10-Q

 

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

For the quarterly period ended September 30, 2015
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period              to             

Commission File Number 001-16441
____________________________________
CROWN CASTLE INTERNATIONAL
CORP.
(Exact name of registrant as specified in its charter)
 
Delaware
76-0470458
(State or other jurisdiction
of incorporation or organization)
(I.R.S. Employer
Identification No.)
 
 
1220 Augusta Drive, Suite 600, Houston, Texas 77057-2261
(Address of principal executives office) (Zip Code)
(713) 570-3000
(Registrant's telephone number, including area code)
____________________________________
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  o

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

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

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

Number of shares of common stock outstanding at November 4, 2015: 333,771,307
 



CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES

INDEX

 
 
 
Page
 
ITEM 1.
 
 
 
 
 
 
 
 
 
 
 
ITEM 2.
 
ITEM 3.
 
ITEM 4.
 
 
ITEM 1.
LEGAL PROCEEDINGS
 
ITEM 1A.
 
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
ITEM 6.
 
 
EXHIBIT INDEX
 

Cautionary Language Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q ("Form 10-Q") contains forward-looking statements that are based on our management's expectations as of the filing date of this report with the SEC. Statements that are not historical facts are hereby identified as forward-looking statements. In addition, words such as "estimate," "anticipate," "project," "plan," "intend," "believe," "expect," "likely," "predicted," any variations of these words and similar expressions are intended to identify forward-looking statements. Such statements include plans, projections and estimates contained in "Part I—Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Part I—Item 3. Quantitative and Qualitative Disclosures About Market Risk" herein. Such forward-looking statements include (1) expectations regarding anticipated growth in the wireless communication industry, carriers' investments in their networks, new tenant additions, customer consolidation or ownership changes, or demand for our wireless infrastructure, (2) expectations regarding non-renewals of tenant leases (including the impact of Sprint decommissioning its iDEN network and the impact of our customers' decommissioning of the former Leap Wireless, MetroPCS and Clearwire networks), (3) availability and adequacy of cash flows and liquidity for, or plans regarding, future discretionary investments including capital expenditures, (4) potential benefits of our discretionary investments, (5) anticipated growth in our future revenues, margins, Adjusted EBITDA, and operating cash flows, (6) expectations regarding our capital structure and the credit markets, our availability and cost of capital, or our ability to service our debt and comply with debt covenants and the benefits of any future refinancings, (7) expectations related to remaining qualified as a real estate investment trust ("REIT") and the advantages, benefits or impact of, or opportunities created by, our REIT status, (8) the realization and utilization of our net operating loss carryforwards ("NOLs"), (9) expectations regarding the inclusion of portions of our small cells within our REIT, and (10) our dividend policy, including the timing, amount, growth or tax characterization of any dividends.
Such forward-looking statements are subject to certain risks, uncertainties and assumptions, including prevailing market conditions, risk factors described in "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 ("2014 Form 10-K") and other factors. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those expected. As used herein, the term "including," and any variation of thereof, means "including without limitation." The use of the word "or" herein is not exclusive.

1


PART I—FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS

CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands of dollars, except share amounts)
 
September 30,
2015
 
December 31,
2014
 
(Unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
184,116

 
$
151,312

Restricted cash
116,653

 
147,411

Receivables, net
324,566

 
313,308

Prepaid expenses
143,675

 
138,873

Deferred income tax assets
33,110

 
24,806

Other current assets
222,251

 
94,503

Assets from discontinued operations (see note 3)

 
412,783

Total current assets
1,024,371

 
1,282,996

Deferred site rental receivables
1,282,752

 
1,202,058

Property and equipment, net of accumulated depreciation of $5,604,110 and $5,052,395, respectively
9,498,568

 
8,982,783

Goodwill
5,527,134

 
5,196,485

Other intangible assets, net
3,837,360

 
3,681,551

Long-term prepaid rent, deferred financing costs and other assets, net
825,459

 
797,403

Total assets
$
21,995,644

 
$
21,143,276

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
157,024

 
$
162,397

Accrued interest
69,184

 
66,943

Deferred revenues
314,648

 
279,882

Other accrued liabilities
181,498

 
182,081

Current maturities of debt and other obligations
102,188

 
113,335

Liabilities from discontinued operations (see note 3)

 
127,493

Total current liabilities
824,542

 
932,131

Debt and other long-term obligations
12,039,178

 
11,807,526

Deferred income tax liabilities
32,317

 
39,889

Other long-term liabilities
1,859,304

 
1,626,502

Total liabilities
14,755,341

 
14,406,048

Commitments and contingencies (note 10)

 

CCIC stockholders' equity:
 
 
 
Common stock, $.01 par value; 600,000,000 shares authorized; shares issued and outstanding: September 30, 2015—333,771,499 and December 31, 2014—333,856,632
3,339

 
3,339

4.50% Mandatory Convertible Preferred Stock, Series A, $.01 par value; 20,000,000 shares authorized; shares issued and outstanding: September 30, 2015 and December 31, 2014—9,775,000; aggregate liquidation value: September 30, 2015 and December 31, 2014—$977,500
98

 
98

Additional paid-in capital
9,532,597

 
9,512,396

Accumulated other comprehensive income (loss)
(3,754
)
 
15,820

Dividends/distributions in excess of earnings
(2,291,977
)
 
(2,815,428
)
Total CCIC stockholders' equity
7,240,303

 
6,716,225

Noncontrolling interest from discontinued operations

 
21,003

Total equity
7,240,303

 
6,737,228

Total liabilities and equity
$
21,995,644

 
$
21,143,276

 
See notes to condensed consolidated financial statements.

2

CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS) (Unaudited)
(In thousands of dollars, except per share amounts)


 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Net revenues:
 
 
 
 
 
 
 
Site rental
$
764,606

 
$
717,623

 
$
2,233,077

 
$
2,143,198

Network services and other
153,501

 
175,260

 
484,938

 
469,690

Net revenues
918,107

 
892,883

 
2,718,015

 
2,612,888

Operating expenses:
 
 
 
 
 
 
 
Costs of operations(a):
 
 
 
 
 
 
 
Site rental
247,000

 
230,599

 
716,244

 
676,275

Network services and other
86,859

 
101,814

 
263,177

 
275,514

General and administrative
76,699

 
65,212

 
223,880

 
187,171

Asset write-down charges
7,477

 
4,932

 
19,652

 
10,673

Acquisition and integration costs
7,608

 
4,068

 
12,001

 
28,852

Depreciation, amortization and accretion
261,662

 
247,206

 
766,621

 
738,965

Total operating expenses
687,305

 
653,831

 
2,001,575

 
1,917,450

Operating income (loss)
230,802

 
239,052

 
716,440

 
695,438

Interest expense and amortization of deferred financing costs
(129,877
)
 
(141,287
)
 
(398,782
)
 
(432,221
)
Gains (losses) on retirement of long-term obligations

 

 
(4,157
)
 
(44,629
)
Interest income
789

 
107

 
1,170

 
329

Other income (expense)
(1,214
)
 
(694
)
 
58,510

 
(9,350
)
Income (loss) from continuing operations before income taxes
100,500

 
97,178

 
373,181

 
209,567

Benefit (provision) for income taxes
3,801

 
1,977

 
9,380

 
8,118

Income (loss) from continuing operations
104,301

 
99,155

 
382,561

 
217,685

Discontinued operations (see note 3):
 
 
 
 
 
 
 
Income (loss) from discontinued operations, net of tax

 
8,882

 
19,690

 
28,502

Net gain (loss) from disposal of discontinued operations, net of tax
(522
)
 

 
981,018

 

Income (loss) from discontinued operations, net of tax
(522
)
 
8,882


1,000,708


28,502

Net income (loss)
103,779

 
108,037

 
1,383,269

 
246,187

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

 
1,100


3,343


3,744

Net income (loss) attributable to CCIC stockholders
103,779

 
106,937

 
1,379,926

 
242,443

Dividends on preferred stock
(10,997
)
 
(10,997
)
 
(32,991
)
 
(32,991
)
Net income (loss) attributable to CCIC common stockholders
$
92,782

 
$
95,940

 
$
1,346,935

 
$
209,452

Net income (loss)
$
103,779

 
$
108,037

 
$
1,383,269

 
$
246,187

Other comprehensive income (loss):
 
 
 
 
 
 
 
Amounts reclassified into "interest expense and amortization of deferred financing costs," net of taxes (see note 5)
3,744

 
15,551

 
18,725

 
47,895

Foreign currency translation adjustments
(632
)
 
(24,177
)
 
(13,493
)
 
(5,708
)
Amounts reclassified into discontinued operations for foreign currency translation adjustments (see note 3)

 

 
(25,678
)
 

Total other comprehensive income (loss)
3,112

 
(8,626
)
 
(20,446
)
 
42,187

Comprehensive income (loss)
106,891

 
99,411

 
1,362,823

 
288,374

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

 
(327
)
 

 
3,313

Comprehensive income (loss) attributable to CCIC stockholders
$
106,891

 
$
99,738

 
$
1,362,823

 
$
285,061

Net income (loss) attributable to CCIC common stockholders, per common share:
 
 
 
 
 
 
 
Income (loss) from continuing operations, basic
$
0.28

 
$
0.27

 
$
1.05

 
$
0.56

Income (loss) from discontinued operations, basic
$

 
$
0.02

 
$
3.00

 
$
0.07

Net income (loss) attributable to CCIC common stockholders, basic
$
0.28

 
$
0.29

 
$
4.05

 
$
0.63

Income (loss) from continuing operations, diluted
$
0.28

 
$
0.26

 
$
1.05

 
$
0.55

Income (loss) from discontinued operations, diluted
$

 
$
0.03

 
$
2.99

 
$
0.08

Net income (loss) attributable to CCIC common stockholders, diluted
$
0.28

 
$
0.29

 
$
4.04

 
$
0.63

Weighted-average common shares outstanding (in thousands):
 
 
 
 
 
 
 
Basic
333,049
 
332,413

 
332,951
 
332,264
Diluted
333,711
 
333,241

 
333,735
 
333,020
________________
(a)
Exclusive of depreciation, amortization and accretion shown separately.
See notes to condensed consolidated financial statements.

3

CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(In thousands of dollars)

 
Nine Months Ended September 30,
 
 
2015
 
2014
 
Cash flows from operating activities:
 
 
 
 
Net income (loss) from continuing operations
$
382,561

 
$
217,685

 
Adjustments to reconcile net income (loss) from continuing operations to net cash provided by (used for) operating activities:
 
 
 
 
Depreciation, amortization and accretion
766,621

 
738,965

 
Gains (losses) on retirement of long-term obligations
4,157

 
44,629

 
Gains (losses) on settled swaps
(54,475
)
 

 
Amortization of deferred financing costs and other non-cash interest
32,394

 
61,322

 
Stock-based compensation expense
44,711

 
39,497

 
Asset write-down charges
19,652

 
10,673

 
Deferred income tax benefit (provision)
(16,199
)
 
(14,589
)
 
Other non-cash adjustments, net
(7,240
)
 
(1,967
)
 
Changes in assets and liabilities, excluding the effects of acquisitions:
 
 
 
 
Increase (decrease) in accrued interest
2,241

 
2,461

 
Increase (decrease) in accounts payable
(8,310
)
 
28,037

 
Increase (decrease) in deferred revenues, deferred ground lease payables, other accrued liabilities and other liabilities
214,607

 
259,178

 
Decrease (increase) in receivables
(703
)
 
(64,079
)
 
Decrease (increase) in prepaid expenses, deferred site rental receivables, long-term prepaid rent, restricted cash and other assets
(89,141
)
 
(170,886
)
 
Net cash provided by (used for) operating activities
1,290,876

 
1,150,926

 
Cash flows from investing activities:
 
 
 
 
Payments for acquisitions of businesses, net of cash acquired
(1,083,319
)
 
(174,356
)
 
Capital expenditures
(658,240
)
 
(498,960
)
 
Receipts from foreign currency swaps
54,475

 

 
Other investing activities, net
(1,561
)
 
2,787

 
Net cash provided by (used for) investing activities
(1,688,645
)
 
(670,529
)
 
Cash flows from financing activities:
 
 
 
 
Proceeds from issuance of long-term debt
1,000,000

 
845,750

 
Principal payments on debt and other long-term obligations
(78,049
)
 
(86,197
)
 
Purchases and redemptions of long-term debt
(1,069,337
)
 
(836,899
)
 
Purchases of capital stock
(29,576
)
 
(21,778
)
 
Borrowings under revolving credit facility
1,560,000

 
567,000

 
Payments under revolving credit facility
(1,240,000
)
 
(587,000
)
 
Payments for financing costs
(17,415
)
 
(15,899
)
 
Net (increase) decrease in restricted cash
28,435

 
39,882

 
Dividends/distributions paid on common stock
(821,056
)
 
(350,535
)
 
Dividends paid on preferred stock
(32,991
)
 
(33,357
)
 
Net cash provided by (used for) financing activities
(699,989
)
 
(479,033
)
 
Net increase (decrease) in cash and cash equivalents - continuing operations
(1,097,758
)
 
1,364

 
Discontinued operations (see note 3):
 
 
 
 
Net cash provided by (used for) operating activities
4,359

 
41,304

 
Net cash provided by (used for) investing activities
1,103,577

 
(20,154
)
 
Net increase (decrease) in cash and cash equivalents - discontinued operations
1,107,936


21,150

 
Effect of exchange rate changes
(1,682
)
 
(7,358
)
 
Cash and cash equivalents at beginning of period
175,620

(a) 
223,394

(a) 
Cash and cash equivalents at end of period
$
184,116

 
$
238,550

(a) 
________________
(a)
Inclusive of cash and cash equivalents included in discontinued operations.
See notes to condensed consolidated financial statements.

4


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

 
CCIC Stockholders
 
 
 
 
 
Common Stock
 
4.50% Mandatory Convertible Preferred Stock
 
 
 
AOCI
 
 
 
 
 
 
 
Shares
 
($.01 Par)
 
Shares
 
($.01 Par)
 
Additional
paid-in
capital
 
Foreign Currency Translation Adjustments
 
Derivative Instruments, net of tax
 
Dividends/Distributions in Excess of Earnings
 
Noncontrolling
Interest from discontinued operations
 
Total
Balance, July 1, 2015
333,762,344

 
$
3,339

 
9,775,000

 
$
98

 
$
9,518,103

 
$
(3,122
)
 
$
(3,744
)
 
$
(2,110,438
)
 
$

 
$
7,404,236

Stock-based compensation related activity, net of forfeitures
10,198

 

 

 

 
14,579

 

 

 

 

 
14,579

Purchases and retirement of capital stock
(1,043
)
 

 

 

 
(85
)
 

 

 

 

 
(85
)
Other comprehensive income (loss)(a)

 

 

 

 

 
(632
)
 
3,744

 

 

 
3,112

Common stock dividends/distributions

 

 

 

 

 

 

 
(274,321
)
 

 
(274,321
)
Preferred stock dividends

 

 

 

 

 

 

 
(10,997
)
 

 
(10,997
)
Net income (loss)

 

 

 

 

 

 

 
103,779

 

 
103,779

Balance, September 30, 2015
333,771,499

 
$
3,339

 
9,775,000

 
$
98

 
$
9,532,597

 
$
(3,754
)
 
$

 
$
(2,291,977
)
 
$

 
$
7,240,303

    
(a)
See the condensed statement of operations and other comprehensive income (loss) for the components of "other comprehensive income (loss)" and note 5 with respect to the reclassification adjustments.

 
CCIC Stockholders
 
 
 
 
 
 
 
Common Stock
 
4.50% Mandatory Convertible Preferred Stock
 
 
 
AOCI
 
 
 
 
 
 
 
Shares
 
($.01 Par)
 
Shares
 
($.01 Par)
 
Additional
paid-in
capital
 
Foreign Currency Translation Adjustments
 
Derivative Instruments, net of tax
 
Dividends/Distributions in Excess of Earnings
 
Noncontrolling
Interest from discontinued operations
 
Total
Balance, July 1, 2014
333,861,080

 
$
3,339

 
9,775,000

 
$
98

 
$
9,488,414

 
$
75,734

 
$
(49,529
)
 
$
(2,656,718
)
 
$
18,098

 
$
6,879,436

Stock-based compensation related activity, net of forfeitures
(980
)
 

 

 

 
12,124

 

 

 

 

 
12,124

Purchases and retirement of capital stock
(653
)
 

 

 

 
(48
)
 

 

 

 

 
(48
)
Other comprehensive income (loss)(a)

 

 

 

 

 
(22,750
)
 
15,551

 

 
(1,427
)
 
(8,626
)
Common stock dividends/distributions

 

 

 

 

 

 

 
(117,181
)
 

 
(117,181
)
Preferred stock dividends

 

 

 

 

 

 

 
(10,997
)
 

 
(10,997
)
Net income (loss)

 

 

 

 

 

 

 
106,937

 
1,100

 
108,037

Balance, September 30, 2014
333,859,447

 
$
3,339

 
9,775,000

 
$
98

 
$
9,500,490

 
$
52,984

 
$
(33,978
)
 
$
(2,677,959
)
 
$
17,771

 
$
6,862,745

    
(a)
See the condensed statement of operations and other comprehensive income (loss) for the components of "other comprehensive income (loss)" and note 5 with respect to the reclassification adjustments.

5


 
CCIC Stockholders
 
 
 
 
 
Common Stock
 
4.50% Mandatory Convertible Preferred Stock
 
 
 
AOCI
 
 
 
 
 
 
 
Shares
 
($.01 Par)
 
Shares
 
($.01 Par)
 
Additional
paid-in
capital
 
Foreign Currency Translation Adjustments
 
Derivative Instruments, net of tax
 
Dividends/Distributions in Excess of Earnings
 
Noncontrolling
Interest from discontinued operations
 
Total
Balance, January 1, 2015
333,856,632

 
$
3,339

 
9,775,000

 
$
98

 
$
9,512,396

 
$
34,545

 
$
(18,725
)
 
$
(2,815,428
)
 
$
21,003

 
$
6,737,228

Stock-based compensation related activity, net of forfeitures
250,443

 
2

 

 

 
49,775

 

 

 

 

 
49,777

Purchases and retirement of capital stock
(335,576
)
 
(2
)
 

 

 
(29,574
)
 

 

 

 

 
(29,576
)
Other comprehensive income (loss)(a)

 

 

 

 

 
(38,299
)
 
18,725

 

 
(872
)
 
(20,446
)
Disposition of CCAL

 

 

 

 

 

 

 

 
(23,474
)
 
(23,474
)
Common stock dividends/distributions

 

 

 

 

 

 

 
(823,484
)
 

 
(823,484
)
Preferred stock dividends

 

 

 

 

 

 

 
(32,991
)
 

 
(32,991
)
Net income (loss)

 

 

 

 

 

 

 
1,379,926

 
3,343

 
1,383,269

Balance, September 30, 2015
333,771,499

 
$
3,339

 
9,775,000

 
$
98

 
$
9,532,597

 
$
(3,754
)
 
$

 
$
(2,291,977
)
 
$

 
$
7,240,303

    
(a)
See the condensed statement of operations and other comprehensive income (loss) for the components of "other comprehensive income (loss)" and notes 3 and 5 with respect to the reclassification adjustments.
 
CCIC Stockholders
 
 
 
 
 
 
 
Common Stock
 
4.50% Mandatory Convertible Preferred Stock
 
 
 
AOCI
 
 
 
 
 
 
 
Shares
 
($.01 Par)
 
Shares
 
($.01 Par)
 
Additional
paid-in
capital
 
Foreign Currency Translation Adjustments
 
Derivative Instruments, net of tax
 
Dividends/Distributions in Excess of Earnings
 
Noncontrolling
Interest from discontinued operations
 
Total
Balance, January 1, 2014
334,070,016

 
$
3,341

 
9,775,000

 
$
98

 
$
9,482,769

 
$
58,261

 
$
(81,873
)
 
$
(2,535,879
)
 
$
14,458

 
$
6,941,175

Stock-based compensation related activity, net of forfeitures
81,350

 
1

 

 

 
39,496

 

 

 

 

 
39,497

Purchases and retirement of capital stock
(291,919
)
 
(3
)
 

 

 
(21,775
)
 

 

 

 

 
(21,778
)
Other comprehensive income (loss)(a)

 

 

 

 

 
(5,277
)
 
47,895

 

 
(431
)
 
42,187

Common stock dividends/distributions

 

 

 

 

 

 

 
(351,532
)
 

 
(351,532
)
Preferred stock dividends

 

 

 

 

 

 

 
(32,991
)
 

 
(32,991
)
Net income (loss)

 

 

 

 

 

 

 
242,443

 
3,744

 
246,187

Balance, September 30, 2014
333,859,447

 
$
3,339

 
9,775,000

 
$
98

 
$
9,500,490

 
$
52,984

 
$
(33,978
)
 
$
(2,677,959
)
 
$
17,771

 
$
6,862,745

    
(a)
See the condensed statement of operations and other comprehensive income (loss) for the components of "other comprehensive income (loss)" and note 5 with respect to the reclassification adjustments.
See notes to condensed consolidated financial statements.

6


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


1.
General
The information contained in the following notes to the consolidated financial statements is condensed from that which would appear in the annual consolidated financial statements; accordingly, the consolidated financial statements included herein should be reviewed in conjunction with the consolidated financial statements for the fiscal year ended December 31, 2014, and related notes thereto, included in the 2014 Form 10-K filed by Crown Castle International Corp. ("CCIC") with the SEC. References to the "Company" include CCIC and its predecessor, as applicable, and their subsidiaries, unless otherwise indicated or the context indicates otherwise.
The Company owns, operates and leases shared wireless infrastructure, including: (1) towers, and to a lesser extent, (2) small cell networks, and (3) third party land interests. The Company's wireless infrastructure is geographically dispersed throughout the United States, including Puerto Rico ("U.S."). See note 3 for a discussion of the May 2015 sale of the Company's formerly 77.6% owned subsidiary that operated towers in Australia (referred to as "CCAL").
The Company's core business is providing access, including space or capacity, to its wireless infrastructure via long-term contracts in various forms, including licenses, subleases and lease agreements. The Company's wireless infrastructure can accommodate multiple tenants for antennas or other equipment necessary for the transmission of signals for wireless communication.
As part of the Company's effort to provide comprehensive wireless infrastructure solutions, it offers certain network services relating to its wireless infrastructure, consisting of (1) the following site development services relating to existing or new antenna installations on its wireless infrastructure: site acquisition, architectural and engineering, or zoning and permitting and (2) tenant equipment installation or subsequent augmentations (collectively, "installation services").
Effective January 1, 2014, the Company commenced operating as a REIT for U.S. federal income tax purposes. In addition, the Company has certain taxable REIT subsidiaries ("TRSs"). See note 8.
Approximately 55% of the Company's towers are leased or subleased or operated and managed under master leases, subleases, and other agreements with Sprint, T-Mobile, and AT&T. The Company has the option to purchase these towers at the end of their respective lease terms. The Company has no obligation to exercise such purchase options.
Basis of Presentation
The condensed consolidated financial statements included herein are unaudited; however, they include all adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are necessary to state fairly the consolidated financial position of the Company at September 30, 2015, and the consolidated results of operations and the consolidated cash flows for the nine months ended September 30, 2015 and 2014. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

2.
Summary of Significant Accounting Policies
The significant accounting policies used in the preparation of the Company's condensed consolidated financial statements are disclosed in the 2014 Form 10-K.
Recently Adopted Accounting Pronouncements
In April 2014, the Financial Accounting Standards Board ("FASB") issued new guidance on the implementation and presentation of discontinued operations. The guidance requires that only disposals that represent a strategic shift that has (or will have) a major effect on the entity's results and operations qualify as discontinued operations. In addition, the new guidance expands the disclosure requirements for disposals that meet the definition of a discontinued operation and requires entities to disclose information about disposals of individually significant components that do not meet the definition of discontinued operations. The

7


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


new guidance was effective for the Company on January 1, 2015, and the Company has applied the new guidance for the sale of CCAL. See note 3.
Recent Accounting Pronouncements Not Yet Adopted
In April 2015, the FASB issued new guidance on the presentation of debt issuance costs. The guidance requires debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability, consistent with debt discounts and premiums. The update requires retrospective application and the guidance is effective for the Company on January 1, 2016. The Company will adopt the guidance on January 1, 2016. As of September 30, 2015, net deferred financing costs were $110.9 million and were recorded as a component of "long-term prepaid rent, deferred financing costs and other assets, net" on the Company's condensed consolidated balance sheet.
In May 2014, the FASB released updated guidance regarding the recognition of revenue from contracts with customers, exclusive of those contracts within lease accounting. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  To achieve that core principle, an entity should apply the following steps: (1) identify the contracts with the customer; (2) identify the performance obligations in the contract; (3) determine the contract price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation.  This guidance is effective for the Company on January 1, 2018, following the FASB's July 2015 decision to defer the effective date of the standard by one year. This guidance is required to be applied, at the Company's election, either (1) retrospectively to each prior reporting period presented, or (2) with the cumulative effect being recognized at the date of initial application. The Company is evaluating the guidance, including the impact on its consolidated financial statements.
In September 2015, the FASB issued new guidance which requires an acquirer to recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The update requires prospective application and the guidance is effective for the Company on January 1, 2016, with early adoption permitted. The Company is evaluating the guidance, including the impact on its consolidated financial statements.
In October 2015, the FASB issued new guidance on the presentation of deferred tax assets and liabilities. The guidance requires deferred tax assets and liabilities to be presented as non-current on the balance sheet. The update requires prospective application and the guidance is effective for the Company on January 1, 2017, with early adoption permitted. The Company is evaluating the guidance, including the impact on its consolidated financial statements.

3.
Discontinued Operations
On May 14, 2015, the Company entered into a definitive agreement to sell CCAL to a consortium of investors led by Macquarie Infrastructure and Real Assets (collectively, “Buyer”). On May 28, 2015, the Company completed the sale. At closing, the Company received net proceeds of approximately $1.1 billion after accounting for the Company's 77.6% ownership interest, repayment of intercompany debt owed to the Company by CCAL and estimated transaction fees and expenses, exclusive of the impact of foreign currency swaps related to the CCAL sale (see note 6).
As part of the sale of CCAL, in January 2016, the Company is entitled to receive an installment payment from the Buyer totaling approximately $124 million, inclusive of the impact of the related foreign currency swap (see note 6). The Buyer's obligation related to the installment payment is unconditional and is substantiated by an irrevocable letter of credit. The installment payment is included within "other current assets" on the Company's condensed consolidated balance sheet.
During the second quarter 2015, the Company used net proceeds from the sale of CCAL to repay portions of outstanding borrowings under its 2012 Credit Facility.
The Company entered into foreign currency swaps to manage and reduce its foreign currency risk associated with the sale of CCAL. These swaps are not included in discontinued operations. See note 6.
CCAL has historically been a separate operating segment of the Company (see note 12). The sale of the Company's CCAL operating segment is treated as discontinued operations for all periods presented pursuant to ASU 2014-8, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which the Company adopted on January 1, 2015 (see note 2). The sale of CCAL represents a strategic shift of the Company to solely focus on U.S. operations. The gain from disposal of CCAL is included in discontinued operations on the condensed consolidated statement of operations. The tables below set forth

8


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


the assets and liabilities related to discontinued operations at December 31, 2014, and their results of operations and cash flows for the nine months ended September 30, 2015 and 2014.
 
 
 
As of December 31, 2014
Assets and liabilities related to discontinued operations:
 
 
 
 
 
Current assets
 
 
$
61,289
 
Property and equipment
 
 
165,528
 
Other non-current assets
 
 
185,966
 
Total assets related to discontinued operations


 
$
412,783
 
Current liabilities
 
 
94,297
 
Non-current liabilities
 
 
33,196
 
Total liabilities related to discontinued operations


 
$
127,493
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2014(b)
 
2015 (b)(c)
 
2014(b)
Total revenues
$
37,142

 
$
65,293

 
$
109,432

Total cost of operations (a)
11,720

 
17,498

 
33,732

Depreciation, amortization, and accretion
7,656

 
10,168

 
20,323

Total other expenses
6,425

 
10,481

 
18,671

Pre-tax income from discontinued operations
11,341

 
27,146

 
36,706

Net income (loss) from discontinued operations(d)
$
8,882

 
$
19,690

 
$
28,502

    
(a)
Exclusive of depreciation, amortization, and accretion shown seperately.
(b)
No interest expense has been allocated to discontinued operations.
(c)
CCAL results are through May 28, 2015, which was the closing date of the Company's sale of CCAL.
(d)
Exclusive of the gain (loss) from disposal of discontinued operations, net of tax, as presented on the condensed consolidated statement of operations.
The Company recorded a gain on the sale of CCAL, which was comprised of the following items:
Cash received from sale of CCAL(a)
$
1,139,369

Installment payment receivable due January 2016(a)
117,384

Total proceeds from sale of CCAL
$
1,256,753

Adjusted for:
 
Net assets and liabilities related to discontinued operations(b)(c)
258,575

Transaction fees and expenses
21,688

Foreign currency translation reclassification adjustments(d)
(25,678
)
Pre-tax gain (loss) from disposal of discontinued operations
1,002,168

Income taxes related to the sale of CCAL
21,150

Gain (loss) from disposal of discontinued operations
$
981,018

    
(a)
Exclusive of foreign currency swaps and based on exchange rates as of May 28, 2015, which was the closing date of the Company's sale of CCAL. See note 6. The impact of fluctuations in the exchange rate subsequent to the closing date are reflected as a component of "other income (expense)" on the Company's condensed consolidated statement of operations.
(b)
Represents net assets attributable to CCIC, net of the disposition of noncontrolling interest of $23.5 million.
(c)
Inclusive of $11.1 million of cash.
(d)
Represents foreign currency translation adjustments previously included in "accumulated other comprehensive income (loss)" on the condensed consolidated balance sheet and reclassified to "gain (loss) from disposal of discontinued operations".

4.
Acquisitions
Sunesys Acquisition
In April 2015, the Company entered into a definitive agreement to acquire Quanta Fiber Networks, Inc. ("Sunesys") for approximately $1.0 billion in cash, subject to certain limited adjustments ("Sunesys Acquisition"). On August 4, 2015, the Company closed the Sunesys Acquisition. The results of operations from Sunesys have been included in the Company's consolidated statement of operations since the date of acquisition.
Prior to the closing, Sunesys was a wholly owned subsidiary of Quanta Services, Inc. and a fiber services provider that owned or had rights to nearly 10,000 miles of fiber in major metropolitan markets across the U.S., including Los Angeles, Philadelphia, Chicago, Atlanta, Silicon Valley, and northern New Jersey. Approximately 60% of Sunesys' fiber miles were located in the top 10 basic trading areas.
The Company utilized borrowings under the 2012 Revolver and cash on hand to fund the cash consideration of approximately $1.0 billion. See note 5.
The preliminary purchase price allocation for the Sunesys Acquisition is shown below. The preliminary purchase price allocation is based upon a preliminary valuation which is subject to change as the Company obtains additional information, with respect to fixed assets, intangible assets and certain liabilities.
Preliminary Purchase Price Allocation
 
Current assets
$
12,821

Property and equipment
432,106

Goodwill (a)
347,547

Other intangible assets, net
249,935

Current liabilities
(25,418
)
Other non-current liabilities
(29,065
)
Net assets acquired (b)
$
987,926

    
(a)
The preliminary purchase price allocation for the Sunesys Acquisition resulted in the recognition of goodwill based on the Company's expectation to leverage the Sunesys fiber footprint to support new small cell networks. The Sunesys fiber is complementary to the Company's existing fiber assets and is located where the Company expects to see wireless carrier network investments.
(b)
Assets acquired in the Sunesys Acquisition are included in the Company's REIT and as such, no deferred taxes were recorded in connection with the Sunesys Acquisition.


9


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


5.
Debt and Other Obligations
 
Original
Issue Date
 
Contractual
Maturity
Date (a)
 
Outstanding
Balance as of
September 30, 2015
 
Outstanding
Balance as of
December 31, 2014
 
Stated Interest
Rate as of
September 30, 2015(a)(b)
Bank debt - variable rate:
 
 
 
 
 
 
 
 
 
2012 Revolver
Jan. 2012
 
Jan. 2019
 
$
1,015,000

(c) 
$
695,000

 
2.0
%
Tranche A Term Loans
Jan. 2012
 
Jan. 2019
 
633,516

 
645,938

 
1.9
%
Tranche B Term Loans
Jan. 2012
 
Jan. 2021
 
2,252,747

(e) 
2,835,509

 
3.0
%
Total bank debt
 
 
 
 
3,901,263

 
4,176,447

 
 
Securitized debt - fixed rate:
 
 
 
 
 
 
 
 
 
January 2010 Tower Revenue Notes
Jan. 2010
 
2037 - 2040
(d) 
1,600,000

 
1,600,000

 
6.0
%
August 2010 Tower Revenue Notes
Aug. 2010
 
2037 - 2040
(d)(f) 
1,300,000

 
1,550,000

 
4.7
%
May 2015 Tower Revenue Notes
May 2015
 
2042 - 2045
(d)(f) 
1,000,000

 

 
3.5
%
2009 Securitized Notes
July 2009
 
2019/2029
 
146,399

 
160,822

 
7.6
%
WCP Securitized Notes
Jan. 2010
 
Nov. 2040
(f) 

 
262,386

 
N/A

Total securitized debt
 
 
 
 
4,046,399

 
3,573,208

 
 
Bonds - fixed rate:
 
 
 
 
 
 
 
 
 
5.25% Senior Notes
Oct. 2012
 
Jan. 2023
 
1,649,969

 
1,649,969

 
5.3
%
2012 Secured Notes
Dec. 2012
 
Dec. 2017/Apr. 2023
 
1,500,000

 
1,500,000

 
3.4
%
4.875% Senior Notes
Apr. 2014
 
Apr. 2022
 
846,405

 
846,062

 
4.9
%
Total bonds
 
 
 
 
3,996,374

 
3,996,031

 
 
Other:
 
 
 
 
 
 
 
 
 
Capital leases and other obligations
Various
 
Various
 
197,330

 
175,175

 
Various

Total debt and other obligations
 
 
 
 
12,141,366

 
11,920,861

 
 
Less: current maturities and short-term debt and other current obligations
 
 
 
 
102,188

 
113,335

 
 
Non-current portion of long-term debt and other long-term obligations
 
 
 
 
$
12,039,178

 
$
11,807,526

 
 
    
(a)
See the 2014 Form 10-K, including note 7, for additional information regarding the maturity and principal amortization provisions and interest rates relating to the Company's indebtedness.
(b)
Represents the weighted-average stated interest rate.
(c)
During January and February 2015, the Company amended its 2012 Credit Facility agreement and increased the capacity of the 2012 Revolver to an aggregate revolving commitment of approximately $2.2 billion. During August 2015, the Company utilized borrowings under the 2012 Revolver of $835.0 million, along with cash on hand, to fund the Sunesys Acquisition. See note 4. As of September 30, 2015, the undrawn availability under the 2012 Revolver was $1.2 billion.
(d)
If the respective series of such debt is not paid in full on or prior to an applicable date 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 additional interest (of an additional approximately 5% per annum) will accrue on the respective series. See the 2014 Form 10-K for additional information regarding these provisions.
(e)
During the second quarter of 2015, the Company repaid the portion of its Tranche B Term Loans that were due January 2019, which had an outstanding balance of $564.1 million.
(f)
In May 2015, the Company issued $1.0 billion aggregate principal amount of Senior Secured Tower Revenue Notes ("May 2015 Tower Revenue Notes"), which were issued by certain of its indirect subsidiaries pursuant to the existing indenture governing the 2010 Tower Revenue Notes and having similar terms and security as the 2010 Tower Revenue Notes. The 2015 Tower Revenue Notes consist of (1) $300.0 million aggregate principal amount of 3.222% Notes with an expected life of seven years and a final maturity date of May 2042 and (2) $700.0 million aggregate principal amount of 3.663% Notes with an expected life of ten years and a final maturity date of May 2045. The Company used the net proceeds received from the May 2015 Tower Revenue Notes offering (1) to repay $250.0 million aggregate principal amount of August 2010 Tower Revenue Notes with an anticipated repayment date of August 2015, (2) to repay all of the previously outstanding WCP Securitized Notes, (3) to repay portions of outstanding borrowings under its 2012 Credit Facility, and (4) to pay related fees and expenses. Collectively, the 2010 Tower Revenue Notes and the May 2015 Tower Revenue Notes are referred to herein as the "Tower Revenue Notes."

10


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


Contractual Maturities
The following are the scheduled contractual maturities of the total debt and other long-term obligations of the Company outstanding as of September 30, 2015. These maturities reflect contractual maturity dates and do not consider the principal payments that will commence following the anticipated repayment dates on the Tower Revenue Notes.
 
Three Months Ending
December 31,
 
Years Ending December 31,
 
 
 
 
 
Unamortized Adjustments, Net
 
Total Debt and Other Obligations Outstanding
 
2015
 
2016
 
2017
 
2018
 
2019
 
Thereafter
 
Total Cash Obligations
 
 
Scheduled contractual maturities
$
23,049

 
$
105,640

 
$
601,859

 
$
98,208

 
$
1,602,265

 
$
9,713,940

 
$
12,144,961

 
$
(3,595
)
 
$
12,141,366

Purchases and Redemptions of Long-Term Debt
The following is a summary of purchases and redemptions of long-term debt during the nine months ended September 30, 2015.
 
Nine Months Ended September 30, 2015
 
Principal Amount
 
Cash Paid(a)
 
Gains (Losses)(b)
August 2010 Tower Revenue Notes
$
250,000

 
$
250,000

 
$
(159
)
WCP Securitized Notes
252,830

 
252,830

 
2,105

Tranche B Term Loans
564,137

 
564,137

 
(6,127
)
Other
2,394

 
2,370

 
24

Total
$
1,069,361

 
$
1,069,337

 
$
(4,157
)
    
(a)
Exclusive of accrued interest.
(b)
Inclusive of $4.2 million related to the net write off of deferred financing costs, premiums and discounts.
Interest Expense and Amortization of Deferred Financing Costs
The components of interest expense and amortization of deferred financing costs are as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Interest expense on debt obligations
$
121,287

 
$
121,450

 
$
366,388

 
$
370,899

Amortization of deferred financing costs
5,451

 
5,516

 
16,624

 
16,678

Amortization of adjustments on long-term debt
116

 
(892
)
 
(1,146
)
 
(2,743
)
Amortization of interest rate swaps(a)
3,744

 
15,551

 
18,725

 
47,895

Other, net of capitalized interest
(721
)
 
(338
)
 
(1,809
)
 
(508
)
Total
$
129,877

 
$
141,287

 
$
398,782

 
$
432,221

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


11


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


6.
Foreign Currency Swaps
During May 2015, the Company entered into two foreign currency swaps to manage and reduce its foreign currency risk related to its sale of CCAL (see note 3). The Company does not enter into foreign currency swaps for speculative or trading purposes. The foreign currency swaps were originally comprised of the following:
Item Swapped
 
Notional
Amount
 
Forward Rate
 
Start Date
 
End Date
 
Pay Amount
 
Receive Amount
 
Fair Value at
September 30, 2015
 
May 2015 cash receipt from sale of CCAL
 
A$1,400,000
 
0.8072
 
May 2015
 
June 2015
 
Australian Dollar
 
US Dollar
 
N/A
(a) 
Installment payment from Buyer
 
A$155,000
 
0.79835
 
May 2015
 
January 2016
 
Australian Dollar
 
US Dollar
 
$15,524
(b) 
    
(a)
In conjunction with closing the CCAL sale on May 28, 2015, the Company cash settled the swap with a notional value of Australian dollar $1.4 billion and recorded a gain on foreign currency swaps of $54.5 million, which is included as a component of "other income (expense)" on the Company's condensed consolidated statement of operations.
(b)
As of September 30, 2015, the Company marked-to-market the swap with a notional value of Australian dollar $155 million and recorded (1) an asset within "other current assets" on the Company's condensed consolidated balance sheet and (2) a corresponding gain on foreign currency swaps, which is included as a component of "other income (expense)" on the Company's condensed consolidated statement of operations.
In total, the Company recorded a gain on foreign currency swaps of $10.2 million and $70.0 million for the three months and nine months ended September 30, 2015, respectively. This gain is included as a component of "other income (expense)" on the Company's condensed consolidated statement of operations.

7.
Fair Value Disclosures
 
Level in Fair Value Hierarchy
 
September 30, 2015
 
December 31, 2014
 
 
Carrying
 Amount
 
Fair
Value
 
Carrying
 Amount
 
Fair
Value
Assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
1
 
$
184,116

 
$
184,116

 
$
151,312

 
$
151,312

Restricted cash, current and non-current
1
 
121,653

 
121,653

 
152,411

 
152,411

Foreign currency swaps
2
 
15,524

 
15,524

 

 

Liabilities:
 
 
 
 
 
 
 
 
 
Long-term debt and other obligations
2
 
12,141,366

 
12,479,140

 
11,920,861

 
12,286,161

The fair value of cash and cash equivalents and restricted cash approximate the carrying value. The Company determines the fair value of its debt securities based on indicative, non-binding quotes from brokers. Quotes from brokers require judgment and are based on the brokers' interpretation of market information, including implied credit spreads for similar borrowings on recent trades or bid/ask prices or quotes from active markets if available. Foreign currency swaps are valued at settlement amounts using observable exchange rates and, if material, reflect an adjustment for the Company's and contract counterparty's credit risk. There were no changes since December 31, 2014 in the Company's valuation techniques used to measure fair values.

8.
Income Taxes
Effective January 1, 2014, the Company commenced operating as a REIT for U.S. federal income tax purposes. As a REIT, the Company is generally entitled to a deduction for dividends that it pays and therefore is not subject to U.S. federal corporate income tax on its net taxable income that is currently distributed to its stockholders. The Company also may be subject to certain federal, state, local, and foreign taxes on its income and assets, including (1) alternative minimum taxes, (2) taxes on any undistributed income, (3) taxes related to the TRSs, (4) certain state, local, or foreign income taxes, (5) franchise taxes, (6) property taxes, and (7) transfer taxes. In addition, the Company could in certain circumstances be required to pay an excise or penalty tax, which could be significant in amount, in order to utilize one or more relief provisions under the Internal Revenue Code 1986, as amended ("Code") to maintain qualification for taxation as a REIT.

12


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


The Company's small cells other than Sunesys (see note 4) are currently included in one or more wholly owned TRSs. In August 2014, the Company received a favorable private letter ruling from the Internal Revenue Service ("IRS"), which provides that the real property portion of the Company's small cells and the related rents qualify as real property and rents from real property, respectively, under the rules governing REITs. The Company is evaluating the impact of this private letter ruling and, subject to board approval, expects to take appropriate action to include at least some part of the Company's small cells (other than Sunesys (see note 4)) as part of the REIT during 2015 or 2016. Once the Company has completed its evaluation and necessary actions to include small cells in the REIT, the Company expects to de-recognize its net deferred tax liabilities related to such part of the Company's small cells.
The Company's TRS assets and operations (along with any part of the Company's small cells that may remain in a TRS) will continue to be subject, as applicable, to federal and state corporate income taxes or to foreign taxes in the jurisdictions in which such assets and operations are located. The Company's foreign assets and operations (including its tower operations in Puerto Rico) most likely will be subject to foreign income taxes in the jurisdictions in which such assets and operations are located, regardless of whether they are included in a TRS or not. The Company will be subject to a federal corporate level tax rate (currently 35%) on the gain recognized from the sale of assets occurring within a specified period (generally 10 years) after the REIT conversion up to the amount of the built in gain that existed on January 1, 2014, which is based upon the fair market value of those assets in excess of the Company's tax basis on January 1, 2014.  This gain can be offset by any remaining federal NOLs.
During the second quarter 2015, the Company recorded approximately $21.2 million in current state income tax expense related to the sale of CCAL. In conjunction with the sale of CCAL, the Company expects to utilize approximately $1.0 billion of its $2.0 billion NOLs to fully offset the tax gain from the sale of CCAL. Further, as a result of the sale of CCAL, the Company expects that a significant portion of its common stock dividend distributions during 2015 will be characterized as capital gains distributions. See note 3.
For the nine months ended September 30, 2015 and 2014, the Company's effective tax rate differed from the federal statutory rate predominately due to the Company's REIT status, including the dividends paid deduction. The income tax provision for the nine months ended September 30, 2015 and 2014 primarily related to the TRSs.


13


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


9.
Per Share Information
Basic net income (loss) attributable to CCIC common stockholders, per common share, excludes dilution and is computed by dividing net income (loss) attributable to CCIC common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net income (loss) attributable to CCIC common stockholders, per common share is computed by dividing net income (loss) attributable to CCIC common stockholders by the weighted-average number of common shares outstanding during the period plus any potential dilutive common share equivalents, including shares issuable (1) upon the vesting of restricted stock awards and restricted stock units as determined under the treasury stock method and (2) upon conversion of the Company's Convertible Preferred Stock, as determined under the if-converted method.
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Net income (loss) from continuing operations
$
104,301

 
$
99,155

 
$
382,561

 
$
217,685

Dividends on preferred stock
(10,997
)
 
(10,997
)
 
(32,991
)
 
(32,991
)
Net income (loss) from continuing operations attributable to CCIC common stockholders for basic and diluted computations
$
93,304

 
$
88,158

 
$
349,570

 
$
184,694

 
 
 
 
 
 
 
 
Income (loss) from discontinued operations, net of tax
(522
)
 
8,882

 
1,000,708

 
28,502

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

 
1,100

 
3,343

 
3,744

Net income (loss) from discontinued operations attributable to CCIC common stockholders for basic and diluted computations
$
(522
)
 
$
7,782

 
$
997,365

 
$
24,758

 
 
 
 
 
 
 
 
Weighted-average number of common shares outstanding (in thousands):
 
 
 
 
 
 
 
Basic weighted-average number of common stock outstanding
333,049

 
332,413

 
332,951

 
332,264

Effect of assumed dilution from potential common shares relating to restricted stock units and restricted stock awards
662

 
828

 
784

 
756

Diluted weighted-average number of common shares outstanding
333,711

 
333,241

 
333,735

 
333,020

 
 
 
 
 
 
 
 
Net income (loss) attributable to CCIC common stockholders, per common share:
 
 
 
 
 
 
 
Income (loss) from continuing operations, basic
0.28

 
0.27

 
1.05

 
0.56

Income (loss) from discontinued operations, basic

 
0.02

 
3.00

 
0.07

Net income (loss) attributable to CCIC common stockholders, basic
0.28

 
0.29

 
4.05

 
0.63

Income (loss) from continuing operations, diluted
0.28

 
0.26

 
1.05

 
0.55

Income (loss) from discontinued operations, diluted

 
0.03

 
2.99

 
0.08

Net income (loss) attributable to CCIC common stockholders, diluted
0.28

 
0.29

 
4.04

 
0.63

During the nine months ended September 30, 2015, the Company granted 1.0 million restricted stock units. For the nine months ended September 30, 2015 and 2014, 12.4 million common share equivalents and 12.3 million common share equivalents, respectively, related to the Convertible Preferred Stock were excluded from the dilutive common shares because the impact of such conversion would be anti-dilutive, based on the Company's common stock price as of the end of the respective periods.

10.
Commitments and Contingencies
The Company is involved in various claims, lawsuits or proceedings arising in the ordinary course of business. While there are uncertainties inherent in the ultimate outcome of such matters and it is impossible to presently determine the ultimate costs or losses that may be incurred, if any, management believes the resolution of such uncertainties and the incurrence of such costs should not have a material adverse effect on the Company's consolidated financial position or results of operations. Additionally, the Company and certain of its subsidiaries are contingently liable for commitments or performance guarantees arising in the ordinary course of business, including certain letters of credit or surety bonds. In addition, the Company has the option to purchase approximately 55% of the Company's towers at the end of their respective lease terms. The Company has no obligation to exercise such purchase options.


14


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


11.
Equity
Declaration and Payment of Dividends
During the nine months ended September 30, 2015, the following dividends were declared or paid:
Equity Type
 
Declaration Date
 
Record Date
 
Payment Date
 
Dividends Per Share
 
Aggregate
Payment
Amount
(In millions)
 
Common Stock
 
February 12, 2015
 
March 20, 2015
 
March 31, 2015
 
$
0.82

 
$
274.7

(a) 
Common Stock
 
May 29, 2015
 
June 19, 2015
 
June 30, 2015
 
$
0.82

 
$
274.5

(a) 
Common Stock
 
July 30, 2015
 
September 18, 2015
 
September 30, 2015
 
$
0.82

 
$
274.3

(a) 
Convertible Preferred Stock
 
December 22, 2014
 
January 15, 2015
 
February 2, 2015
 
$
1.1250

 
$
11.0

 
Convertible Preferred Stock
 
March 27, 2015
 
April 15, 2015
 
May 1, 2015
 
$
1.1250

 
$
11.0

 
Convertible Preferred Stock
 
June 21, 2015
 
July 15, 2015
 
August 3, 2015
 
$
1.1250

 
$
11.0

 
Convertible Preferred Stock
 
September 23, 2015
 
October 15, 2015
 
November 2, 2015
 
$
1.1250

 
$
11.0

(b) 
    
(a)
Inclusive of dividends accrued for holders of unvested restricted stock units.
(b)
Represents amount paid on November 2, 2015 based on holders of record on October 15, 2015.
See note 14.
Purchases of the Company's Common Stock
For the nine months ended September 30, 2015, the Company purchased 0.3 million shares of its common stock utilizing $29.6 million in cash.
"At the Market" Stock Offering Program
In August 2015, the Company established an "at the market" stock offering program ("ATM Program") through which it may, from time to time, issue and sell shares of its common stock having an aggregate gross sales price of up to $500.0 million to or through sales agents. Sales, if any, under the ATM Program may be made by means of ordinary brokers' transactions on the New York Stock Exchange or otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices or, subject to specific instructions of the Company, at negotiated prices. The Company intends to use the net proceeds from any sales under the ATM Program for general corporate purposes, which may include the funding of future acquisitions or investments and the repayment or repurchase of any outstanding indebtedness. As of September 30, 2015, no shares of common stock were sold under the ATM Program.

12.
Operating Segments
The Company has determined that presently, following the sale of CCAL, it has one reportable operating segment, CCUSA, consisting of its U.S. operations, which is consistent with its current operational and financial reporting structure. Financial results for the Company are currently reported to the Company's management team and board of directors in this manner.
Prior to its sale in May 2015, CCAL, the Company's previously 77.6% owned subsidiary that owned and operated towers in Australia, was a reportable segment. As a result of the sale of CCAL, the Company's segment data has been reclassified for all periods presented to include CCAL on a discontinued operations basis.
The Company will continue its evaluation of its operating segments following the disposition of CCAL and its change in strategic focus to its U.S. business. To the extent the Company makes changes to its financial reporting or organizational structure, including the integration of the Sunesys Acquisition, the Company will evaluate any impact such changes may have to its segment reporting.


15


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


13.
Supplemental Cash Flow Information
 
Nine Months Ended September 30,
 
2015
 
2014
Supplemental disclosure of cash flow information:
 
 
 
Interest paid
$
364,147

 
$
368,437

Income taxes paid
23,865

 
15,353

Supplemental disclosure of non-cash investing and financing activities:
 
 
 
Increase (decrease) in accounts payable for purchases of property and equipment
(5,399
)
 
2,827

Purchase of property and equipment under capital leases and installment purchases
41,331

 
27,772

Installment payment receivable for sale of CCAL (see note 3)
117,384

 


14.
Subsequent Events
Common Stock Dividend
On October 19, 2015, the Company declared a quarterly common stock cash dividend of $0.885 per share, which was approved by the Company's board of directors. The common stock dividend will be paid on December 31, 2015, to common stock holders of record as of December 18, 2015.

16


ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the response to Part I, Item 1 of this report and the consolidated financial statements of the Company including the related notes and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" ("MD&A") included in our 2014 Form 10-K. Capitalized terms used but not defined in this Item have the same meaning given to them in our 2014 Form 10-K. Unless this Form 10-Q indicates otherwise or the context otherwise requires, the terms "we," "our," "our company," "the company," or "us" as used in this Form 10-Q refer to Crown Castle International Corp., and its predecessor, as applicable, and their subsidiaries.

General Overview
Overview
We own, operate and lease shared wireless infrastructure that are geographically dispersed throughout the U.S. with a significant presence in the top 100 BTAs. Site rental revenues represented 83% of our third quarter 2015 consolidated net revenues. The vast majority of our site rental revenues is of a recurring nature and has been contracted for in a prior year.
Strategy
Our strategy is to create long-term stockholder value via a combination of (1) growing cash flows generated from our portfolio of wireless infrastructure, (2) returning a meaningful portion of our cash provided by operating activities to our stockholders in the form of dividends and (3) investing capital efficiently to grow long-term dividends per share. We measure our efforts to create "long-term stockholder value" by the combined payment of dividends to stockholders and growth in our per share results. The key elements of our strategy are to:
Grow cash flows from our wireless infrastructure. We seek to maximize the site rental cash flows derived from our wireless infrastructure by adding tenants on our wireless infrastructure through long-term leases as our customers deploy and improve their wireless networks. We seek to maximize new tenant additions or modifications of existing tenant installations (collectively, "new tenant additions") through our focus on customer service and deployment speed. Due to the relatively fixed nature of the costs to operate our wireless infrastructure (which tend to increase at approximately the rate of inflation), we expect increases in our site rental cash flows from new tenant additions and the related subsequent impact from contracted escalations to result in growth in our operating cash flows. We believe there is considerable additional future demand for our existing wireless infrastructure based on their location and the anticipated growth in the wireless communication services industry. Substantially all of our wireless infrastructure can accommodate additional tenancy, either as currently constructed or with appropriate modifications to the structure, which we expect to have high incremental returns.
Return cash provided by operating activities to stockholders in the form of dividends. We believe that distributing a meaningful portion of our cash provided by operating activities appropriately provides stockholders with increased certainty for a portion of expected long-term stockholder value while still retaining sufficient flexibility to invest in our business and deliver growth. We believe this decision reflects the translation of the high-quality, long-term contractual cash flows of our business into stable capital returns to stockholders.
Invest capital efficiently to grow long-term dividends per share. We seek to invest our capital available, including the net cash provided by our operating activities and external financing sources, in a manner that will increase long-term stockholder value on a risk-adjusted basis. Our historical investments have included the following (in no particular order):
purchase shares of our common stock from time to time;
acquire or construct wireless infrastructure;
acquire land interests under towers;
make improvements and structural enhancements to our existing wireless infrastructure; or
purchase, repay or redeem our debt.
Our strategy to create long-term stockholder value is based on our belief that additional demand for our wireless infrastructure will be created by the expected continued growth in the wireless communication services industry, which is predominately driven by the demand for wireless data services by consumers. We believe that such demand for our wireless infrastructure will continue, will result in growth of our cash flows due to new tenant additions on our existing wireless infrastructure, and will create other growth opportunities for us, such as demand for new wireless infrastructure.

17


Business Fundamentals and Results
The following are certain highlights of our business fundamentals and results as of and for the nine months ended September 30, 2015.
Effective January 1, 2014, we commenced operating as a REIT for U.S. federal income tax purposes.
As a REIT, we are generally entitled to a deduction for dividends that we pay and therefore are not subject to U.S. federal corporate income tax on our taxable income that is distributed to our stockholders.
To qualify and be taxed as a REIT, we will generally be required to distribute at least 90% of our REIT taxable income, after the utilization of our NOLs (determined without regard to the dividends paid deduction and excluding net capital gain), each year to our stockholders.
See note 8 to our condensed consolidated financial statements for further discussion of our REIT status.
Potential growth resulting from wireless network expansion and new entrants
We expect wireless carriers will continue their focus on improving network quality and expanding capacity by adding additional antennas or other equipment on our wireless infrastructure.
We expect existing and potential new customer demand for our wireless infrastructure will result from (1) new technologies, (2) increased usage of wireless data applications (including mobile entertainment, mobile internet usage, and machine-to-machine applications), (3) adoption of other emerging and embedded wireless devices (including laptops, tablets, and other devices), (4) increasing smartphone penetration, (5) wireless carrier focus on expanding quality and capacity, or (6) the availability of additional spectrum.
Substantially all of our wireless infrastructure can accommodate additional tenancy, either as currently constructed or with appropriate modifications to the structure.
U.S. wireless carriers continue to invest in their networks.
Our site rental revenues grew $89.9 million, or 4%, from the nine months ended September 30, 2014 to the nine months ended September 30, 2015. This growth was predominately comprised of the following, exclusive of the impact of straight-line accounting:
An approximate 6% increase from new leasing activity.
An approximate 3% increase from cash escalations.
An approximate 4% decrease in site rental revenues caused by the non-renewal of tenant leases.
Site rental revenues under long-term tenant leases 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 seven years, exclusive of renewals at the tenant's option, currently representing approximately $20 billion of expected future cash inflows.
Revenues predominately from large wireless carriers
Approximately 91% of our consolidated site rental revenues were derived from AT&T, Sprint, T-Mobile, and Verizon Wireless. See also "Item 2. MD&A—General Overview—Outlook Highlights" presented below.
Majority of land interests under our towers under long-term control
Nearly 90% and 75% of our site rental gross margin is derived from towers that reside on land that we own or control for greater than ten and 20 years, respectively. The aforementioned amounts include towers that reside on land interests that are owned, including fee interests and perpetual easements, which represent approximately one-third of our site rental gross margin.
Relatively fixed wireless infrastructure operating costs
Our wireless infrastructure operating costs tend to increase at approximately the rate of inflation and are not typically influenced by new tenant additions.
Minimal sustaining capital expenditure requirements
Sustaining capital expenditures represented approximately 3% of net revenues.
Debt portfolio with long-dated maturities extended over multiple years, with the majority of such debt having a fixed rate (see "Item 3. Quantitative and Qualitative Disclosures About Market Risk" for a further discussion of our debt)
68% of our debt is fixed rate.
Our debt service coverage and leverage ratios were comfortably within their respective financial maintenance covenants.
During January and February 2015, we amended our 2012 Credit Facility agreement and increased the capacity of the 2012 Revolver to an aggregate revolving commitment of approximately $2.2 billion.
During the second quarter 2015, we (1) issued $1.0 billion aggregate principal amount of the May 2015 Tower Revenue Notes, (2) repaid $250.0 million of August 2010 Tower Revenue Notes with an anticipated repayment date of August 2015, (3) repaid all of the previously outstanding WCP Securitized Notes, and (4) repaid a portion of our outstanding borrowings under our 2012 Credit Facility. See note 5 to our condensed consolidated financial statements.

18


Significant cash flows from operations
Net cash provided by operating activities was $1.3 billion.
We expect to grow our core business of providing access to our wireless infrastructure as a result of contractual escalators and future anticipated demand for our wireless infrastructure.
Returning cash flows provided by operations to stockholders in the form of dividends
During each of the first three quarters of 2015, we paid common stock cash dividends totaling approximately $821.1 million. See "Item 2. MD&A—General Overview—Common Stock Dividend" below for a discussion of the increase to our quarterly cash dividend in the fourth quarter of 2015.
Investing capital efficiently to grow long-term dividends per share
Discretionary capital expenditures were $582.8 million, including wireless infrastructure improvements in order to support additional site rentals, construction of wireless infrastructure and land purchases.
Common Stock Dividend
During each of the first three quarters of 2015, we paid a quarterly common stock cash dividend of $0.82 per share, totaling approximately $821.1 million. In October 2015, we increased our quarterly cash dividend, beginning in the fourth quarter of 2015, from an annual amount of $3.28 per share to an annual amount of $3.54 per share. As such, we declared a quarterly cash dividend of $0.885 per share in October 2015, which represented an increase of 8% from the quarterly cash dividend declared during each of the first three quarters of 2015. We currently expect such dividends to result in aggregate cash payments of approximately $1.2 billion during the next 12 months. Over time, we expect to increase our dividend per share generally commensurate with our realized growth in organic cash flows. Future dividends are subject to the approval of our board of directors. See notes 8, 11 and 14 to our condensed consolidated financial statements.
Sale of CCAL
In May 2015, we entered into a definitive agreement to sell our 77.6% owned Australian subsidiary, CCAL, to a consortium of investors led by Macquarie Infrastructure and Real Assets. On May 28, 2015, we completed the sale of CCAL. At closing, we received net proceeds of approximately $1.1 billion after accounting for our ownership interest, repayment of intercompany debt owed to us by CCAL and estimated transaction fees and expenses, exclusive of the impact of foreign currency swaps related to the CCAL sale.
As part of the sale of CCAL, in January 2016, we are entitled to receive an installment payment of $124 million from the Buyer, inclusive of the impact of the related foreign currency swap (see note 6 to our condensed consolidated financial statements). During the second quarter 2015, we used net proceeds from the sale of CCAL to repay portions of outstanding borrowings under our 2012 Credit Facility.
We entered into foreign currency swaps to manage and reduce our foreign currency risk associated with the sale of CCAL. These swaps are not included in discontinued operations. See note 6 to our condensed consolidated financial statements.
Sunesys Acquisition
In April 2015, we entered into a definitive agreement to acquire Sunesys for approximately $1.0 billion in cash, subject to certain limited adjustments. On August 4, 2015, we closed the Sunesys Acquisition utilizing $835.0 million in 2012 Revolver borrowings and cash on hand. Prior to the closing, Sunesys was a wholly owned subsidiary of Quanta Services, Inc., and a fiber services provider that owned or had rights to nearly 10,000 miles of fiber in major metropolitan markets across the U.S., including Los Angeles, Philadelphia, Chicago, Atlanta, Silicon Valley, and northern New Jersey. Approximately 60% of Sunesys' fiber miles were located in the top 10 basic trading areas. See note 4 to our condensed consolidated financial statements.
Outlook Highlights
The following are certain highlights of our full year 2015 and 2016 outlook that impact our business fundamentals described above.
We expect that our full year 2015 site rental revenue growth will be benefited by similar levels of tenant additions as in 2014, as large U.S. wireless carriers upgrade and enhance their networks, partially offset by an increase in non-renewals of tenant leases. During 2015, we expect non-renewals of tenant leases to primarily result from Sprint's decommissioning of its legacy Nextel iDEN network.
We expect that our full year 2016 site rental revenue growth will be benefited by similar levels of tenant additions as in 2015, as large U.S. wireless carriers upgrade and enhance their networks, partially offset by non-renewals of tenant leases primarily resulting from anticipated non-renewals of $80 million to $90 million from our customers' decommissioning of the former Leap Wireless, MetroPCS and Clearwire networks, at least in part.

19


We expect sustaining capital expenditures to be approximately 3% of net revenues for full year 2015 due to expansion of our office facilities. We expect sustaining capital expenditures to be approximately 2% of net revenues for full year 2016.


20


Consolidated Results of Operations
The following discussion of our results of operations should be read in conjunction with our condensed consolidated financial statements and our 2014 Form 10-K.
The following discussion of our results of operations is based on our condensed consolidated financial statements prepared in accordance with GAAP, which requires us to make estimates and judgments that affect the reported amounts (see "Item 2. MD&A—Accounting and Reporting Matters—Critical Accounting Policies and Estimates" and note 2 to our consolidated financial statements on our 2014 Form 10-K).
See "Item 2. MD&A—Accounting and Reporting Matters—Non-GAAP Financial Measures" for a discussion of our use of Adjusted EBITDA, including its definition and a reconciliation to net income (loss).
Comparison of Consolidated Results
The following information is derived from our historical consolidated statements of operations for the periods indicated.
 
Three Months Ended September 30,
 
Percent
Change(b)
 
2015
 
2014
 
 
(Dollars in thousands)
 
 
Net revenues:
 
 
 
 
 
Site rental
$
764,606

 
$
717,623

 
7
 %
Network services and other
153,501

 
175,260

 
(12
)%
Net revenues
918,107

 
892,883

 
3
 %
Operating expenses:
 
 
 
 
 
Costs of operations(a):
 
 
 
 
 
Site rental
247,000

 
230,599

 
7
 %
Network services and other
86,859

 
101,814

 
(15
)%
Total costs of operations
333,859

 
332,413

 
 %
General and administrative
76,699

 
65,212

 
18
 %
Asset write-down charges
7,477

 
4,932

 
*

Acquisition and integration costs
7,608

 
4,068

 
*

Depreciation, amortization and accretion
261,662

 
247,206

 
6
 %
Total operating expenses
687,305

 
653,831

 
5
 %
Operating income (loss)
230,802

 
239,052

 
(3
)%
Interest expense and amortization of deferred financing costs
(129,877
)
 
(141,287
)
 
(8
)%
Gains (losses) on retirement of long-term obligations

 

 
 
Interest income
789

 
107

 
 
Other income (expense)
(1,214
)
 
(694
)
 
 
Income (loss) from continuing operations before income taxes
100,500

 
97,178

 
 
Benefit (provision) for income taxes
3,801

 
1,977

 
 
Income (loss) from continuing operations
104,301

 
99,155

 
 
Discontinued operations:
 
 
 
 
 
Income (loss) from discontinued operations, net of tax

 
8,882

 
 
Net gain (loss) from disposal of discontinued operations, net of tax
(522
)
 

 
 
Income (loss) from discontinued operations, net of tax
(522
)
 
8,882

 
 
Net income (loss)
103,779

 
108,037

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

 
1,100

 
 
Net income (loss) attributable to CCIC stockholders
103,779

 
106,937

 
 
Dividends on preferred stock
(10,997
)
 
(10,997
)
 
 
Net income (loss) attributable to CCIC common stockholders
$
92,782

 
$
95,940

 
 
________________
*
Percentage is not meaningful
(a)
Exclusive of depreciation, amortization and accretion shown separately.
(b)
Inclusive of the impact of foreign exchange rate fluctuations.

21


 
Nine Months Ended September 30,

Percent
Change(b)
 
2015

2014

 
(Dollars in thousands)
 
 
Net revenues:
 
 
 
 
 
Site rental
$
2,233,077

 
$
2,143,198

 
4
 %
Network services and other
484,938

 
469,690

 
3
 %
Net revenues
2,718,015

 
2,612,888

 
4
 %
Operating expenses:
 
 
 
 
 
Costs of operations(a):
 
 
 
 
 
Site rental
716,244

 
676,275

 
6
 %
Network services and other
263,177

 
275,514

 
(4
)%
Total costs of operations
979,421

 
951,789

 
3
 %
General and administrative
223,880

 
187,171

 
20
 %
Asset write-down charges
19,652

 
10,673

 
*

Acquisition and integration costs
12,001

 
28,852

 
*

Depreciation, amortization and accretion
766,621

 
738,965

 
4
 %
Total operating expenses
2,001,575

 
1,917,450

 
4
 %
Operating income (loss)
716,440

 
695,438

 
3
 %
Interest expense and amortization of deferred financing costs
(398,782
)
 
(432,221
)
 
(8
)%
Gains (losses) on retirement of long-term obligations
(4,157
)
 
(44,629
)
 
 
Interest income
1,170

 
329

 
 
Other income (expense)
58,510

 
(9,350
)
 
 
Income (loss) from continuing operations before income taxes
373,181

 
209,567

 
 
Benefit (provision) for income taxes
9,380

 
8,118

 
 
Income (loss) from continuing operations
382,561

 
217,685

 
 
Discontinued operations:
 
 
 
 
 
Income (loss) from discontinued operations, net of tax
19,690

 
28,502

 
 
Net gain (loss) from disposal of discontinued operations, net of tax
981,018

 

 
 
Income (loss) from discontinued operations, net of tax
1,000,708

 
28,502

 
 
Net income (loss)
1,383,269

 
246,187

 
 
Less: net income (loss) attributable to the noncontrolling interest
3,343

 
3,744

 
 
Net income (loss) attributable to CCIC stockholders
1,379,926

 
242,443

 
 
Dividends on preferred stock
(32,991
)
 
(32,991
)
 
 
Net income (loss) attributable to CCIC common stockholders
$
1,346,935

 
$
209,452

 
 
________________
*
Percentage is not meaningful
(a)
Exclusive of depreciation, amortization and accretion shown separately.
(b)
Inclusive of the impact of foreign exchange rate fluctuations.

Comparison of Operating Results
We have determined that presently, following the sale of CCAL, we have one reportable operating segment,  CCUSA, consisting of our U.S. operations, which is consistent with our current operational and financial reporting structure. Our financial results are currently reported to management and the board of directors in this manner.
Prior to its sale in May 2015, CCAL, our previously 77.6% owned subsidiary that owned and operated towers in Australia, was a reportable segment. As a result of the sale of CCAL, our historical financial statements have been reclassified for all periods presented to include CCAL on a discontinued operations basis. See also "Item 2. MD&A—General Overview—Sale of CCAL".
We will continue our evaluation of our operating segments following the disposition of CCAL, and our change in strategic focus to our U.S. business. To the extent we make changes to our financial reporting or organizational structure, including the integration of the Sunesys Acquisition, we will evaluate any impact such changes may have to our segment reporting.

22


Third Quarter 2015 and 2014
Net revenues for the third quarter of 2015 increased by $25.2 million, or 3%, from the same period in the prior year. This increase in net revenues resulted from an increase from the same period in the prior year in site rental revenues of $47.0 million, or 7%, offset by a decrease in network services and other revenues of $21.8 million, or 12%.
The increase in site rental revenues was impacted by the following items, inclusive of straight-line accounting, in no particular order: new tenant additions across our entire portfolio, renewals or extensions of tenant leases, escalations, acquisitions, construction of wireless infrastructure, and non-renewals of tenant leases. Tenant additions were influenced by the ongoing efforts of large U.S. wireless carriers to upgrade and enhance their networks. See "Item 2. MD&A—Business Fundamentals and Results."
Site rental gross margins for the third quarter of 2015 increased by $30.6 million, or 6%, from the same period in the prior year. The increase in the site rental gross margins was related to the previously mentioned 7% increase in site rental revenues.
Network services and other gross margin decreased by $6.8 million, or 9%, from the same period in the prior year. The decrease in our gross margin from our network services and other revenues is a reflection of (1) the volume of activity from carrier network enhancements such as LTE upgrades and (2) the volume and mix of network services and other work. Our network services and other offerings are of a variable nature as these revenues are not under long-term contracts.
General and administrative expenses for the third quarter of 2015 increased by $11.5 million, or approximately 18%, from the same period in the prior year. General and administrative expenses were 8% of net revenues for the third quarter of 2015 and 7% of net revenues for the third quarter of 2014. General and administrative expenses are inclusive of stock-based compensation charges. The increase in general and administrative expenses in nominal dollars was related to the expansion in the size of our wireless infrastructure portfolio primarily due to our recent acquisitions and small cell network activities. Typically, our general and administrative expenses do not significantly increase as a result of new tenant additions on our existing wireless infrastructure.
Adjusted EBITDA for the third quarter of 2015 increased by $15.6 million, or 3%, from the same period in the prior year. Adjusted EBITDA was positively impacted by the growth in our site rental activities, partially offset by the aforementioned increase in general and administrative expenses and decrease in network services and other gross margin.
Depreciation, amortization and accretion for the third quarter of 2015 increased by $14.5 million, or 6%, from the same period in the prior year. This increase predominately resulted from a corresponding increase in our gross property and equipment due to capital expenditures and acquisitions.
Interest expense and amortization of deferred financing costs decreased $11.4 million, or 8%, from the third quarter of 2014 to the third quarter of 2015 primarily as a result of an $11.8 million decrease in the amortization of previously settled interest rate swaps. For a further discussion of our debt and interest rate swaps, see note 5 to our condensed consolidated financial statements and see notes 7 and 8 to our consolidated financial statements in our 2014 Form 10-K.
For the third quarter of 2015 and 2014, the effective tax rate differed from the federal statutory rate predominately due to our REIT status including the dividends paid deduction.  See note 8 to our condensed consolidated financial statements and also note 10 to our consolidated financial statements in our 2014 Form 10-K.
Net income (loss) attributable to CCIC stockholders for the third quarter of 2015 was income of $103.8 million compared to income of $106.9 million for the third quarter of 2014.
First Nine Months 2015 and 2014
Net revenues for the first nine months of 2015 increased by $105.1 million, or 4%, from the same period in the prior year. This increase in net revenues resulted from an increase from the same period in the prior year in (1) site rental revenues of $89.9 million, or 4%, and (2) network services and other revenues of $15.2 million, or 3%. The increase in site rental revenues was impacted by the following items, inclusive of straight-line accounting, in no particular order: new tenant additions across our entire portfolio, renewals or extensions of tenant leases, escalations, acquisitions, construction of wireless infrastructure, and non-renewals of tenant leases. Tenant additions were influenced by the ongoing efforts of large U.S. wireless carriers to upgrade and enhance their networks. See "Item 2. MD&A—Business Fundamentals and Results."
Site rental gross margins for the first nine months of 2015 increased by $49.9 million, or 3%, from the same period in the prior year. The increase in the site rental gross margins was related to the previously mentioned 4% increase in site rental revenues.
Network services and other gross margin increased by $27.6 million, or 14%, from the same period in the prior year. The increase in our gross margin from our network services and other revenues is a reflection of (1) the volume of activity from carrier

23


network enhancements such as LTE upgrades, (2) the volume and mix of network services work, and (3) the expansion in the size of our wireless infrastructure portfolio due to the T-Mobile Acquisition and AT&T Acquisition. Our network services business is of a variable nature as these revenues are not under long-term contracts.
General and administrative expenses for the first nine months of 2015 increased by $36.7 million, or approximately 20%, from the same period in the prior year. General and administrative expenses were 8% of net revenues for the first nine months of 2015 and 7% of net revenues for the first nine months of 2014. General and administrative expenses are inclusive of stock-based compensation charges. The increase in general and administrative expenses in nominal dollars was related to (1) the expansion in the size of our wireless infrastructure portfolio primarily due to our recent acquisitions and small cell network activities and (2) growth in network services. Typically, our general and administrative expenses do not significantly increase as a result of new tenant additions on our existing wireless infrastructure.
Adjusted EBITDA for the first nine months of 2015 increased by $47.7 million, or 3%, from the same period in the prior year. Adjusted EBITDA was positively impacted by the growth in our site rental and network services activities, partially offset by the aforementioned increase in general and administrative expenses.
Depreciation, amortization and accretion for the first nine months of 2015 increased by $27.7 million, or 4%, from the same period in the prior year. This increase predominately resulted from a corresponding increase in our gross property and equipment due to capital expenditures and acquisitions.
Interest expense and amortization of deferred financing costs decreased $33.4 million, or 8%, from the first nine months of 2014 to the first nine months of 2015, as a result of (1) a $29.2 million decrease in the amortization of interest rate swaps and (2) our refinancing activities. During May 2015, we issued an aggregate principal amount of $1.0 billion in May 2015 Tower Revenue Notes, which, together with proceeds received from our sale of CCAL, provided us with funding to (1) repay $250.0 million aggregate principal amount of the August 2010 Tower Revenue Notes with an anticipated repayment date of August 2015, (2) repay all of the previously outstanding WCP Securitized Notes, (3) repay portions of outstanding borrowings under our 2012 Credit Facility, and (4) pay related fees and expenses. During the first nine months of 2014, we issued $850.0 million of 4.875% Senior Notes, which provided us with funding to (1) repay $300.0 million of the January 2010 Tower Revenue Notes and (2) redeem all of the previously outstanding 7.125% Senior Notes. As a result of the repayment and redemption of certain of our debt during the first nine months of 2015 and the first nine months of 2014, we incurred losses of $4.2 million and $44.6 million, respectively. For a further discussion of our debt, see note 5 to our condensed consolidated financial statements and see note 7 to our consolidated financial statements in the 2014 Form 10-K.
The decrease in acquisition and integration expenses for the first nine months of 2015 compared to the first nine months of 2014 was a result of expenses recorded during the first nine months of 2014 related to our acquisitions in 2012 and 2013.
Other income (expense) for the first nine months of 2015 was income of $58.5 million, compared to expense of $9.4 million for the first nine months of 2014. This change was predominately a result of gains recorded during the first nine months of 2015 on foreign currency swaps that we entered into to manage and reduce our foreign currency risk related to our May 2015 sale of CCAL. See note 6 to our condensed consolidated financial statements.
For the first nine months of 2015 and 2014, the effective tax rate differs from the federal statutory rate predominately due to our REIT status, including the dividends paid deduction.  See note 8 to our condensed consolidated financial statements and also note 10 to our consolidated financial statements in our 2014 Form 10-K.
Income from discontinued operations, net of tax, decreased from the first nine months of 2014 to the first nine months of 2015 due to the sale of CCAL occurring mid-period on May 28, 2015. In addition, during the first nine months of 2015, we recorded a gain on the sale of discontinued operations, net of tax, of $1.0 billion.
Net income (loss) attributable to CCIC stockholders for the first nine months of 2015 was income of $1.4 billion, compared to income of $242.4 million for the first nine months of 2014. The increase in net income attributable to CCIC stockholders was primarily due to the gain recorded on the sale of CCAL.


24


Liquidity and Capital Resources
Overview
General. Our core business generates revenues under long-term leases (see "Item 2. MD&A—General Overview—Overview") predominately from the largest U.S. wireless carriers. Our strategy is to create long-term stockholder value via a combination of (1) growing cash flows generated from our portfolio of wireless infrastructure, (2) returning a meaningful portion of our cash provided by operating activities to our stockholders in the form of dividends and (3) investing capital efficiently to grow long-term dividends per share. We measure our efforts to create "long-term stockholder value" by the combined payment of dividends to stockholders and growth in our per share results.
We have and expect to continue to engage in discretionary investments that we believe will maximize long-term stockholder value. Our historical discretionary investments include (in no particular order): purchasing our common stock, acquiring or constructing wireless infrastructure, acquiring land interests under towers, improving and structurally enhancing our existing wireless infrastructure, and purchasing, repaying, or redeeming our debt. Based on the growth in small cell activity, we expect to increase our capital spending on the construction of small cell networks. We seek to fund our discretionary investments with both net cash provided by operating activities and, cash available from financing capacity, such as the use of our undrawn availability from the 2012 Revolver, debt financings and issuances of equity or equity related securities.
We seek to maintain a capital structure that we believe drives long-term stockholder value and optimizes our weighted-average cost of capital. We target a leverage ratio of approximately four to five times Adjusted EBITDA and interest coverage of approximately three times Adjusted EBITDA, subject to various factors such as the availability and cost of capital and the potential long-term return on our discretionary investments. We may choose to increase or decrease our leverage or coverage from these targets for various periods of time. 
Effective January 1, 2014, we commenced operating as a REIT for U.S. federal income tax purposes. We expect to continue to pay minimal cash income taxes as a result of our REIT status and our NOLs. See note 8 to our condensed consolidated financial statements and our 2014 Form 10-K.
Liquidity Position. The following is a summary of our capitalization and liquidity position. See "Item 3. Quantitative and Qualitative Disclosures About Market Risk" and note 5 to our condensed consolidated financial statements for additional information regarding our debt.
 
September 30, 2015
 
(In thousands of dollars)
Cash and cash equivalents(a)
$
184,116

Undrawn 2012 Revolver availability(b)
1,215,000

Total debt and other long-term obligations
12,141,366

Total equity
7,240,303

    
(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 the 2012 Credit Facility. See our 2014 Form 10-K.
Over the next 12 months:
Our liquidity sources may include (1) cash on hand, (2) net cash provided by operating activities (net of cash interest payments), (3) undrawn availability from our 2012 Revolver, and (4) issuances of equity pursuant to our ATM Program. Our liquidity uses over the next 12 months are expected to include (1) debt service obligations of $102.2 million (principal payments), (2) common stock dividend payments expected to be $3.54 per share, or an aggregate of approximately $1.2 billion, subject to future approval by our board of directors (see "Item 2. MD&A—Common Stock Dividend"), (3) Convertible Preferred Stock dividend payments of approximately $45 million, and (4) sustaining and discretionary capital expenditures (expect to be equal to or greater than current levels). During the next 12 months, we expect that our liquidity sources should be sufficient to cover our expected uses. As CCIC and CCOC are holding companies, our cash flow from operations is generated by our operating subsidiaries.
We have no scheduled contractual debt maturities other than principal payments on amortizing debt. See "Item 3. Quantitative and Qualitative Disclosures About Market Risk" for a tabular presentation as of September 30, 2015 of our scheduled contractual debt maturities and a discussion of anticipated repayment dates.

25


Summary Cash Flow Information
 
Nine Months Ended September 30,
 
2015
 
2014
 
Change
 
(In thousands of dollars)
Net increase (decrease) in cash and cash equivalents provided by (used for) from continuing operations:
 
 
 
 
 
Operating activities
$
1,290,876

 
$
1,150,926

 
$
139,950

Investing activities
(1,688,645
)
 
(670,529
)
 
(1,018,116
)
Financing activities
(699,989
)
 
(479,033
)
 
(220,956
)
Net increase (decrease) in cash and cash equivalents from continuing operations
(1,097,758
)
 
1,364

 
(1,099,122
)
Net increase (decrease) in cash and cash equivalents from discontinued operations
1,107,936


21,150

 
1,086,786

Effect of exchange rate changes on cash
(1,682
)
 
(7,358
)
 
5,676

Net increase (decrease) in cash and cash equivalents
$
8,496

 
$
15,156

 
$
(6,660
)
Operating Activities
The increase in net cash provided by operating activities from continuing operations for the first nine months of 2015 of $140.0 million, or 12%, from the first nine months of 2014, was due primarily to (1) a net benefit from changes in working capital, and (2) growth in our site rental and network services offerings. Changes in working capital (including changes in accounts receivable, deferred site rental receivables, deferred rental revenues, prepaid ground leases, restricted cash, and accrued interest) can have a significant impact on net cash provided by operating activities, largely due to the timing of prepayments and receipts. We expect to grow our net cash provided by operating activities in the future (exclusive of movements in working capital) if we realize expected growth in our core business.
Investing Activities
Capital Expenditures
Our capital expenditures include the following:
Discretionary capital expenditures made with respect to activities which we believe exhibit sufficient potential to enhance long-term stockholder value. They consist of wireless infrastructure construction and improvements and, to a lesser extent, purchases of land assets under towers as we seek to manage our interests in the land beneath our towers. Improvements to existing wireless infrastructure to accommodate new leasing typically vary based on, among other factors: (1) the type of wireless infrastructure, (2) the scope, volume, and mix of work performed on the wireless infrastructure, (3) existing capacity prior to installation, or (4) changes in structural engineering regulations and standards. Our decisions regarding capital expenditures are influenced by the availability and cost of capital and expected returns on alternative uses of cash, such as payments of dividends and investments.
Sustaining capital expenditures consist of (1) corporate-related capital improvements and (2) maintenance on our wireless infrastructure assets that enable our customers' ongoing quiet enjoyment of the wireless infrastructure.
Capital expenditures for the nine months ended September 30, 2015 and 2014 were as follows:
 
Nine Months Ended September 30,
 
2015
 
2014
 
Change
 
(In thousands of dollars)
Discretionary:
 
 
 
 
 
Purchases of land interests
$
67,786

 
$
54,889

 
$
12,897

Wireless infrastructure construction and improvements
515,008

 
401,441

 
113,567

Sustaining
75,446

 
42,630

 
32,816

Total
$
658,240

 
$
498,960

 
$
159,280

Discretionary capital expenditures increased from the first nine months of 2014 to 2015 primarily as a result of (1) improvements to existing towers to accommodate new leasing and (2) the construction of small cell networks. We expect to invest in discretionary capital expenditures over the next 12 months at levels equal to or greater than current levels and we expect increases in the construction of small cell networks.

26


Our sustaining capital expenditures have historically been less than 2% of net revenues annually and are approximately 3% of net revenues in 2015 due to expansion of our office facilities. We expect sustaining capital expenditures of approximately 2% of net revenues in 2016.
Sale of CCAL. See note 3 to our condensed consolidated financial statements for a discussion of our May 2015 sale of CCAL, our previously 77.6% owned Australian subsidiary.
Foreign Currency Swaps. During May 2015, in conjunction with our sale of CCAL, we entered into foreign currency swaps to manage and reduce our foreign currency risk associated with the sale of CCAL. See note 6 to our condensed consolidated financial statements.
Acquisitions. See note 4 to our condensed consolidated financial statements for a discussion of the Sunesys Acquisition, which closed in August 2015.
Financing Activities
We seek to allocate cash generated by our operations in a manner that will enhance long-term stockholder value, which may include various financing activities such as (in no particular order) paying dividends on our common stock (currently expected to total an aggregate of approximately $1.2 billion during the next 12 months), paying dividends on our Convertible Preferred Stock (expected to be approximately $45 million during the next 12 months), purchasing our common stock, or purchasing, repaying, or redeeming our debt.
Credit Facility. The proceeds of our 2012 Revolver may be used for general corporate purposes, which may include the financing of capital expenditures, acquisitions, such as the Sunesys Acquisition, and purchases of our common stock. During January and February 2015, we increased the aggregate revolving commitment under the 2012 Revolver by $730 million to approximately $2.2 billion. As of November 4, 2015, there was $1.0 billion outstanding and $1.2 billion in undrawn availability under our revolving credit facility. See also note 5 to our condensed consolidated financial statements.
Incurrence, Purchases, and Repayments of Debt. In May 2015, we issued $1.0 billion in May 2015 Tower Revenue Notes. The issuance enabled us to (1) repay $250.0 million aggregate principal amount of August 2010 Tower Revenue Notes with an anticipated repayment date of August 2015, all of the previously outstanding WCP Securitized Notes, and portions of outstanding borrowings under our 2012 Credit Facility, (2) lower our cost of debt, and (3) extend the weighted-average maturity of our debt obligations. See note 5 to our condensed consolidated financial statements for further discussion of the May 2015 Tower Revenue Notes.
Common Stock Activity. As of September 30, 2015 and December 31, 2014, we had 333.8 million and 333.9 million common shares outstanding, respectively. See "Item 2. MD&A—General Overview—Common Stock Dividend" for a discussion of the increase to our quarterly cash dividend in the fourth quarter of 2015. See notes 11 and 14 to our condensed consolidated financial statements for further discussion of the common stock dividends. See below for a discussion of the automatic conversion of Convertible Preferred Stock into common stock during November 2016.
ATM Program. In August 2015, we established an ATM stock offering program through which we may, from time to time, issue and sell shares of our common stock having an aggregate gross sales price of up to $500.0 million to or through sales agents. Sales, if any, under the ATM Program may be made by means of ordinary brokers' transactions on the New York Stock Exchange or otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices or, subject to our specific instructions, at negotiated prices. We intend to use the net proceeds from any sales under the ATM Program for general corporate purposes, which may include the funding of future acquisitions or investments and the repayment or repurchase of any outstanding indebtedness. As of September 30, 2015, no shares of common stock were sold under the ATM Program. See note 11.
Convertible Preferred Stock Activity. As of September 30, 2015 and December 31, 2014, we had approximately 9.8 million shares of preferred stock outstanding. Unless converted earlier, each outstanding share of the Convertible Preferred Stock will automatically convert on November 1, 2016. Currently, each share of Convertible Preferred Stock will convert into between 1.1418 shares (based on the current maximum conversion price of $87.58) and 1.4272 shares (based on the current minimum conversion price of $70.07) of common stock, depending on the applicable market value of the common stock and subject to certain anti-dilution adjustments. At any time prior to November 1, 2016, holders of the Convertible Preferred Stock may elect to convert all or a portion of their shares into common stock at the minimum conversion rate of 1.1418, subject to certain anti-dilution adjustments. See note 11 to our condensed consolidated financial statements for further discussion of the Convertible Preferred Stock dividends declared and paid during 2015.

27


Debt Covenants
The credit agreement governing the 2012 Credit Facility contains financial maintenance covenants. We are currently in compliance with these financial maintenance covenants, and based upon our current expectations, we believe we will continue to comply with our financial maintenance covenants. In addition, certain of our debt agreements also contain restrictive covenants that place restrictions on us and may limit our ability to, among other things, incur additional debt and liens, purchase our securities, make capital expenditures, dispose of assets, undertake transactions with affiliates, make other investments, pay dividends or distribute excess cash flow. See our 2014 Form 10-K for a further discussion of our debt covenants, certain restrictive covenants and factors that are likely to determine our subsidiaries' ability to comply with current and future debt covenants.

Accounting and Reporting Matters
Critical Accounting Policies and Estimates
Our critical accounting policies and estimates are those that we believe (1) are most important to the portrayal of our financial condition and results of operations or (2) require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. The critical accounting policies and estimates for 2015 are not intended to be a comprehensive list of our accounting policies and estimates. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP, with no need for management's judgment. In other cases, management is required to exercise judgment in the application of accounting principles with respect to particular transactions. Our critical accounting policies and estimates as of December 31, 2014 are described in "Item 7. MD&A" and in note 2 of our consolidated financial statements in our 2014 Form 10-K. The critical accounting policies and estimates for the first nine months of 2015 have not changed from the critical accounting policies for the year ended December 31, 2014.
Accounting Pronouncements
Recently Adopted Accounting Pronouncements. See note 2 to our condensed consolidated financial statements.
Recent Accounting Pronouncements Not Yet Adopted. See note 2 to our condensed consolidated financial statements.
Non-GAAP Financial Measures
Historically, our measurement of profit or loss used to evaluate the operating performance of our operating segments has been earnings before interest, taxes, depreciation, amortization, and accretion, as adjusted ("Adjusted EBITDA"). As discussed in note 12 to our condensed consolidated financial statements, we are currently in the process of evaluating the financial reporting and organizational structure used to manage our business, including the scope and content of the financial data being reported to our management team and board of directors. Our definition of Adjusted EBITDA is set forth below. Our measure of Adjusted EBITDA may not be comparable to similarly titled measures of other companies, including companies in the tower sector and other similar providers of wireless infrastructure, and is not a measure of performance calculated in accordance with GAAP. Adjusted EBITDA should not be considered in isolation or as a substitute for operating income or loss, net income or loss, net cash provided by (used for) operating, investing and financing activities or other income statement or cash flow statement data prepared in accordance with GAAP.
We define Adjusted EBITDA as net income (loss) plus restructuring charges (credits), asset write-down charges, acquisition and integration costs, depreciation, amortization and accretion, amortization of prepaid lease purchase price adjustments, interest expense and amortization of deferred financing costs, gains (losses) on retirement of long-term obligations, net gain (loss) on interest rate swaps, gains (losses) on foreign currency swaps, impairment of available-for-sale securities, interest income, other income (expense), benefit (provision) for income taxes, cumulative effect of a change in accounting principle, income (loss) from discontinued operations and stock-based compensation expense. The reconciliation of Adjusted EBITDA to our net income (loss) is set forth below. Adjusted EBITDA is not intended as an alternative measure of operating results or cash flows from operations as determined in accordance with GAAP, and our definition of Adjusted EBITDA may not be comparable to similarly titled measures of other companies.

28


 
Three Months Ended September 30,
 
2015
 
2014
Net income (loss)
$
103,779

 
$
108,037

Adjustments to increase (decrease) net income (loss):
 
 
 
Income (loss) from discontinued operations
522

 
(8,882
)
Asset write-down charges
7,477

 
4,932

Acquisition and integration costs
7,608

 
4,068

Depreciation, amortization and accretion
261,662

 
247,206

Amortization of prepaid lease purchase price adjustments
5,143

 
4,988

Interest expense and amortization of deferred financing costs
129,877

 
141,287

Interest income
(789
)
 
(107
)
Other income (expense)
1,214

 
694

Benefit (provision) for income taxes
(3,801
)
 
(1,977
)
Stock-based compensation expense
16,466

 
13,358

Adjusted EBITDA(a)
$
529,158

 
$
513,604

    
(a)
The above reconciliation excludes the items included in the Company's Adjusted EBITDA definition which are not applicable to the periods shown.
 
Nine Months Ended September 30,
 
2015
 
2014
Net income (loss)
$
1,383,269

 
$
246,187

Adjustments to increase (decrease) net income (loss):
 
 
 
Income (loss) from discontinued operations
(1,000,708
)
 
(28,502
)
Asset write-down charges
19,652

 
10,673

Acquisition and integration costs
12,001

 
28,852

Depreciation, amortization and accretion
766,621

 
738,965

Amortization of prepaid lease purchase price adjustments
15,387

 
14,546

Interest expense and amortization of deferred financing costs
398,782

 
432,221

Gains (losses) on retirement of long-term obligations
4,157

 
44,629

Interest income
(1,170
)
 
(329
)
Other income (expense)
(58,510
)
 
9,350

Benefit (provision) for income taxes
(9,380
)
 
(8,118
)
Stock-based compensation expense
49,282

 
43,199

Adjusted EBITDA(a)
$
1,579,383

 
$
1,531,673

    
(a)
The above reconciliation excludes the items included in the Company's Adjusted EBITDA definition which are not applicable to the periods shown.
We believe Adjusted EBITDA is useful to an investor in evaluating our operating performance because:
it is the primary measure used by our management to evaluate the economic productivity of our operations, including the efficiency of our employees and the profitability associated with their performance, the realization of lease revenues under our long-term leases, our ability to obtain and maintain our tenants, and our ability to operate our wireless infrastructure effectively;
it is the primary measure of profit and loss historically used by 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.

29


Our management uses Adjusted EBITDA:
with respect to compliance with our debt covenants, which require us to maintain certain financial ratios including, or similar to, Adjusted EBITDA;
as the primary measure of profit and loss historically used for purposes of making decisions about allocating resources to, and assessing the performance of, our operating segments;
as a performance goal in employee annual incentive compensation;
as a measurement of operating performance because it assists us in comparing our operating performance on a consistent basis as it removes the impact of our capital structure (primarily interest charges from our outstanding debt) and asset base (primarily depreciation, amortization and accretion) from our operating results;
in presentations to our board of directors to enable it to have the same measurement of operating performance used by management;
for planning purposes, including preparation of our annual operating budget;
as a valuation measure in strategic analyses in connection with the purchase and sale of assets; and
in determining self-imposed limits on our debt levels, including the evaluation of our leverage ratio and interest coverage ratio.
There are material limitations to using a measure such as Adjusted EBITDA, including the difficulty associated with comparing results among more than one company, including our competitors, and the inability to analyze certain significant items, including depreciation and interest expense, that directly affect our net income or loss. Management compensates for these limitations by considering the economic effect of the excluded expense items independently as well as in connection with their analysis of net income (loss).

ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following section updates "Item 7A. Quantitative and Qualitative Disclosures About Market Risk" in our 2014 Form 10-K and should be read in conjunction with that report as well as our condensed consolidated financial statements included in Part 1, Item 1 of this report.
Interest Rate Risk
Our interest rate risk relates primarily to the impact of interest rate movements on the following:
the potential refinancing of our existing debt ($12.1 billion outstanding at September 30, 2015 and $11.9 billion at December 31, 2014);
our $3.9 billion and $4.2 billion of floating rate debt at September 30, 2015 and December 31, 2014, respectively, which represented approximately 32% and 35% of our total debt, as of September 30, 2015 and as of December 31, 2014, respectively; and
potential future borrowings of incremental debt, including borrowings on our 2012 Credit Facility.
Over the next 12 months, we have no debt maturities other than principal payments on amortizing debt. We currently have no interest rate swaps.
Sensitivity Analysis
We manage our exposure to market interest rates on our existing debt by controlling the mix of fixed and floating rate debt. As of September 30, 2015, we had $3.9 billion of floating rate debt, which included $2.3 billion of debt with a LIBOR floor of 75 basis points per annum. As a result, a hypothetical unfavorable fluctuation in market interest rates on our existing debt of 1/8 of a percent point over a 12 month period would increase our interest expense by approximately $2 million when giving effect to our LIBOR floor and would increase our interest expense by approximately $5 million exclusive of the impact of the LIBOR floor.

30


Tabular Information
The following table provides information about our market risk related to changes in interest rates. The future principal payments and weighted-average interest rates are presented as of September 30, 2015. These debt maturities reflect contractual maturity dates and do not consider the impact of the principal payments that commence if the applicable debt is not repaid or refinanced on or prior to the anticipated repayment dates on the Tower Revenue Notes (see footnote (c)). The information presented below regarding the variable rate debt is supplementary to our sensitivity analysis regarding the impact of changes in the LIBOR rates. See notes 5 and 7 to our condensed consolidated financial statements and our 2014 Form 10-K for additional information regarding our debt.
 
Future Principal Payments and Interest Rates by the Debt Instruments' Contractual Year of Maturity
 
2015
 
2016
 
2017
 
2018
 
2019
 
Thereafter
 
Total
 
Fair Value(a)
 
(Dollars in thousands)
Debt:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed rate(c)
$
13,176

 
$
49,586

 
$
545,805

(f) 
$
42,154

 
$
34,336

 
$
7,558,640

(c)(d) 
$
8,243,697

(c)(d) 
$
8,588,875

Average interest rate(b)(c)(d)
4.4
%
 
4.3
%
 
2.6
%
 
4.8
%
 
5.0
%
 
7.5
%
(c)(d) 
7.1
%
(c)(d) 
 
Variable rate
$
9,873

 
$
56,054

 
$
56,054

 
$
56,054

 
$
1,567,929

(g) 
$
2,155,300

 
$
3,901,264

 
$
3,890,265

Average interest rate(e)
2.6
%
 
2.8
%
 
3.3
%
 
3.7
%
 
3.7
%
 
4.8
%
 
4.3
%
 
 
________________
(a)
The fair value of our debt is based on indicative quotes (that is, non-binding quotes) from brokers that require judgment to interpret market information, 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 footnotes (c) and (d)).
(c)
The impact of principal payments that will commence following the anticipated repayment dates is not considered. The January 2010 Tower Revenue Notes consist of two series of notes with principal amounts of $350.0 million and $1.3 billion, having anticipated repayment dates in 2017 and 2020, respectively. The August 2010 Tower Revenue Notes consist of two series of notes with principal amounts of $300.0 million and $1.0 billion, having anticipated repayment dates in 2017 and 2020, respectively. See note 5 to our condensed consolidated financial statements for a discussion of our issuance of $1.0 billion of the May 2015 Tower Revenue Notes with anticipated repayment dates ranging between 2022 and 2025.
(d)
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 2037 to 2045 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 2014 Excess Cash Flow of the issuers of the Tower Revenue Notes was approximately $502.9 million. We currently expect to refinance these notes on or prior to the respective anticipated repayment dates.
(e)
The average variable interest rate is based on the currently observable forward rates. The 2012 Revolver and the Tranche A Term Loans bear interest at a per annum rate equal to LIBOR plus 1.5% to 2.25%, based on CCOC's total net leverage ratio. The Tranche B Term Loans bear interest at a per annum rate equal to LIBOR (with LIBOR subject to a floor of 75 basis points per annum) plus 2.25% to 2.5%, based on CCOC's total net leverage ratio.
(f)
Predominantly consists of $500.0 million in aggregate principal of 2.381% secured notes due 2017.
(g)
Predominantly consists of the Tranche A Term Loans due January 2019 and the 2012 Revolver. See notes 4 and 5 to our condensed consolidated financial statements.
Foreign Currency Risk
Following the May 2015 sale of CCAL (as discussed in note 3 to our condensed consolidated financial statements), the vast majority of our foreign currency risk is related to the installment payment receivable of Australian dollar $155 million from the Buyer due in January 2016. As discussed in note 6 to our condensed consolidated financial statements, we have hedged this installment payment receivable via an Australian dollar foreign currency swap, which effectively eliminates our foreign currency exposure to the Australian dollar.

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


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PART II—OTHER INFORMATION

ITEM 1.
LEGAL PROCEEDINGS
See the disclosure in note 10 to our condensed consolidated financial statements set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q, which disclosure is hereby incorporated herein by reference.

ITEM 1A.
RISK FACTORS
There are no material changes to the risk factors discussed in "Item 1A—Risk Factors" in our 2014 Form 10-K.

ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table summarizes information with respect to purchase of our equity securities during the third quarter of 2015:
Period
 
Total Number of Shares Purchased
 
Average Price Paid per Share
 
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
 
Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
 
 
(In thousands)
 
 
 
 
 
 
July 1 - July 31, 2015
 

 
 
 

 

August 1 - August 31, 2015
 
1

 
81.98

 

 

September 1 - September 30, 2015
 

 
 
 

 

Total
 
1

 
$
81.98

 

 

We paid $0.1 million in cash to effect these purchases. The shares purchased relate to shares withheld in connection with the payment of withholding taxes upon vesting of restricted stock.

ITEM 6.
EXHIBITS
The list of exhibits set forth in the accompanying Exhibit Index is incorporated by reference into this Item 6.


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
CROWN CASTLE INTERNATIONAL CORP.
 
 
 
 
Date:
November 6, 2015
 
By:
/s/ Jay A. Brown
 
 
 
 
Jay A. Brown
 
 
 
 
Senior Vice President,
 
 
 
 
Chief Financial Officer and Treasurer
 
 
 
 
(Principal Financial Officer)
 
 
 
 
Date:
November 6, 2015
 
By:
/s/ Rob A. Fisher
 
 
 
 
Rob A. Fisher
 
 
 
 
Vice President and Controller
 
 
 
 
(Principal Accounting Officer)
 

34


Exhibit Index

Exhibit No.
 
Description
 
 
 
 
(c)
1.1
 
Form of Sales Agreement, dated August 28, 2015, between Crown Castle International Corp. and each of Merrill Lynch, Pierce, Fenner & Smith Incorporated, Barclays Capital Inc., Citigroup Global Markets Inc., Credit Agricole Securities (USA) Inc., J.P. Morgan Securities LLC, Mizuho Securities USA Inc., Mitsubishi UFJ Securities (USA), Inc., Morgan Stanley & Co. LLC, RBC Capital Markets, LLC, SMBC Nikko Securities America, Inc., SunTrust Robinson Humphrey, Inc. and Wells Fargo Securities, LLC
 
 
 
 
(a)
3.1
 
Restated Certificate of Incorporation of Crown Castle International Corp. (including the Certificate of Designations of 4.50% Mandatory Convertible Preferred Stock, Series A, incorporated therein as Exhibit I)

 
 
 
 
(b)
3.2
 
Amended and Restated By-Laws of Crown Castle International Corp., dated July 30, 2015


 
 
 
 
(d)
10.1
 
Agency Resignation and Appointment Agreement and Amendment to Credit Agreement dated as of August 7, 2015, among Crown Castle International Corp., Crown Castle Operating Company, certain subsidiaries of Crown Castle Operating Company party thereto, The Royal Bank of Scotland plc, as the retiring administrative agent, issuing bank and swingline lender, Mizuho Bank, Ltd., as the successor administrative agent, issuing bank and swingline lender, and the lenders party thereto
 
 
 
 
*
31.1
 
Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002
 
 
 
 
*
31.2
 
Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002
 
 
 
 
*
32.1
 
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002
 
 
 
 
*
101.INS
 
XBRL Instance Document
 
 
 
 
*
101.SCH
 
XBRL Taxonomy Extension Schema Document
 
 
 
 
*
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document
 
 
 
 
*
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
 
 
*
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document
 
 
 
 
*
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document
    
*
Filed herewith.
(a)
Incorporated by reference to the exhibit previously filed by the Registrant on Form 8-K (File No. 001-16441) on December 16, 2014.
(b)
Incorporated by reference to the exhibit previously filed by the Registrant on Form 8-K (File No. 001-16441) on August 4, 2015.
(c)
Incorporated by reference to the exhibit previously filed by the Registrant on Form 8-K (File No. 001-16441) on August 28, 2015.
(d)
Incorporated by reference to the exhibit previously filed by the Registrant on Form 8-K (File No. 001-16441) on August 31, 2015.

35