purchases of land interests | $ | 86,907 | $ | 163,837 | $ | (76,930 | ) | ||||
Wireless infrastructure improvements and other | 93,531 | 55,105 | 38,426 | ||||||||
Construction of wireless infrastructure | 83,945 | 32,061 | 51,884 | ||||||||
Sustaining | 19,003 | 14,112 | 4,891 | ||||||||
Total | $ | 283,386 | $ | 265,115 | $ | 18,271 |
Covenant Description | Type | Debt | Current Covenant Requirement | As of September 30, 2012 | Latest Issuance Date | |||||
CCIC: | ||||||||||
Leverage ratio(a) | Restrictive | (g) | 9% Senior Notes | ≤7.00 | 6.5 | 6.7 | ||||
Leverage ratio(a) | Restrictive | (g) | 7.125% Senior Notes | ≤7.00 | 6.5 | 6.3 | ||||
Leverage ratio(a) | Restrictive | (g) | 5.25% Senior Notes | ≤7.00 | 6.5 | 6.5 | ||||
CCOC: | ||||||||||
Net leverage ratio(b) | Maintenance | (h) | Credit Agreement | ≤6.0 | 4.4 | 4.8 | ||||
Interest coverage ratio(c) | Maintenance | (h) | Credit Agreement | ≥2.5 | 4.3 | 3.9 | ||||
Tower and third party land interest companies: | ||||||||||
Debt service coverage ratio(d)(e) | Cash Trap | (i) | 2010 Tower Revenue Notes | >1.75 | 3.6 | 3.1 | ||||
Debt service coverage ratio(d)(e) | Cash Trap | (i) | 2009 Securitized Notes | >1.30 | 3.3 | 2.4 | ||||
Fixed charge coverage ratio(d)(e) | Cash Trap | (i) | 7.75% Secured Notes | >1.35 | 3.2 | 2.5 | ||||
Debt service coverage ratio(f) | Cash Trap | (i) | WCP Securitized Notes | ≥1.30 | 1.5 | N/A |
(a) | After giving effect to the issuance of the 5.25% Senior Notes. See "Item 2. MD&A—General Overview" for a discussion of the impact of the Proposed T-Mobile Transaction on our CCIC leverage ratio. |
(b) | The Total Net Leverage Ratio for CCOC is calculated as the ratio of Total Indebtedness (excluding debt held by CCIC) less Unrestricted Cash (as defined in the credit agreement and calculated in accordance with GAAP) to Consolidated EBITDA (as defined in the credit agreement) for the most recently completed quarter multiplied by four. In March 2014, the covenant requirement decreases to a maximum Total Net Leverage Ratio of 5.5 to 1.0. Consolidated EBITDA is calculated in substantially 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 12 to our condensed consolidated financial statements. |
(c) | The Consolidated Interest Coverage Ratio for CCOC is calculated as the ratio of Consolidated EBITDA for the most recently completed quarter multiplied by four to Consolidated Pro forma Debt Service (as defined in the credit agreement). Consolidated Pro forma Debt Service is calculated as interest to be paid over the succeeding 12 months on the principal balance of debt (excluding debt held by CCIC, CCOC or any restricted subsidiary) then outstanding based on the then current interest rate for such debt. |
(d) | 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 Consolidated Fixed Charge Coverage Ratio is equal to or less than 1.20 and the aggregate amount of cash deposited in the Cash Trap Reserve Sub-account (as defined in the indenture) 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 such account. See note (e) below for a discussion of the calculation of the Debt Service Coverage Ratio and Consolidated Fixed Charge |
(e) | 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 agreement. |
(f) | We assumed $320.1 million face value of debt in connection with the WCP Acquisition. The Debt Service Coverage Ratio on the WCP securitized debt is calculated as Net Cash Flow (as defined in the indenture) less: (1) the Series 2010-1 Class A Targeted Amortization Amounts (as defined in the indenture) for the immediately succeeding 12 payment dates and (2) the Unpaid Series 2010-1 Class A Monthly Amortization Amount (as defined in the indenture) to the payments of interest that the issuers of such debt will be required to pay on the succeeding 12 payment dates on the principal balance of the WCP Securitized Notes plus the Indenture Trustee Fee and Servicing Fee (as defined in the indenture) payable during such 12 month period. The WCP securitized debt also has an amortization threshold of 1.15, which could result in applying all Excess Cash Flow (as defined in the indenture) to prepay principal amounts with applicable prepayment consideration. In addition, if the Non-Performing Wireless Site Contract Ratio (as defined in the indenture) on the WCP Securitized Notes is greater than 10%, it could result in applying all Excess Cash Flow to prepay principal amounts with applicable prepayment consideration. |
(g) | The 9% senior notes, 7.125% senior notes and 5.25% senior notes contain restrictive covenants with which CCIC and our restricted subsidiaries must comply, subject to a number of exceptions and qualifications, including restrictions on our ability to incur incremental debt, issue preferred stock, guarantee debt, pay dividends, repurchase our capital stock, use assets as security in other transactions, sell assets or merge with or into other companies, and make certain investments. Certain of these covenants are not applicable if there is no event of default and if the ratio of our Consolidated Debt (as defined in the senior notes indenture) to our Adjusted Consolidated Cash Flows (as defined in the senior notes indenture) is less than 7.0 to 1.0. |
(h) | Failure to comply with the ratios applicable to the financial maintenance could result in default under our credit agreement. |
(i) | Failure to comply with the cash trap reserve covenants would require the cash flows generated by the issuers and their subsidiaries to be deposited in a reserve account and not released to us. |
Three Months Ended December 31, 2012 | Years Ending December 31, | ||||||||||||||||||||||||||
Contractual Obligations | 2013 | 2014 | 2015 | 2016 | Thereafter | Totals | |||||||||||||||||||||
(In thousands of dollars) | |||||||||||||||||||||||||||
Debt and other long-term obligations(a)(b) | $ | 19,839 | $ | 89,795 | $ | 99,336 | $ | 941,179 | $ | 113,198 | $ | 8,813,572 | $ | 10,076,919 | |||||||||||||
Interest payments on debt and other long-term obligations(a)(b)(c) | 137,354 | 561,047 | 557,342 | 540,312 | 510,083 | 9,061,992 | 11,368,130 | ||||||||||||||||||||
Definitive acquisition agreements(d) | 2,422,079 | — | — | — | — | — | 2,422,079 | ||||||||||||||||||||
Total contractual obligations | $ | 2,579,272 | $ | 650,842 | $ | 656,678 | $ | 1,481,491 | $ | 623,281 | $ | 17,875,564 | $ | 23,867,128 |
(a) | The impact of principal payments that will commence following the anticipated repayment dates of our tower revenue notes are not considered. The January 2010 Tower Revenue Notes consist of three series of notes with principal amounts of $300.0 million, $350.0 million and $1.3 billion, having anticipated repayments dates in 2015, 2017, and 2020, respectively. The August 2010 Tower Revenue Notes consist of three series of notes with principal amounts of $250.0 million, $300.0 million and $1.0 billion, having anticipated repayment dates in 2015, 2017, and 2020, respectively. If the tower revenue notes are not repaid in full by the applicable anticipated repayment dates, the applicable interest rate increases by 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 ranging from 2035 to 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 2011 Excess Cash Flow of the issuers of the tower revenue notes was approximately $456 million. The anticipated repayment date is 2015 for each class of the WCP Securitized Notes. We currently expect to refinance these notes on or prior to the respective anticipated repayment dates. |
(b) | If the WCP Securitized Notes with a current face value of $315.4 million are not repaid in full by their anticipated repayment dates in 2015, the applicable interest rate increases by an additional approximately 5% per annum. If the WCP Securitized Notes are not repaid in full by their rapid amortization date of 2017, monthly principal payments commence using the Excess Cash Flow of the issuers of the WCP Securitized Notes. The WCP Securitized Notes are presented based on their contractual maturity dates in 2040. The full year 2011 Excess Cash Flow of the issuers of the WCP Securitized Notes was approximately $17 million. In connection with the WCP acquisition, we acquired restricted cash of $29.5 million that if not spent on towers or third party land interests by November 2012 will be required to be used to repay principal amounts outstanding on the WCP Securitized Notes. We currently expect to refinance these notes on or prior to the respective anticipated repayment dates. |
(c) | Interest payments on the floating rate debt are based on estimated rates currently in effect. |
(d) | In September 2012, we entered into the Proposed T-Mobile Transaction to have the exclusive rights to lease, operate or otherwise acquire up to 7,180 towers for approximately $2.4 billion in cash, subject to certain adjustments, including adjustments based on the actual number of towers at closing. See also note 15 of our condensed consolidated financial statements. |
• | it is the primary measure used by our management to evaluate the economic productivity of our operations, including the efficiency of our employees and the profitability associated with their performance, the realization of contract revenues under our long-term contracts, our ability to obtain and maintain our customers and our ability to operate our site rental business effectively; |
• | it is the primary measure of profit and loss used by our management for purposes of making decisions about allocating resources to, and assessing the performance of, our operating segments; |
• | it is similar to the measure of current financial performance generally used in our debt covenant calculations; |
• | although specific definitions may vary, it is widely used in the tower sector and other similar providers of wireless infrastructure to measure operating performance without regard to items such as depreciation, amortization and accretion which can vary depending upon accounting methods and the book value of assets; and |
• | we believe it helps investors meaningfully evaluate and compare the results of our operations (1) from period to period and (2) to our competitors by removing the impact of our capital structure (primarily interest charges from our outstanding debt) and asset base (primarily depreciation, amortization and accretion) from our operating results. |
• | 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. |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
• | the potential refinancing of our existing debt (face values of $10.0 billion and $7.0 billion outstanding at September 30, 2012 and December 31, 2011, respectively); |
• | our $2.1 billion of floating rate debt representing approximately 21% of our total debt, compared to 13% of our total debt as of December 31, 2011; and |
• | potential future borrowings of incremental debt. |
Future Principal Payments and Interest Rates by the Debt Instruments' Contractual Year of Maturity | |||||||||||||||||||||||||||||||
2012 | 2013 | 2014 | 2015 | 2016 | Thereafter | Total | Fair Value(a) | ||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||||||
Debt: | |||||||||||||||||||||||||||||||
Fixed rate(c) | $ | 9,589 | $ | 48,795 | $ | 48,961 | $ | 878,304 | $ | 47,198 | $ | 6,968,572 | (c) | $ | 8,001,419 | (c) | $ | 8,746,302 | |||||||||||||
Average interest rate(b)(c) | 4.9 | % | 4.7 | % | 4.8 | % | 8.8 | % | 7.1 | % | 8.4 | % | (c) | 8.4 | % | (c) | |||||||||||||||
Variable rate | $ | 10,250 | $ | 41,000 | $ | 50,375 | $ | 62,875 | $ | 66,000 | $ | 1,845,000 | $ | 2,075,500 | $ | 2,075,754 | |||||||||||||||
Average interest rate | 3.2 | % | 3.2 | % | 3.1 | % | 3.1 | % | 3.1 | % | 3.8 | % | 3.7 | % |
(a) | The fair value of our debt is based on indicative, non-binding quotes from brokers. Quotes from the brokers require judgment and are based on the brokers' interpretation of market information, including implied credit spreads for similar borrowings on recent trades or bid/ask offers. These fair values are not necessarily indicative of the amount which could be realized in a current market exchange. |
(b) | The average interest rate represents the weighted-average stated coupon rate (see footnote (c)). |
(c) | The impact of principal payments that commence if the applicable debt is not repaid or refinanced on or prior to the anticipated repayment dates are not considered. The January 2010 Tower Revenue Notes consist of three series of notes with principal amounts of $300.0 million, $350.0 million and $1.3 billion, having anticipated repayments dates in 2015, 2017, and 2020, respectively. The August 2010 Tower Revenue Notes consist of three series of notes with principal amounts of $250.0 million, $300.0 million and $1.0 billion, having anticipated repayment dates in 2015, 2017, and 2020, respectively. If the tower revenue notes are not repaid in full by their anticipated repayment dates, the applicable interest rate increases by an additional approximately 5% per annum and monthly principal payments commence using the Excess Cash Flow of the issuers of the tower revenue notes. The tower revenue notes are presented based on their contractual maturity dates between 2035 and 2040 and include the impact of an assumed 5% increase in interest rate that would occur following the anticipated repayment dates but exclude the impact of monthly principal payments that would commence using Excess Cash Flow of the issuers of the tower revenue notes. The full year 2011 Excess Cash Flow of the issuers was approximately $456 million. If the WCP Securitized Notes with a current face value of $315.4 million are not repaid in full by their anticipated repayment dates in 2015, the applicable interest rate increases by an additional approximately 5% per annum. If the WCP Securitized Notes are not repaid in full by their rapid amortization date of 2017, monthly principal payments commence using |
ITEM 4. | CONTROLS AND PROCEDURES |
ITEM 1A. | RISK FACTORS |
• | disrupt our business relationships with our customers, depending on the nature of or counterparty to such transactions and activities; |
• | direct the time and attention of management away from other business operations toward such transactions and activities, including integrations; |
• | fail to achieve revenue or margin targets, operational synergies or other benefits contemplated; |
• | increase operational risk or volatility in our business; or |
• | result in current and prospective employees experiencing uncertainty about their future roles with us, which might adversely affect our ability to retain or attract key managers and other employees. |
ITEM 6. | EXHIBITS |
Exhibit No. | Description | |
(a) 3.1 | Composite Certificate of Incorporation of Crown Castle International Corp. | |
(a) 3.2 | Composite By-laws of Crown Castle International Corp. | |
(c) 4.1 | Indenture dated October 15, 2012, between Crown Castle International Corp. and the Bank of New York Mellon Trust Company, N.A., as trustee. | |
(b) 10.1 | Master Agreement dated as of September 28, 2012, among T-Mobile USA, Inc., SunCom Wireless Operating Company, L.L.C., Cook Inlet/VS GSM IV PCS Holdings, LLC, T-Mobile Central LLC, T-Mobile South LLC, Powertel/Memphis, Inc., VoiceStream Pittsburgh, L.P., T-Mobile West LLC, T-Mobile Northeast LLC, Wireless Alliance, LLC, SunCom Wireless Property Company, L.L.C. and Crown Castle International Corp. | |
(b) 10.2 | Form of Master Prepaid Lease | |
(b) 10.3 | Form of Management Agreement | |
(b) 10.4 | Form of MPL Site Master Lease Agreement | |
(b) 10.5 | Form of Sale Site Master Lease Agreement | |
(c) 10.6 | Registration Rights Agreement dated October 15, 2012, by and among Crown Castle International Corp., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. LLC, as representatives of the initial purchasers. | |
31.2 | Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002 | |
32.1 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002 | |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
(a) | Incorporated by reference to the exhibit previously filed by the Registrant on Form S-3 (Registration No. 333-180526) on April 3, 2012. |
(b) | Incorporated by reference to the exhibit previously filed by the Registrant on Form 8-K (Registration No. 001-16441) on October 2, 2012. |
(c) | Incorporated by reference to the exhibit previously filed by the Registrant on Form 8-K (Registration No. 001-16441) on October 16, 2012. |
CROWN CASTLE INTERNATIONAL CORP. | ||||
Date: | November 2, 2012 | By: | /s/ Jay A. Brown | |
Jay A. Brown | ||||
Senior Vice President, | ||||
Chief Financial Officer and Treasurer | ||||
(Principal Financial Officer) | ||||
Date: | November 2, 2012 | By: | /s/ Rob A. Fisher | |
Rob A. Fisher | ||||
Vice President and Controller | ||||
(Principal Accounting Officer) |
1. | I have reviewed this report on Form 10-Q of Crown Castle International Corp. (“registrant”); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ W. Benjamin Moreland | ||
W. Benjamin Moreland President and Chief Executive Officer |
1. | I have reviewed this report on Form 10-Q of Crown Castle International Corp. (“registrant”); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Jay A. Brown | ||
Jay A. Brown Senior Vice President, Chief Financial Officer and Treasurer |
1) | the Report complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of September 30, 2012 (the last date of the period covered by the Report). |
/s/ W. Benjamin Moreland | ||
W. Benjamin Moreland President and Chief Executive Officer | ||
November 2, 2012 | ||
/s/ Jay A. Brown | ||
Jay A. Brown Senior Vice President, Chief Financial Officer and Treasurer | ||
November 2, 2012 |
Stock-Based Compensation (Summary of Restricted Stock Award Activity) (Details) (Restricted Stock Awards [Member], USD $)
In Millions, except Share data in Thousands, unless otherwise specified |
9 Months Ended | |||||
---|---|---|---|---|---|---|
Sep. 30, 2012
|
||||||
Restricted Stock Awards [Member]
|
||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Shares outstanding at the beginning of the year, number of shares | 3,403 | |||||
Shares granted, number of shares | 966 | [1] | ||||
Shares vested, number of shares | (1,971) | [2] | ||||
Shares forfeited, number of shares | (51) | |||||
Shares outstanding at the end of the period, number of shares | 2,347 | |||||
Shares granted, weighted-average grant-date fair value | $ 38.65 | |||||
Weighted-average requisite service period (years) | 2 years 6 months | |||||
Expected volatility rate on restricted stock awards | 31.00% | |||||
Fair value of shares on vesting date | $ 101.5 | |||||
|
Operating Segments (Financial Results for the Company's Operating Segments) (Details) (USD $)
|
3 Months Ended | 9 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2012
|
Sep. 30, 2011
|
Dec. 31, 2011
|
|||||||
Segment Reporting Information [Line Items] | |||||||||||
Site rental | $ 538,761,000 | $ 468,920,000 | $ 1,553,878,000 | $ 1,382,219,000 | |||||||
Network services and other | 82,576,000 | 44,963,000 | 204,715,000 | 131,039,000 | |||||||
Net revenues | 621,337,000 | 513,883,000 | 1,758,593,000 | 1,513,258,000 | |||||||
Site rental | 135,314,000 | [1] | 121,759,000 | [1] | 389,756,000 | [1] | 361,317,000 | [1] | |||
Network services and other | 50,029,000 | [1] | 25,083,000 | [1] | 121,812,000 | [1] | 78,213,000 | [1] | |||
General and administrative | 55,862,000 | 42,922,000 | 153,941,000 | 128,925,000 | |||||||
Asset write-down charges | 1,560,000 | 3,090,000 | 8,250,000 | 13,696,000 | |||||||
Acquisition and integration costs | 2,937,000 | 617,000 | 12,112,000 | 1,661,000 | |||||||
Depreciation, amortization and accretion | 154,867,000 | 138,523,000 | 446,749,000 | 413,987,000 | |||||||
Total operating expenses | 400,569,000 | 331,994,000 | 1,132,620,000 | 997,799,000 | |||||||
Operating income (loss) | 220,768,000 | 181,889,000 | 625,973,000 | 515,459,000 | |||||||
Interest expense and amortization of deferred financing costs | (144,949,000) | (127,119,000) | (427,361,000) | (380,288,000) | |||||||
Gains (losses) on retirement of long-term obligations | 0 | 0 | (14,586,000) | 0 | |||||||
Interest income | 291,000 | 175,000 | 1,027,000 | 554,000 | |||||||
Other income (expense) | (632,000) | (737,000) | (3,958,000) | (5,441,000) | |||||||
Benefit (provision) for income taxes | (32,300,000) | (2,825,000) | 29,437,000 | (7,763,000) | |||||||
Net income (loss) | 43,178,000 | 51,383,000 | 210,532,000 | 122,521,000 | |||||||
Less: Net income (loss) attributable to the noncontrolling interest | 1,133,000 | 105,000 | 2,443,000 | 355,000 | |||||||
Net income (loss) attributable to CCIC stockholders | 42,045,000 | 51,278,000 | 208,089,000 | 122,166,000 | |||||||
Capital expenditures | 123,690,000 | 148,425,000 | 283,386,000 | 265,115,000 | |||||||
Total assets (at quarter end) | 12,736,419,000 | 12,736,419,000 | 10,545,096,000 | ||||||||
CCUSA [Member]
|
|||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Site rental | 507,247,000 | 441,137,000 | 1,463,126,000 | 1,301,234,000 | |||||||
Network services and other | 78,287,000 | 40,853,000 | 187,304,000 | 118,534,000 | |||||||
Net revenues | 585,534,000 | 481,990,000 | 1,650,430,000 | 1,419,768,000 | |||||||
Site rental | 126,059,000 | [1] | 112,843,000 | [1] | 363,066,000 | [1] | 335,421,000 | [1] | |||
Network services and other | 46,592,000 | [1] | 22,713,000 | [1] | 110,240,000 | [1] | 70,246,000 | [1] | |||
General and administrative | 50,461,000 | 37,295,000 | 135,655,000 | 113,594,000 | |||||||
Asset write-down charges | 1,518,000 | 3,165,000 | 8,197,000 | 13,452,000 | |||||||
Acquisition and integration costs | 2,937,000 | 617,000 | 12,058,000 | 1,661,000 | |||||||
Depreciation, amortization and accretion | 147,186,000 | 130,878,000 | 423,620,000 | 391,342,000 | |||||||
Total operating expenses | 374,753,000 | 307,511,000 | 1,052,836,000 | 925,716,000 | |||||||
Operating income (loss) | 210,781,000 | 174,479,000 | 597,594,000 | 494,052,000 | |||||||
Interest expense and amortization of deferred financing costs | (144,949,000) | (127,119,000) | (427,349,000) | (379,964,000) | |||||||
Gains (losses) on retirement of long-term obligations | 0 | 0 | (14,586,000) | 0 | |||||||
Interest income | 210,000 | 25,000 | 665,000 | 166,000 | |||||||
Other income (expense) | 3,825,000 | 5,042,000 | 10,869,000 | 11,771,000 | |||||||
Benefit (provision) for income taxes | (31,864,000) | (2,261,000) | 30,883,000 | (6,076,000) | |||||||
Net income (loss) | 38,003,000 | 50,166,000 | 198,076,000 | 119,949,000 | |||||||
Less: Net income (loss) attributable to the noncontrolling interest | 0 | (141,000) | (268,000) | (141,000) | |||||||
Net income (loss) attributable to CCIC stockholders | 38,003,000 | 50,307,000 | 198,344,000 | 120,090,000 | |||||||
Capital expenditures | 117,830,000 | 144,129,000 | 268,730,000 | 256,455,000 | |||||||
Total assets (at quarter end) | 12,669,983,000 | 12,669,983,000 | |||||||||
CCAL [Member]
|
|||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Site rental | 31,514,000 | 27,783,000 | 90,752,000 | 80,985,000 | |||||||
Network services and other | 4,289,000 | 4,110,000 | 17,411,000 | 12,505,000 | |||||||
Net revenues | 35,803,000 | 31,893,000 | 108,163,000 | 93,490,000 | |||||||
Site rental | 9,255,000 | [1] | 8,916,000 | [1] | 26,690,000 | [1] | 25,896,000 | [1] | |||
Network services and other | 3,437,000 | [1] | 2,370,000 | [1] | 11,572,000 | [1] | 7,967,000 | [1] | |||
General and administrative | 5,401,000 | 5,627,000 | 18,286,000 | 15,331,000 | |||||||
Asset write-down charges | 42,000 | (75,000) | 53,000 | 244,000 | |||||||
Acquisition and integration costs | 0 | 0 | 54,000 | 0 | |||||||
Depreciation, amortization and accretion | 7,681,000 | 7,645,000 | 23,129,000 | 22,645,000 | |||||||
Total operating expenses | 25,816,000 | 24,483,000 | 79,784,000 | 72,083,000 | |||||||
Operating income (loss) | 9,987,000 | 7,410,000 | 28,379,000 | 21,407,000 | |||||||
Interest expense and amortization of deferred financing costs | (4,478,000) | (5,755,000) | (14,815,000) | (17,513,000) | |||||||
Gains (losses) on retirement of long-term obligations | 0 | 0 | 0 | 0 | |||||||
Interest income | 81,000 | 150,000 | 362,000 | 388,000 | |||||||
Other income (expense) | 21,000 | (24,000) | (24,000) | (23,000) | |||||||
Benefit (provision) for income taxes | (436,000) | (564,000) | (1,446,000) | (1,687,000) | |||||||
Net income (loss) | 5,175,000 | 1,217,000 | 12,456,000 | 2,572,000 | |||||||
Less: Net income (loss) attributable to the noncontrolling interest | 1,133,000 | 246,000 | 2,711,000 | 496,000 | |||||||
Net income (loss) attributable to CCIC stockholders | 4,042,000 | 971,000 | 9,745,000 | 2,076,000 | |||||||
Capital expenditures | 5,860,000 | 4,296,000 | 14,656,000 | 8,660,000 | |||||||
Total assets (at quarter end) | 354,992,000 | 354,992,000 | |||||||||
Elimination [Member]
|
|||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Site rental | 0 | 0 | 0 | 0 | |||||||
Network services and other | 0 | 0 | 0 | 0 | |||||||
Net revenues | 0 | 0 | 0 | 0 | |||||||
Site rental | 0 | [1] | 0 | [1] | 0 | [1] | 0 | [1] | |||
Network services and other | 0 | [1] | 0 | [1] | 0 | [1] | 0 | [1] | |||
General and administrative | 0 | 0 | 0 | 0 | |||||||
Asset write-down charges | 0 | 0 | 0 | 0 | |||||||
Acquisition and integration costs | 0 | 0 | 0 | 0 | |||||||
Depreciation, amortization and accretion | 0 | 0 | 0 | 0 | |||||||
Total operating expenses | 0 | 0 | 0 | 0 | |||||||
Operating income (loss) | 0 | 0 | 0 | 0 | |||||||
Interest expense and amortization of deferred financing costs | 4,478,000 | 5,755,000 | 14,803,000 | 17,189,000 | |||||||
Gains (losses) on retirement of long-term obligations | 0 | 0 | 0 | 0 | |||||||
Interest income | 0 | 0 | 0 | 0 | |||||||
Other income (expense) | (4,478,000) | (5,755,000) | (14,803,000) | (17,189,000) | |||||||
Benefit (provision) for income taxes | 0 | 0 | 0 | 0 | |||||||
Net income (loss) | 0 | 0 | 0 | 0 | |||||||
Less: Net income (loss) attributable to the noncontrolling interest | 0 | 0 | 0 | 0 | |||||||
Net income (loss) attributable to CCIC stockholders | 0 | 0 | 0 | 0 | |||||||
Capital expenditures | 0 | 0 | 0 | 0 | |||||||
Total assets (at quarter end) | $ (288,556,000) | $ (288,556,000) | |||||||||
|
General Business (Details)
|
Sep. 30, 2012
towers
|
---|---|
Tower Count | 24,400 |
Number of Sprint Towers under Purchase Option Agreement | 6,500 |
Sprint Purchase Option Year | 2037 |
CCUSA [Member]
|
|
Tower Count | 22,700 |
CCAL [Member]
|
|
Tower Count | 1,700 |
Goodwill and Intangible Assets (Tables)
|
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2012
|
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Intangible Assets [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of below-market tenant leases [Table Text Block] | The estimated annual amounts related to below-market tenant leases expected to be amortized into site rental revenues for the three months ended December 31, 2012 and years ended December 31, 2013 to 2016 are as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Finite-Lived Intangible Assets by Major Class [Table Text Block] | The following is a summary of the Company's intangible assets.
|
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Schedule of Acquired Finite-Lived Intangible Assets by Major Class [Table Text Block] | The components of the additions to intangible assets during the nine months ended September 30, 2012 are as follows:
________________
|
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Schedule of Amortization Expense [Text Block] | Amortization expense related to intangible assets is classified as follows on the Company's consolidated statement of operations and comprehensive income (loss):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Expected Amortization Expense [Table Text Block] | The estimated annual amortization expense related to intangible assets (inclusive of those recorded to "site rental costs of operations") for the three months ended December 31, 2012 and years ended December 31, 2013 to 2016 is as follows:
|
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