- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- FORM 10-Q ---------------- QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2001 Commission File Number 000-24737 ---------------- CROWN CASTLE INTERNATIONAL CORP. (Exact name of registrant as specified in its charter) Delaware 76-0470458 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 510 Bering Drive 77057-1457 Suite 500 (Zip Code) Houston, Texas (Address of principal executive offices) (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 [_] Number of shares of common stock outstanding at May 1, 2001: 213,807,453 - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
CROWN CASTLE INTERNATIONAL CORP. INDEX Page ---- PART I--FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheet at December 31, 2000 and March 31, 2001....... 3 Consolidated Statement of Operations and Comprehensive Loss for the three months ended March 31, 2000 and 2001.................................... 4 Consolidated Statement of Cash Flows for the three months ended March 31, 2000 and 2001........................................................... 5 Condensed Notes to Consolidated Financial Statements..................... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................................... 13 Item 3. Quantitative and Qualitative Disclosures About Market Risk........ 19 PART II--OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K.................................. 20 Signatures................................................................ 21 2
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (In thousands of dollars, except share amounts) December 31, March 31, 2000 2001 ------------ ----------- (Unaudited) ASSETS Current assets: Cash and cash equivalents............................ $ 453,833 $ 716,941 Receivables: Trade, net of allowance for doubtful accounts of $18,722 and $19,608 at December 31, 2000 and March 31, 2001, respectively............................ 168,184 197,116 Other.............................................. 4,942 1,298 Short-term investments.............................. 38,000 37,500 Inventories......................................... 78,640 112,806 Prepaid expenses and other current assets........... 28,535 25,589 ---------- ---------- Total current assets............................... 772,134 1,091,250 Property and equipment, net........................... 4,303,037 4,450,622 Investments........................................... 137,000 100,000 Goodwill and other intangible assets, net of accumulated amortization of $101,085 and $116,235 at December 31, 2000 and March 31, 2001, respectively... 1,112,876 1,095,530 Deferred financing costs and other assets, net of accumulated amortization of $10,733 and $12,873 at December 31, 2000 and March 31, 2001, respectively... 114,794 131,144 ---------- ---------- $6,439,841 $6,868,546 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable..................................... $ 100,766 $ 83,191 Accrued interest..................................... 47,604 17,225 Accrued compensation and related benefits............ 11,901 7,952 Deferred rental revenues and other accrued liabilities......................................... 164,605 289,654 ---------- ---------- Total current liabilities.......................... 324,876 398,022 Long-term debt........................................ 2,602,687 2,701,175 Other liabilities..................................... 93,354 99,457 ---------- ---------- Total liabilities.................................. 3,020,917 3,198,654 ---------- ---------- Commitments and contingencies Minority interests.................................... 155,344 151,784 Redeemable preferred stock............................ 842,718 851,351 Stockholders' equity: Common stock, $.01 par value; 690,000,000 shares authorized; shares issued: December 31, 2000-- 198,912,094 and March 31, 2001--213,691,811......... 1,989 2,137 Additional paid-in capital........................... 2,894,095 3,258,380 Accumulated other comprehensive loss................. (25,100) (56,078) Accumulated deficit.................................. (450,122) (537,682) ---------- ---------- Total stockholders' equity......................... 2,420,862 2,666,757 ---------- ---------- $6,439,841 $6,868,546 ========== ========== See condensed notes to consolidated financial statements. 3
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) (In thousands of dollars, except per share amounts) Three Months Ended March 31, ------------------ 2000 2001 -------- -------- Net revenues: Site rental and broadcast transmission................... $ 93,741 $134,042 Network services and other............................... 30,503 78,911 -------- -------- 124,244 212,953 -------- -------- Operating expenses: Costs of operations (exclusive of depreciation and amortization): Site rental and broadcast transmission.................. 40,287 57,739 Network services and other.............................. 15,901 55,456 General and administrative............................... 14,853 25,895 Corporate development.................................... 2,071 3,453 Non-cash general and administrative compensation charges................................................. 461 1,395 Depreciation and amortization............................ 45,122 74,091 -------- -------- 118,695 218,029 -------- -------- Operating income (loss)................................... 5,549 (5,076) Other income (expense): Interest and other income (expense)...................... 5,704 3,092 Interest expense and amortization of deferred financing costs................................................... (41,761) (66,655) -------- -------- Loss before income taxes, minority interests and extraordinary item....................................... (30,508) (68,639) Provision for income taxes................................ (11) (60) Minority interests........................................ (1,541) 644 -------- -------- Loss before extraordinary item............................ (32,060) (68,055) Extraordinary item--loss on early extinguishment of debt.. (1,495) -- -------- -------- Net loss.................................................. (33,555) (68,055) Dividends on preferred stock.............................. (11,493) (19,505) -------- -------- Net loss after deduction of dividends on preferred stock.. $(45,048) $(87,560) ======== ======== Net loss.................................................. $(33,555) $(68,055) Other comprehensive income (loss): Foreign currency translation adjustments................. (2,380) (27,593) Derivative instruments: Net change in fair value of cash flow hedging instruments............................................ -- (3,341) Amounts reclassified into results of operations......... -- (222) -------- -------- Comprehensive loss before cumulative effect of change in accounting principle..................................... (35,935) (99,211) Cumulative effect of change in accounting principle for derivative financial instruments......................... -- 178 -------- -------- Comprehensive loss........................................ $(35,935) $(99,033) ======== ======== Per common share--basic and diluted: Loss before extraordinary item........................... $ (0.27) $ (0.41) Extraordinary item....................................... (0.01) -- -------- -------- Net loss................................................. $ (0.28) $ (0.41) ======== ======== Common shares outstanding--basic and diluted (in thousands)............................................... 158,566 211,195 ======== ======== See condensed notes to consolidated financial statements. 4
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) (In thousands of dollars) Three Months Ended March 31, -------------------- 2000 2001 --------- --------- Cash flows from operating activities: Net loss................................................ $ (33,555) $ (68,055) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization.......................... 45,122 74,091 Amortization of deferred financing costs and discounts on long-term debt..................................... 19,139 22,161 Non-cash general and administrative compensation charges............................................... 461 1,395 Minority interests..................................... 1,541 (644) Extraordinary loss on early extinguishment of debt..... 1,495 -- Changes in assets and liabilities, excluding the effects of acquisitions: Increase in deferred rental revenues and other liabilities.......................................... 38,026 130,806 Increase in inventories, prepaid expenses and other assets............................................... (11,767) (39,730) Decrease in accrued interest.......................... (11,541) (30,020) Increase in receivables............................... (9,842) (29,170) Decrease in accounts payable.......................... (2,145) (15,945) --------- --------- Net cash provided by operating activities............ 36,934 44,889 --------- --------- Cash flows from investing activities: Maturities of investments............................... -- 111,000 Capital expenditures.................................... (110,427) (251,860) Purchase of investments................................. -- (73,500) Investments in affiliates and other..................... (1,498) (10,568) Acquisitions of businesses and assets, net of cash acquired............................................... (287,363) -- --------- --------- Net cash used for investing activities............... (399,288) (224,928) --------- --------- Cash flows from financing activities: Proceeds from issuance of capital stock................. 6,845 350,830 Net borrowings under revolving credit agreements........ 19,000 95,548 Incurrence of financing costs........................... (18,930) (2,672) Proceeds from issuance of long-term debt................ 400,000 -- Principal payments on long-term debt.................... (82,000) -- --------- --------- Net cash provided by financing activities............ 324,915 443,706 --------- --------- Effect of exchange rate changes on cash.................. (2,384) (559) --------- --------- Net increase (decrease) in cash and cash equivalents..... (39,823) 263,108 Cash and cash equivalents at beginning of period......... 549,328 453,833 --------- --------- Cash and cash equivalents at end of period............... $ 509,505 $ 716,941 ========= ========= Supplementary schedule of non-cash investing and financing activities: Amounts recorded in connection with acquisitions: Fair value of net assets acquired, including goodwill and other intangible assets........................... $ 320,392 $ -- Minority interests..................................... 18,289 -- Issuance of common stock............................... 14,740 -- Supplemental disclosure of cash flow information: Interest paid........................................... $ 33,096 $ 74,443 Income taxes paid....................................... 23 60 See condensed notes to consolidated financial statements. 5
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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, 2000, and related notes thereto, included in the Annual Report on Form 10-K (the "Form 10-K") filed by Crown Castle International Corp. with the Securities and Exchange Commission. All references to the "Company" include Crown Castle International Corp. and its subsidiary companies unless otherwise indicated or the context indicates otherwise. The consolidated financial statements included herein are unaudited; however, they include all adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are necessary to present fairly the consolidated financial position of the Company at March 31, 2001 and the consolidated results of operations and consolidated cash flows for the three months ended March 31, 2000 and 2001. Accounting measurements at interim dates inherently involve greater reliance on estimates than at year end. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the entire year. 2. New Accounting Pronouncement On January 1, 2001, the Company adopted the requirements of Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"). SFAS 133 requires that derivative instruments be recognized as either assets or liabilities in the consolidated balance sheet based on their fair values. Changes in the fair values of such derivative instruments are recorded either in results of operations or in other comprehensive income (loss), depending on the intended use of the derivative instrument. The initial application of SFAS 133 is reported as the effect of a change in accounting principle. The adoption of SFAS 133 resulted in a net transition adjustment gain of approximately $178,000 in accumulated other comprehensive income (loss), the recognition of approximately $363,000 of derivative instrument assets and the recognition of approximately $185,000 of derivative instrument liabilities. The amounts for this transition adjustment are based on current fair value measurements at the date of adoption of SFAS 133. The Company expects that the adoption of SFAS 133 will increase the volatility of other comprehensive income (loss) as reported in its future financial statements. The derivative instruments recognized upon the Company's adoption of SFAS 133 consist of interest rate swap agreements. Such agreements are used to manage interest rate risk on a portion of the Company's floating rate indebtedness, and are designated as cash flow hedging instruments in accordance with SFAS 133. The interest rate swap agreements have notional amounts aggregating $150,000,000 and effectively convert the interest payments on an equal amount of debt from a floating rate to a fixed rate. As such, the Company is protected from future increases in market interest rates on that portion of its indebtedness. To the extent that the interest rate swap agreements are effective in hedging the Company's interest rate risk, the changes in their fair values are recorded as other comprehensive income (loss). Amounts recorded as other comprehensive income (loss) are reclassified into results of operations in the same periods that the hedged interest costs are recorded in interest expense. The Company estimates that such reclassified amounts will be approximately $1,400,000 for the year ending December 31, 2001. To the extent that any portions of the interest rate swap agreements are deemed ineffective, the related changes in fair values are recognized in results of operations. As of March 31, 2001, the accumulated other comprehensive loss in consolidated stockholders' equity includes $3,385,000 in losses related to derivative instruments. 6
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 3. Long-term Debt Long-term debt consists of the following: December 31, March 31, 2000 2001 ------------ ---------- (In thousands of dollars) 2000 Credit Facility............................... $ 500,000 $ 550,000 CCUK Credit Facility............................... 138,932 146,160 Crown Atlantic Credit Facility..................... 239,000 270,000 9% Guaranteed Bonds due 2007....................... 181,820 172,661 10 5/8% Senior Discount Notes due 2007, net of discount.......................................... 206,768 212,188 10 3/8% Senior Discount Notes due 2011, net of discount.......................................... 355,482 364,584 9% Senior Notes due 2011........................... 180,000 180,000 11 1/4% Senior Discount Notes due 2011, net of discount.......................................... 175,685 180,582 9 1/2% Senior Notes due 2011....................... 125,000 125,000 10 3/4% Senior Notes due 2011...................... 500,000 500,000 ---------- ---------- $2,602,687 $2,701,175 ========== ========== Crown Atlantic Credit Facility In March 2001, the Crown Atlantic Credit Facility was amended to increase the available borrowings to $345,000,000. Under the amended facility, the amount of available borrowings will begin to decrease on March 31, 2003. Reporting Requirements Under the Indentures Governing the Company's Debt Securities (the "Indentures") and the Certificate of Designations Governing the Company's 12 3/4% Senior Exchangeable Preferred Stock (the "Certificate") The following information (as such capitalized terms are defined in the Indentures and the Certificate) is presented solely as a requirement of the Indentures and the Certificate; such information is not intended as an alternative measure of financial position, operating results or cash flow from operations (as determined in accordance with generally accepted accounting principles). Furthermore, the Company's measure of the following information may not be comparable to similarly titled measures of other companies. 7
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Summarized financial information for (1) the Company and its Restricted Subsidiaries and (2) the Company's Unrestricted Subsidiaries is as follows: March 31, 2001 ---------------------------------------------------- Company and Restricted Unrestricted Consolidation Consolidated Subsidiaries Subsidiaries Eliminations Total ------------ ------------ ------------- ------------ (In thousands of dollars) Cash and cash equivalents............ $ 576,246 $ 140,695 $ -- $ 716,941 Other current assets.... 266,764 107,545 -- 374,309 Property and equipment, net.................... 3,086,113 1,364,509 -- 4,450,622 Investments............. 100,000 -- -- 100,000 Investments in Unrestricted Subsidiaries........... 1,609,035 -- (1,609,035) -- Goodwill and other intangible assets, net.................... 186,332 909,198 -- 1,095,530 Other assets, net....... 111,504 19,640 -- 131,144 ---------- ---------- ----------- ---------- $5,935,994 $2,541,587 $(1,609,035) $6,868,546 ========== ========== =========== ========== Current liabilities..... $ 206,904 $ 191,118 $ -- $ 398,022 Long-term debt.......... 2,112,354 588,821 -- 2,701,175 Other liabilities....... 21,521 77,936 -- 99,457 Minority interests...... 77,107 74,677 -- 151,784 Redeemable preferred stock.................. 851,351 -- -- 851,351 Stockholders' equity.... 2,666,757 1,609,035 (1,609,035) 2,666,757 ---------- ---------- ----------- ---------- $5,935,994 $2,541,587 $(1,609,035) $6,868,546 ========== ========== =========== ========== Three Months Ended March 31, 2001 -------------------------------------- Company and Restricted Unrestricted Consolidated Subsidiaries Subsidiaries Total ------------ ------------ ------------ (In thousands of dollars) Net revenues........................ $125,771 $ 87,182 $212,953 Costs of operations (exclusive of depreciation and amortization)..... 67,196 45,999 113,195 General and administrative.......... 21,547 4,348 25,895 Corporate development............... 3,405 48 3,453 Non-cash general and administrative compensation charges............... 872 523 1,395 Depreciation and amortization....... 41,741 32,350 74,091 -------- -------- -------- Operating income (loss)............. (8,990) 3,914 (5,076) Interest and other income (expense).......................... 1,577 1,515 3,092 Interest expense and amortization of deferred financing costs........... (54,605) (12,050) (66,655) Provision for income taxes.......... -- (60) (60) Minority interests.................. 725 (81) 644 -------- -------- -------- Net loss............................ $(61,293) $ (6,762) $(68,055) ======== ======== ======== 8
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Tower Cash Flow and Adjusted Consolidated Cash Flow for the Company and its Restricted Subsidiaries is as follows under (1) the indenture governing the 10 5/8% Senior Discount Notes and the Certificate (the "1997 and 1998 Securities") and (2) the indentures governing the 10 3/8% Discount Notes, the 9% Senior Notes, the 11 1/4% Discount Notes, the 9 1/2% Senior Notes and the 10 3/4% Senior Notes (the "1999 and 2000 Securities"): 1997 and 1998 1999 and 2000 Securities Securities -------------- ------------- (In thousands of dollars) Tower Cash Flow, for the three months ended March 31, 2001........................................ $ 32,098 $ 32,098 ========= ========= Consolidated Cash Flow, for the twelve months ended March 31, 2001............................ $ 119,838 $ 131,163 Less: Tower Cash Flow, for the twelve months ended March 31, 2001............................ (104,359) (104,359) Plus: four times Tower Cash Flow, for the three months ended March 31, 2001..................... 128,392 128,392 --------- --------- Adjusted Consolidated Cash Flow, for the twelve months ended March 31, 2001..................... $ 143,871 $ 155,196 ========= ========= 4. Redeemable Preferred Stock Redeemable preferred stock ($.01 par value, 10,000,000 shares authorized) consists of the following: December 31, March 31, 2000 2001 ------------ --------- (In thousands of dollars) 12 3/4% Senior Exchangeable Preferred Stock; shares issued: December 31, 2000--257,067 and March 31, 2001--265,261 (stated at mandatory redemption and aggregate liquidation value)................................... $258,433 $266,670 8 1/4% Cumulative Convertible Redeemable Preferred Stock; shares issued: 200,000 (stated net of unamortized value of warrants; mandatory redemption and aggregate liquidation value of $200,000)......................................... 195,383 195,486 6.25% Convertible Preferred Stock; shares issued: 8,050,000 (stated net of unamortized issue costs; mandatory redemption and aggregate liquidation value of $402,500)......................................... 388,902 389,195 -------- -------- $842,718 $851,351 ======== ======== 5. Stockholders' Equity On January 11, 2001, the Company sold shares of its common stock in an underwritten public offering. The Company had granted the underwriters an over-allotment option to purchase additional shares in the offering. On January 12, 2001, the over-allotment option was partially exercised. As a result, the Company sold a total of 13,445,200 shares of its common stock at a price of $26.25 per share and received proceeds of $342,853,000 (after underwriting discounts of $10,084,000). The proceeds from this offering will be used for general corporate purposes. 6. Per Share Information Per share information is based on the weighted-average number of common shares outstanding during each period for the basic computation and, if dilutive, the weighted-average number of potential common shares resulting from the assumed conversion of outstanding stock options, warrants and convertible preferred stock for the diluted computation. 9
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) A reconciliation of the numerators and denominators of the basic and diluted per share computations is as follows: Three Months Ended March 31, ------------------ 2000 2001 -------- -------- (In thousands of dollars, except per share amounts) Loss before extraordinary item......................... $(32,060) $(68,055) Dividends on preferred stock........................... (11,493) (19,505) -------- -------- Loss before extraordinary item applicable to common stock for basic and diluted computations.............. (43,553) (87,560) Extraordinary item..................................... (1,495) -- -------- -------- Net loss applicable to common stock for basic and diluted computations.................................. $(45,048) $(87,560) ======== ======== Weighted-average number of common shares outstanding during the period for basic and diluted computations (in thousands)........................................ 158,566 211,195 ======== ======== Per common share--basic and diluted: Loss before extraordinary item....................... $ (0.27) $ (0.41) Extraordinary item................................... (0.01) -- -------- -------- Net loss............................................. $ (0.28) $ (0.41) ======== ======== The calculations of common shares outstanding for the diluted computations exclude the following potential common shares as of March 31, 2001: (1) options to purchase 21,394,339 shares of common stock at exercise prices ranging from $-0- to $39.75 per share, (2) warrants to purchase 639,990 shares of common stock at an exercise price of $7.50 per share, (3) warrants to purchase 1,000,000 shares of common stock at an exercise price of $26.875 per share, (4) shares of the Company's 8 1/4% Cumulative Convertible Redeemable Preferred Stock which are convertible into 7,441,860 shares of common stock and (5) shares of the Company's 6.25% Convertible Preferred Stock which are convertible into 10,915,254 shares of common stock. The inclusion of such potential common shares in the diluted per share computations would be antidilutive since the Company incurred net losses for all periods presented. 7. Contingencies The Company is involved in various claims, lawsuits and proceedings arising in the ordinary course of business. While there are uncertainties inherent in the ultimate outcome of such matters and it is impossible to presently determine the ultimate costs that may be incurred, 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. 8. Operating Segments The measurement of profit or loss currently used to evaluate the results of operations for the Company and its operating segments is earnings before interest, taxes, depreciation and amortization ("EBITDA"). The Company defines EBITDA as operating income (loss) plus depreciation and amortization, non-cash general and administrative compensation charges and restructuring charges. EBITDA is not intended as an alternative measure of operating results or cash flow from operations (as determined in accordance with generally accepted accounting principles), and the Company's measure of EBITDA may not be comparable to similarly titled 10
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) measures of other companies. There are no significant revenues resulting from transactions between the Company's operating segments. The financial results for the Company's operating segments are as follows: Three Months Ended March 31, 2001 ------------------------------------------------------------------- Corporate Crown Office Consolidated CCUSA CCAL CCUK Atlantic and Other Total ---------- -------- ---------- -------- --------- ------------ (In thousands of dollars) Net revenues: Site rental and broadcast transmission......... $ 62,176 $ 2,990 $ 49,368 $ 19,508 $ -- $ 134,042 Network services and other................ 60,605 -- 9,776 8,530 -- 78,911 ---------- -------- ---------- -------- -------- ---------- 122,781 2,990 59,144 28,038 -- 212,953 ---------- -------- ---------- -------- -------- ---------- Costs of operations (exclusive of depreciation and amortization).......... 66,101 1,095 32,029 13,970 -- 113,195 General and administrative......... 16,322 1,491 1,703 2,645 3,734 25,895 Corporate development... -- -- 48 -- 3,405 3,453 ---------- -------- ---------- -------- -------- ---------- EBITDA.................. 40,358 404 25,364 11,423 (7,139) 70,410 Non-cash general and administrative compensation charges... 531 -- 523 -- 341 1,395 Depreciation and amortization........... 39,627 1,696 22,219 10,131 418 74,091 ---------- -------- ---------- -------- -------- ---------- Operating income (loss)................. 200 (1,292) 2,622 1,292 (7,898) (5,076) Interest and other income (expense)....... 874 (144) 931 15 1,416 3,092 Interest expense and amortization of deferred financing costs.................. (13,467) (43) (7,035) (5,015) (41,095) (66,655) Provision for income taxes.................. -- -- (27) (33) -- (60) Minority interests...... (198) 923 -- (81) -- 644 ---------- -------- ---------- -------- -------- ---------- Net loss................ $ (12,591) $ (556) $ (3,509) $ (3,822) $(47,577) $ (68,055) ========== ======== ========== ======== ======== ========== Capital expenditures.... $ 113,863 $ 486 $ 110,829 $ 26,101 $ 581 $ 251,860 ========== ======== ========== ======== ======== ========== Total assets (at period end)................... $3,445,966 $132,461 $1,620,152 $869,866 $800,101 $6,868,546 ========== ======== ========== ======== ======== ========== 11
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Three Months Ended March 31, 2000 --------------------------------------------------- Corporate Crown Office Consolidated CCUSA CCUK Atlantic and Other Total ------- ------- -------- --------- ------------ (In thousands of dollars) Net revenues: Site rental and broadcast transmission........... $31,370 $48,579 $13,792 $ -- $ 93,741 Network services and other.................. 18,055 6,546 5,868 34 30,503 ------- ------- ------- -------- -------- 49,425 55,125 19,660 34 124,244 ------- ------- ------- -------- -------- Costs of operations (exclusive of depreciation and amortization)............ 19,383 27,934 8,822 49 56,188 General and administrative........... 9,980 1,026 1,797 2,050 14,853 Corporate development..... -- 285 -- 1,786 2,071 ------- ------- ------- -------- -------- EBITDA.................... 20,062 25,880 9,041 (3,851) 51,132 Non-cash general and administrative compensation charges..... 67 54 -- 340 461 Depreciation and amortization............. 21,154 15,553 8,119 296 45,122 ------- ------- ------- -------- -------- Operating income (loss)... (1,159) 10,273 922 (4,487) 5,549 Interest and other income (expense)................ 776 185 471 4,272 5,704 Interest expense and amortization of deferred financing costs.......... (3,734) (8,285) (4,376) (25,366) (41,761) Provision for income taxes.................... (11) -- -- -- (11) Minority interests........ (100) (1,303) (138) -- (1,541) Extraordinary item........ (1,495) -- -- -- (1,495) ------- ------- ------- -------- -------- Net income (loss)......... $(5,723) $ 870 $(3,121) $(25,581) $(33,555) ======= ======= ======= ======== ======== Capital expenditures...... $66,941 $20,904 $22,235 $ 347 $110,427 ======= ======= ======= ======== ======== 9. Subsequent Events CCUK Letter of Credit In April 2001, CCUK issued a letter of credit to one of its customers in connection with a site development agreement. The letter of credit was issued through one of CCUSA's lenders in the amount of (Pounds)100,000,000 (approximately $141,900,000) and expires on April 16, 2002. RaiWay S.p.A. On April 27, 2001, a wholly owned subsidiary of the Company entered into a Share Purchase Agreement for the acquisition of 49% of the outstanding capital stock of RaiWay S.p.A. ("RaiWay", a corporation organized under the laws of Italy). RaiWay is a subsidiary of RAI Radio Televisione Italiana S.p.A. ("RAI"), the Italian state-owned television and radio broadcaster. RaiWay manages over 2,300 broadcast transmission sites across Italy. The cost of the Company's investment in RaiWay will amount to approximately $383,820,000 in cash, and such amount was deposited into an escrow account upon execution of the Share Purchase Agreement. The transaction is expected to close by the end of the third quarter of 2001, and is subject to approval by the Italian regulatory authorities. The Company will account for its investment in RaiWay utilizing the equity method of accounting. The Share Purchase Agreement contemplates that the Company may transfer up to 5% of its shares in RaiWay to Poste Italiana S.p.A. ("Poste"), the Italian state-owned post office service. Long-term Debt On May 10, 2001, the Company issued $450,000,000 aggregate principal amount of its 9 3/8% Senior Notes for proceeds of $441,000,000 (after underwriting discounts of $9,000,000). The proceeds from the sale of these securities will be used to fund the initial interest payments on the 9 3/8% Senior Notes and for general corporate purposes. Semi-annual interest payments for the 9 3/8% Senior Notes are due on each February 1 and August 1, commencing on August 1, 2001. The maturity date of the 9 3/8% Senior Notes is August 1, 2011. 12
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion is intended to assist in understanding our consolidated financial condition as of March 31, 2001 and our consolidated results of operations for the three-month periods ended March 31, 2000 and 2001. The statements in this discussion regarding the industry outlook, our expectations regarding the future performance of our businesses and the other nonhistorical statements in this discussion are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including but not limited to the uncertainties relating to decisions on capital expenditures to be made in the future by wireless carriers and broadcasters. This 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 "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Form 10-K. Any capitalized terms used but not defined in this Item have the same meaning given to them in the Form 10-K. Results of Operations During 2000 we completed the transactions with BellSouth, BellSouth DCS and GTE. Additionally, during 2000 Crown Atlantic acquired the Frontier towers from Bell Atlantic Mobile, and CCAL completed the substantial portion of the transaction with Cable & Wireless Optus. Results of operations of these acquired towers are included in our consolidated financial statements for the periods subsequent to the respective dates of acquisition. As such, our results of operations for the three months ended March 31, 2000 are not comparable to the results of operations for the three months ended March 31, 2001. The following information is derived from our historical Consolidated Statements of Operations for the periods indicated. Three Months Three Months Ended March 31, Ended March 31, 2000 2001 ------------------ ------------------ Percent Percent of Net of Net Amount Revenues Amount Revenues -------- -------- -------- -------- (In thousands of dollars) Net revenues: Site rental and broadcast transmission........................ $ 93,741 75.4% $134,042 62.9% Network services and other........... 30,503 24.6 78,911 37.1 -------- ----- -------- ----- Total net revenues................. 124,244 100.0 212,953 100.0 -------- ----- -------- ----- Operating expenses: Costs of operations: Site rental and broadcast transmission........................ 40,287 43.0 57,739 43.1 Network services and other........... 15,901 52.1 55,456 70.3 -------- -------- Total costs of operations.......... 56,188 45.2 113,195 53.2 General and administrative........... 14,853 12.0 25,895 12.2 Corporate development................ 2,071 1.7 3,453 1.6 Non-cash general and administrative compensation charges................ 461 0.4 1,395 0.6 Depreciation and amortization........ 45,122 36.3 74,091 34.8 -------- ----- -------- ----- Operating income (loss)................ 5,549 4.4 (5,076) (2.4) Other income (expense): Interest and other income (expense).. 5,704 4.6 3,092 1.5 Interest expense and amortization of deferred financing costs............ (41,761) (33.6) (66,655) (31.3) -------- ----- -------- ----- Loss before income taxes, minority interests and extraordinary item...... (30,508) (24.6) (68,639) (32.2) Provision for income taxes............. (11) -- (60) (0.1) Minority interests..................... (1,541) (1.2) 644 0.3 -------- ----- -------- ----- Loss before extraordinary item......... (32,060) (25.8) (68,055) (32.0) Extraordinary item--loss on early extinguishment of debt................ (1,495) (1.2) -- -- -------- ----- -------- ----- Net loss............................... $(33,555) (27.0)% $(68,055) (32.0)% ======== ===== ======== ===== 13
Comparison of Three Months Ended March 31, 2001 and 2000 Consolidated revenues for the three months ended March 31, 2001 were $213.0 million, an increase of $88.7 million from the three months ended March 31, 2000. This increase was primarily attributable to: (1) a $40.3 million, or 43.0%, increase in site rental and broadcast transmission revenues, of which $0.8 million was attributable to CCUK, $5.7 million was attributable to Crown Atlantic, $3.0 million was attributable to CCAL and $30.8 million was attributable to CCUSA, (2) a $42.6 million increase in network services and other revenues from CCUSA, (3) a $3.2 million increase in network services and other revenues from CCUK, and (4) a $2.7 million increase in network services and other revenues from Crown Atlantic. Costs of operations for the three months ended March 31, 2001 were $113.2 million, an increase of $57.0 million from the three months ended March 31, 2000. This increase was primarily attributable to: (1) a $17.5 million increase in site rental and broadcast transmission costs, of which $0.3 million was attributable to CCUK, $2.4 million was attributable to Crown Atlantic, $1.1 million was attributable to CCAL and $13.7 million was attributable to CCUSA, (2) a $33.0 million increase in network services costs related to CCUSA, (3) a $3.8 million increase in network services costs from CCUK, and (4) a $2.8 million increase in network services costs from Crown Atlantic. Costs of operations for site rental and broadcast transmission as a percentage of site rental and broadcast transmission revenues were 43.1% for the three months ended March 31, 2001 as compared to 43.0% for the three months ended March 31, 2000, as lower margins attributable to the CCUSA operations were largely offset by higher margins from the CCAL and Crown Atlantic operations. Costs of operations for network services and other as a percentage of network services and other revenues increased to 70.3% for the three months ended March 31, 2001 from 52.1% for the three months ended March 31, 2000, primarily due to lower margins from the CCUSA, CCUK and Crown Atlantic operations. General and administrative expenses for the three months ended March 31, 2001 were $25.9 million, an increase of $11.0 million from the three months ended March 31, 2000. This increase was primarily attributable to: (1) a $6.3 million increase in expenses related to the CCUSA operations, (2) a $1.7 million increase in expenses at our corporate office, (3) a $0.8 million increase in expenses at Crown Atlantic, (4) a $0.7 million increase in expenses at CCUK, and (5) $1.5 million in expenses at CCAL. General and administrative expenses as a percentage of revenues were 12.2% for the three months ended March 31, 2001 as compared to 12.0% for the three months ended March 31, 2000 because of higher overhead costs as a percentage of revenues for CCUK, CCAL and Crown Atlantic, largely offset by lower overhead costs as a percentage of revenues for CCUSA. Corporate development expenses for the three months ended March 31, 2001 were $3.5 million, compared to $2.1 million for the three months ended March 31, 2000. This increase was primarily attributable to an increase in expenses at our corporate office. For the three months ended March 31, 2001, we recorded non-cash general and administrative compensation charges of $1.4 million related to the issuance of stock and stock options to certain employees and executives, compared to $0.5 million for the three months ended March 31, 2000. 14
Depreciation and amortization for the three months ended March 31, 2001 was $74.1 million, an increase of $29.0 million from the three months ended March 31, 2000. This increase was primarily attributable to: (1) a $6.7 million increase in depreciation and amortization related to the property and equipment and goodwill from CCUK, (2) a $2.0 million increase in depreciation and amortization related to the property and equipment and goodwill from Crown Atlantic, (3) $1.7 million of depreciation and amortization related to property and equipment from CCAL, and (4) an $18.5 million increase in depreciation and amortization related to the property and equipment, goodwill and other intangible assets related to the CCUSA operations. Interest and other income (expense) for the three months ended March 31, 2001 resulted primarily from: (1) the investment of the net proceeds from our recent offerings, partially offset by (2) costs incurred in connection with unsuccessful acquisition attempts. Interest expense and amortization of deferred financing costs for the three months ended March 31, 2001 was $66.7 million, an increase of $24.9 million, or 59.6%, from the three months ended March 31, 2000. This increase was primarily attributable to interest on indebtedness at CCUSA, CCUK and Crown Atlantic, and interest on the 10 3/4% senior notes. Minority interests represent the minority shareholder's 20% interest in CCUK's operations (prior to July 2000), the minority partner's 43.1% interest in Crown Atlantic's operations, the minority partner's 18.0% interest in the operations of the GTE joint venture and the minority shareholder's 33.3% interest in the CCAL operations. The extraordinary loss on early extinguishment of debt for the three months ended March 31, 2000 represents the write-off of unamortized deferred financing costs related to CCUSA's prior credit facility. Liquidity and Capital Resources Our business strategy contemplates substantial capital expenditures: (1) in connection with the expansion of our tower portfolios by partnering with wireless carriers to assume ownership or control of their existing towers, by pursuing build-to-suit opportunities, and by pursuing other tower acquisition opportunities, and (2) to acquire existing transmission networks globally as opportunities arise. Since its inception, CCIC has generally funded its activities, other than acquisitions and investments, through excess proceeds from contributions of equity capital and cash provided by operations. CCIC has financed acquisitions and investments with the proceeds from equity contributions, borrowings under our senior credit facilities, issuances of debt securities and the issuance of promissory notes to sellers. Since its inception, CCUK has generally funded its activities, other than the acquisition of the BBC home service transmission business, through cash provided by operations and borrowings under CCUK's credit facility. CCUK financed the acquisition of the BBC home service transmission business with the proceeds from equity contributions and the issuance of the CCUK bonds. For the three months ended March 31, 2000 and 2001, our net cash provided by operating activities was $36.9 million and $44.9 million, respectively. For the three months ended March 31, 2000 and 2001, our net cash provided by financing activities was $324.9 million and $443.7 million, respectively. Our primary financing-related activities in the first five months of 2001 included the following: 15
January 2001 Offering On January 11, 2001, we sold shares of our common stock in an underwritten public offering. We had granted the underwriters an over-allotment option to purchase additional shares in the offering. On January 12, 2001, the over- allotment option was partially exercised. As a result, we sold a total of 13,445,200 shares of our common stock at a price of $26.25 per share and received proceeds of $342.9 million (after underwriting discounts of $10.1 million). The proceeds from this offering will be used for general corporate purposes. Crown Atlantic Credit Facility In March 2001, the Crown Atlantic credit facility was amended to increase the available borrowings to $345.0 million. Under the amended facility, the amount of available borrowings will begin to decrease on March 31, 2003. During the first quarter of 2001, Crown Atlantic borrowed an additional $31.0 million under the Crown Atlantic credit facility for general corporate purposes. May 2001 Debt Offering On May 10, 2001, we issued $450.0 million aggregate principal amount of our 9 3/8% senior notes for proceeds of $441.0 million (after underwriting discounts of $9.0 million). The proceeds from the sale of these securities will be used to fund the initial interest payments on the 9 3/8% senior notes and for general corporate purposes. Capital expenditures were $251.9 million for the three months ended March 31, 2001, of which $0.6 million were for CCIC, $113.9 million were for CCUSA, $26.1 million were for Crown Atlantic, $110.8 million were for CCUK and $0.5 million were for CCAL. We anticipate that we will build, through the end of 2001, approximately 1,000 towers in the United States at a cost of approximately $230.0 million and approximately 500 towers in the United Kingdom at a cost of approximately $100.0 million. We also expect to spend approximately $120.0 million in the United States to improve the structural capacity of our domestic towers. In addition to capital expenditures in connection with build-to-suits, we have applied a significant amount of capital to finance the cash consideration paid in connection with an investment in Italy. On April 27, 2001, we entered into a Share Purchase Agreement for the acquisition of 49% of the outstanding capital stock of RaiWay S.p.A. ("RaiWay"). RaiWay is a subsidiary of RAI Radio Televisione Italiana S.p.A. ("RAI"), the Italian state-owned television and radio broadcaster. RaiWay manages over 2,300 broadcast transmission sites across Italy. The cost of our investment in RaiWay will amount to approximately $383.8 million in cash, and such amount was deposited into an escrow account upon execution of the Share Purchase Agreement. The transaction is expected to close by the end of the third quarter of 2001, and is subject to approval by the Italian regulatory authorities. We will account for our investment in RaiWay utilizing the equity method of accounting. The Share Purchase Agreement contemplates that we may transfer up to 5% of our shares in RaiWay to Poste Italiana S.p.A. ("Poste"), the Italian state-owned post office service. We expect that the completion of the recent transactions and the execution of our new tower build, or build-to-suit program, will have a material impact on our liquidity. We expect that once integrated, these transactions will have a positive impact on liquidity, but will require some period of time to offset the initial adverse impact on liquidity. In addition, we believe that as new towers become operational and we begin to add tenants, they should result in a long-term increase in liquidity. To fund the execution of our business strategy, including the recent transactions described above and the construction of new towers that we have agreed to build, we expect to use the net proceeds of our recent offerings and borrowings available under our U.S. and U.K. credit facilities. We will have additional cash needs to fund our operations in the future. We may also have additional cash needs in the future if additional tower acquisitions or build- to-suit opportunities arise. Some of the opportunities that we are currently pursuing could require significant additional capital. If we do not otherwise have cash available, or borrowings under our credit facilities have otherwise been utilized, when our cash need arises, we would be forced to seek additional debt or equity financing or to forego the opportunity. In the event we determine to seek additional debt or equity financing, there can be no assurance that any such financing will be available, on commercially acceptable terms or at all, or permitted by the terms of our existing indebtedness. 16
As of March 31, 2001, we had consolidated cash and cash equivalents of $716.9 million (including $47.1 million at CCUSA, $75.4 million at CCUK, $13.7 million at Crown Atlantic and $2.6 million at CCAL), consolidated long-term debt of $2,701.2 million, consolidated redeemable preferred stock of $851.4 million and consolidated stockholders' equity of $2,666.8 million. As of May 10, 2001, Crown Atlantic had unused borrowing availability under its amended credit facility of approximately $75.0 million, and CCUK had unused borrowing availability under its credit facility of approximately (Pounds)35.0 million ($49.7 million). As of May 10, 2001, our subsidiaries had approximately $394.0 million of unused borrowing availability under the 2000 credit facility. Our various credit facilities require our subsidiaries to maintain certain financial covenants and place restrictions on the ability of our subsidiaries to, among other things, incur debt and liens, pay dividends, make capital expenditures, undertake transactions with affiliates and make investments. These facilities also limit the ability of the borrowing subsidiaries to pay dividends to CCIC. If we are unable to refinance our subsidiary debt or renegotiate the terms of such debt, we may not be able to meet our debt service requirements, including interest payments on the notes, in the future. Our 9% senior notes, our 9 1/2% senior notes, our 10 3/4% senior notes and our 9 3/8% senior notes require annual cash interest payments of approximately $16.2 million, $11.9 million, $53.8 million and $42.2 million, respectively. Prior to November 15, 2002, May 15, 2004 and August 1, 2004, the interest expense on our 10 5/8% discount notes, our 10 3/8% discount notes and our 11 1/4% discount notes, respectively, will be comprised solely of the amortization of original issue discount. Thereafter, the 10 5/8% discount notes, the 10 3/8% discount notes and the 11 1/4% discount notes will require annual cash interest payments of approximately $26.7 million, $51.9 million and $29.3 million, respectively. Prior to December 15, 2003, we do not expect to pay cash dividends on our exchangeable preferred stock or, if issued, cash interest on the exchange debentures. Thereafter, assuming all dividends or interest have been paid-in- kind, our exchangeable preferred stock or, if issued, the exchange debentures will require annual cash dividend or interest payments of approximately $47.8 million. Annual cash interest payments on the CCUK bonds are (Pounds)11.25 million ($16.0 million). In addition, our various credit facilities will require periodic interest payments on amounts borrowed thereunder, which amounts could be substantial. As a holding company, CCIC will require distributions or dividends from its subsidiaries, or will be forced to use capital raised in debt and equity offerings, to fund its debt obligations, including interest payments on the cash-pay notes and eventually the 10 5/8% discount notes, the 10 3/8% discount notes and the 11 1/4% discount notes. The terms of the indebtedness of our subsidiaries significantly limit their ability to distribute cash to CCIC. As a result, we will be required to apply a portion of the net proceeds from the recent debt offerings to fund interest payments on the cash-pay notes. If we do not retain sufficient funds from the offerings or any future financing, we may not be able to make our interest payments on the cash-pay notes. Our ability to make scheduled payments of principal of, or to pay interest on, our debt obligations, and our ability to refinance any such debt obligations, will depend on our future performance, which, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. We anticipate that we may need to refinance all or a portion of our indebtedness on or prior to its scheduled maturity. There can be no assurance that we will be able to effect any required refinancings of our indebtedness on commercially reasonable terms or at all. Reporting Requirements Under the Indentures Governing the Company's Debt Securities (the "Indentures") and the Certificate of Designations Governing the Company's 12 3/4% Senior Exchangeable Preferred Stock the "Certificate") The following information (as such capitalized terms are defined in the Indentures and the Certificate) is presented solely as a requirement of the Indentures and the Certificate; such information is not intended as an alternative measure of financial position, operating results or cash flow from operations (as determined in accordance with generally accepted accounting principles). Furthermore, our measure of the following information may not be comparable to similarly titled measures of other companies. 17
Summarized financial information for (1) CCIC and our Restricted Subsidiaries and (2) our Unrestricted Subsidiaries is as follows: March 31, 2001 ---------------------------------------------------- Company and Restricted Unrestricted Consolidation Consolidated Subsidiaries Subsidiaries Eliminations Total ------------ ------------ ------------- ------------ (In thousands of dollars) Cash and cash equivalents............. $ 576,246 $ 140,695 $ -- $ 716,941 Other current assets..... 266,764 107,545 -- 374,309 Property and equipment, net..................... 3,086,113 1,364,509 -- 4,450,622 Investments.............. 100,000 -- -- 100,000 Investments in Unrestricted Subsidiaries............ 1,609,035 -- (1,609,035) -- Goodwill and other intangible assets, net.. 186,332 909,198 -- 1,095,530 Other assets, net........ 111,504 19,640 -- 131,144 ---------- ---------- ----------- ---------- $5,935,994 $2,541,587 $(1,609,035) $6,868,546 ========== ========== =========== ========== Current liabilities...... $ 206,904 $ 191,118 $ -- $ 398,022 Long-term debt........... 2,112,354 588,821 -- 2,701,175 Other liabilities........ 21,521 77,936 -- 99,457 Minority interests....... 77,107 74,677 -- 151,784 Redeemable preferred stock................... 851,351 -- -- 851,351 Stockholders' equity..... 2,666,757 1,609,035 (1,609,035) 2,666,757 ---------- ---------- ----------- ---------- $5,935,994 $2,541,587 $(1,609,035) $6,868,546 ========== ========== =========== ========== Three Months Ended March 31, 2001 -------------------------------------- Company and Restricted Unrestricted Consolidated Subsidiaries Subsidiaries Total ------------ ------------ ------------ (In thousands of dollars) Net revenues........................... $125,771 $ 87,182 $212,953 Costs of operations (exclusive of depreciation and amortization)........ 67,196 45,999 113,195 General and administrative............. 21,547 4,348 25,895 Corporate development.................. 3,405 48 3,453 Non-cash general and administrative compensation charges.................. 872 523 1,395 Depreciation and amortization.......... 41,741 32,350 74,091 -------- -------- -------- Operating income (loss)................ (8,990) 3,914 (5,076) Interest and other income (expense).... 1,577 1,515 3,092 Interest expense and amortization of deferred financing costs.............. (54,605) (12,050) (66,655) Provision for income taxes............. -- (60) (60) Minority interests..................... 725 (81) 644 -------- -------- -------- Net loss............................... $(61,293) $ (6,762) $(68,055) ======== ======== ======== 18
Tower Cash Flow and Adjusted Consolidated Cash Flow for CCIC and our Restricted Subsidiaries is as follows under (1) the indenture governing the 10 5/8% Discount Notes and the Certificate (the "1997 and 1998 Securities") and (2) the indentures governing the 10 3/8% Discount Notes, the 9% Senior Notes, the 11 1/4% Discount Notes, the 9 1/2% Senior Notes and the 10 3/4% Senior Notes (the "1999 and 2000 Securities"): 1997 and 1998 1999 and 2000 Securities Securities ------------- ------------- (In thousands of dollars) Tower Cash Flow, for the three months ended March 31, 2001......................................... $ 32,098 $ 32,098 ======== ======== Consolidated Cash Flow, for the twelve months ended March 31, 2001............................. $119,838 $131,163 Less: Tower Cash Flow, for the twelve months ended March 31, 2001................................... (104,359) (104,359) Plus: four times Tower Cash Flow, for the three months ended March 31, 2001...................... 128,392 128,392 -------- -------- Adjusted Consolidated Cash Flow, for the twelve months ended March 31, 2001...................... $143,871 $155,196 ======== ======== Item 3. Quantitative and Qualitative Disclosures About Market Risk As a result of our international operating, investing and financing activities, we are exposed to market risks, which include changes in foreign currency exchange rates and interest rates which may adversely affect our results of operations and financial position. In attempting to minimize the risks and/or costs associated with such activities, we seek to manage exposure to changes in interest rates and foreign currency exchange rates where economically prudent to do so. Certain of the financial instruments we have used to obtain capital are subject to market risks from fluctuations in market interest rates. The majority of our financial instruments, however, are long-term fixed interest rate notes and debentures. Therefore, fluctuations in market interest rates of 1% in 2001 would not have a material effect on our consolidated financial results. The majority of our foreign currency transactions are denominated in the British pound sterling or the Australian dollar, which are the functional currencies of CCUK and CCAL, respectively. As a result of CCUK's and CCAL's transactions being denominated and settled in such functional currencies, the risks associated with currency fluctuations are generally limited to foreign currency translation adjustments. We do not currently hedge against foreign currency translation risks and believe that foreign currency exchange risk is not significant to our operations. 19
PART II--OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 11.1 Computation of Net Loss Per Common Share 12.1 Computation of Ratios of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and Preferred Stock Dividends (b) Reports on Form 8-K: The Registrant filed a Current Report on Form 8-K dated January 16, 2001 and filed with the Securities and Exchange Commission on January 16, 2001, reporting under Item 7 thereof certain unaudited pro forma condensed consolidated financial statements of the Company. The Registrant filed a Current Report on Form 8-K dated January 12, 2001 and filed with the Securities and Exchange Commission on January 16, 2001, reporting under Item 5 thereof that the Company had priced a public offering of 12,000,000 shares of Common Stock, with an over-allotment option of 1,800,000 shares of Common Stock. 20
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CROWN CASTLE INTERNATIONAL CORP. Date: May 11, 2001 /s/ W. Benjamin Moreland By: _________________________________ W. Benjamin Moreland Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) Date: May 11, 2001 /s/ Wesley D. Cunningham By: _________________________________ Wesley D. Cunningham Senior Vice President, Chief Accounting Officer and Corporate Controller (Principal Accounting Officer) 21
EXHIBIT 11.1 CROWN CASTLE INTERNATIONAL CORP. COMPUTATION OF NET LOSS PER COMMON SHARE (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) THREE MONTHS ENDED MARCH 31, -------------------- 2000 2001 -------- -------- Loss before extraordinary item................ $(32,060) $(68,055) Dividends on preferred stock.................. (11,493) (19,505) -------- -------- Loss before extraordinary item applicable to common stock for basic and diluted computations................................. (43,553) (87,560) Extraordinary item............................ (1,495) -- -------- -------- Net loss applicable to common stock for basic and diluted computations..................... $(45,048) $(87,560) ======== ======== Weighted-average number of common shares outstanding during the period for basic and diluted computations (in thousands).......... 158,566 211,195 ======== ======== Per common share--basic and diluted: Loss before extraordinary item.............. $ (0.27) $ (0.41) Extraordinary item............................ (0.01) -- -------- -------- Net loss................................... $ (0.28) $ (0.41) ======== ========
EXHIBIT 12.1 CROWN CASTLE INTERNATIONAL CORP. COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS (DOLLARS IN THOUSANDS) THREE MONTHS ENDED MARCH 31, ------------------------- 2000 2001 ---------- ---------- Computation of Earnings: Income (loss) before income taxes, minority interests and extraordinary item $(30,508) $(68,639) Add: Fixed charges (as computed below) 46,557 74,330 -------- -------- $ 16,049 $ 5,691 ======== ======== Computation of Fixed Charges and Combined Fixed Charges and Preferred Stock Dividends: Interest expense $ 22,622 $ 44,494 Amortization of deferred financing costs and discounts on long-term debt 19,139 22,161 Interest component of operating lease expense 4,796 7,675 -------- -------- Fixed charges 46,557 74,330 Preferred stock dividends 11,493 19,505 -------- -------- Combined fixed charges and preferred stock dividends $ 58,050 $ 93,835 ======== ======== Ratio of Earnings to Fixed Charges -- -- ======== ======== Deficiency of Earnings to Cover Fixed Charges $ 30,508 $ 68,639 ======== ======== Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends -- -- ======== ======== Deficiency of Earnings to Cover Combined Fixed Charges and Preferred Stock Dividends $ 42,001 $ 88,144 ======== ========