<PAGE>
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 September 30, 1999
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 November 1, 1999:
Common Stock - 144,915,296
Class A Common Stock - 11,340,000
<PAGE>
CROWN CASTLE INTERNATIONAL CORP.
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet at December 31, 1998 and September 30, 1999 3
Consolidated Statement of Operations and Comprehensive Loss for the three and nine months 4
ended September 30, 1998 and 1999
Consolidated Statement of Cash Flows for the nine months ended September 30, 1998 5
and 1999
Condensed Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results 19
of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk 30
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 31
Item 6. Exhibits and Reports on Form 8-K 31
Signatures 33
</TABLE>
2
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
December 31, September 30,
1998 1999
------------- --------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 296,450 $ 492,159
Receivables:
Trade, net of allowance for doubtful accounts of $1,535 and $971 at 32,130 39,027
December 31, 1998 and September 30, 1999, respectively
Other 4,290 17,058
Inventories 6,599 15,316
Prepaid expenses and other current assets 2,647 11,243
---------- ----------
Total current assets 342,116 574,803
Property and equipment, net of accumulated depreciation of $22,780 and $88,395 at 592,594 2,347,017
December 31, 1998 and September 30, 1999, respectively
Goodwill and other intangible assets, net of accumulated amortization of $20,419 and 569,740 608,055
$45,293 at December 31, 1998 and September 30, 1999, respectively
Deferred financing costs and other assets, net of accumulated amortization of $1,722 18,780 51,758
and $3,484 at December 31, 1998 and September 30, 1999, respectively ---------- ----------
$1,523,230 $3,581,633
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 46,020 $ 31,771
Accrued interest 15,677 17,410
Accrued compensation and related benefits 5,188 2,644
Deferred rental revenues and other accrued liabilities 26,002 53,309
---------- ----------
Total current liabilities 92,887 105,134
Long-term debt 429,710 1,478,767
Other liabilities 22,823 64,671
---------- ----------
Total liabilities 545,420 1,648,572
---------- ----------
Commitments and contingencies
Minority interests 39,185 54,473
Redeemable preferred stock, $.01 par value; 10,000,000 shares authorized:
12 3/4% Senior Exchangeable Preferred Stock; shares issued: December 31, 1998 - 201,063 220,909
200,000 and September 30, 1999 - 219,741 (stated at mandatory redemption and
aggregate liquidation value)
Stockholders' equity:
Common stock, $.01 par value; 690,000,000 shares authorized:
Common Stock; shares issued: December 31, 1998 - 83,123,873 and 831 1,449
September 30, 1999 - 144,887,446
Class A Common Stock; shares issued: 11,340,000 113 113
Additional paid-in capital 795,153 1,799,875
Cumulative foreign currency translation adjustment 1,690 117
Accumulated deficit (60,225) (143,875)
---------- ----------
Total stockholders' equity 737,562 1,657,679
---------- ----------
$1,523,230 $3,581,633
========== ==========
</TABLE>
See condensed notes to consolidated financial statements.
3
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- ---------------------
1998 1999 1998 1999
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Net revenues:
Site rental and broadcast transmission $ 18,008 $ 75,632 $ 28,456 $183,135
Network services and other 10,886 23,295 23,805 48,428
-------- -------- -------- --------
28,894 98,927 52,261 231,563
-------- -------- -------- --------
Operating expenses:
Costs of operations (exclusive of depreciation and
amortization):
Site rental and broadcast transmission 5,980 32,934 8,398 78,018
Network services and other 7,079 11,712 14,234 26,869
General and administrative 6,254 12,534 15,022 30,076
Corporate development 816 1,194 2,838 4,134
Restructuring charges -- -- -- 1,814
Non-cash compensation charges 11,361 501 11,361 1,672
Depreciation and amortization 9,410 39,850 17,105 89,369
-------- -------- -------- --------
40,900 98,725 68,958 231,952
-------- -------- -------- --------
Operating income (loss) (12,006) 202 (16,697) (389)
Other income (expense):
Equity in earnings of unconsolidated affiliate 1,530 -- 2,055 --
Interest and other income (expense) 923 7,923 2,293 12,802
Interest expense and amortization of deferred financing costs (7,554) (34,506) (17,581) (72,348)
-------- -------- -------- --------
Loss before income taxes, minority interests and cumulative (17,107) (26,381) (29,930) (59,935)
effect of change in accounting principle
Provision for income taxes (9) (71) (218) (268)
Minority interests (328) (615) (328) (1,187)
-------- -------- -------- --------
Loss before cumulative effect of change in accounting (17,444) (27,067) (30,476) (61,390)
principle
Cumulative effect of change in accounting principle for costs -- -- -- (2,414)
of start-up activities -------- -------- -------- --------
Net loss (17,444) (27,067) (30,476) (63,804)
Dividends on preferred stock (216) (6,824) (4,348) (19,846)
-------- -------- -------- --------
Net loss after deduction of dividends on preferred stock $(17,660) $(33,891) $(34,824) $(83,650)
======== ======== ======== ========
Net loss $(17,444) $(27,067) $(30,476) $(63,804)
Other comprehensive income:
Foreign currency translation adjustments 2,750 6,747 4,507 (1,573)
-------- -------- -------- --------
Comprehensive loss $(14,694) $(20,320) $(25,969) $(65,377)
======== ======== ======== ========
Per common share - basic and diluted:
Loss before cumulative effect of change in accounting $(0.33) $(0.23) $(1.38) $(0.66)
principle
Cumulative effect of change in accounting principle -- -- -- (0.02)
-------- -------- -------- --------
Net loss $(0.33) $(0.23) $(1.38) $(0.68)
======== ======== ======== ========
Common shares outstanding - basic and diluted (in thousands) 53,879 149,621 25,262 123,067
======== ======== ======== ========
</TABLE>
See condensed notes to consolidated financial statements.
4
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------
1998 1999
---------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(30,476) $ (63,804)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 17,105 89,369
Amortization of deferred financing costs and discounts on long-term debt 13,069 31,238
Cumulative effect of change in accounting principle -- 2,414
Non-cash compensation charges 11,361 1,672
Minority interests 328 1,187
Equity in earnings of unconsolidated affiliate (2,055) --
Changes in assets and liabilities, excluding the effects of acquisitions:
Increase in deferred rental revenues and other liabilities 3,550 65,056
Increase (decrease) in accrued interest (111) 1,812
Increase in receivables (5,464) (20,112)
Increase in inventories, prepaid expenses and other assets (3,311) (19,445)
Decrease in accounts payable (644) (13,680)
-------- -----------
Net cash provided by operating activities 3,352 75,707
-------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of businesses, net of cash acquired 997 (1,095,692)
Capital expenditures (77,728) (213,627)
Investments in affiliates -- (6,826)
-------- -----------
Net cash used for investing activities (76,731) (1,316,145)
-------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt -- 757,206
Proceeds from issuance of capital stock 149,097 617,297
Net borrowings under revolving credit agreements 72,712 84,751
Incurrence of financing costs (1,699) (22,283)
Purchase of capital stock (884) --
-------- -----------
Net cash provided by financing activities 219,226 1,436,971
-------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 424 (824)
-------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 146,271 195,709
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 55,078 296,450
-------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $201,349 $ 492,159
======== ===========
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 $417,703 $ 1,676,582
Issuance of long-term debt -- 180,000
Minority interests -- 14,330
Issuance of common stock 418,700 386,560
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 4,984 $ 38,931
Income taxes paid 286 295
</TABLE>
See condensed notes to consolidated financial statements.
5
<PAGE>
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, 1998,
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 September 30, 1999, the
consolidated results of operations for the three and nine months ended September
30, 1998 and 1999 and consolidated cash flows for the nine months ended
September 30, 1998 and 1999. 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.
RECENT ACCOUNTING PRONOUNCEMENTS
In April 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position 98-5,
Reporting on the Costs of Start-Up Activities ("SOP 98-5"). SOP 98-5 requires
that costs of start-up activities be charged to expense as incurred and broadly
defines such costs. The Company has deferred certain costs incurred in
connection with potential business initiatives and new geographic markets, and
SOP 98-5 requires that such deferred costs be charged to results of operations
upon its adoption. SOP 98-5 is effective for fiscal years beginning after
December 15, 1998. The Company has adopted the requirements of SOP 98-5 as of
January 1, 1999. The cumulative effect of the change in accounting principle
for the adoption of SOP 98-5 resulted in a charge to results of operations for
$2,414,000 in the Company's financial statements for the three months ended
March 31, 1999.
In June 1998, the Financial Accounting Standards Board (the "FASB") issued
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 will be recorded either in results of
operations or in other comprehensive income, depending on the intended use of
the derivative instrument. The initial application of SFAS 133 will be reported
as the effect of a change in accounting principle. SFAS 133, as amended, is
effective for all fiscal quarters of fiscal years beginning after June 15, 2000.
The Company will adopt the requirements of SFAS 133 in its financial statements
for the three months ending March 31, 2001. The Company has not yet determined
the effect that the adoption of SFAS 133 will have on its consolidated financial
statements.
2. ACQUISITIONS
Agreement with Bell Atlantic Mobile ("BAM")
On December 8, 1998, the Company entered into an agreement with BAM to form a
joint venture ("Crown Atlantic") to own and operate a significant majority of
BAM's towers. Upon formation of Crown Atlantic on March 31, 1999, (i) the
Company contributed to Crown Atlantic $250,000,000 in cash and 15,597,783 shares
of its Common Stock in exchange for a 61.5% ownership interest in Crown
Atlantic; (ii) Crown Atlantic
6
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
borrowed $180,000,000 under a committed $250,000,000 revolving credit facility
(see Note 3); and (iii) BAM contributed to Crown Atlantic approximately 1,458
towers in exchange for a cash distribution of $380,000,000 from Crown Atlantic
and a 38.5% ownership interest in Crown Atlantic. Upon dissolution of Crown
Atlantic, BAM will receive (i) the shares of the Company's Common Stock
contributed to Crown Atlantic and (ii) a payment (either in cash or in shares of
the Company's Common Stock, at the Company's election) equal to approximately
15.6% of the fair market value of Crown Atlantic's other net assets; the Company
would then receive the remaining assets and liabilities of Crown Atlantic. The
Company has accounted for its investment in Crown Atlantic as an acquisition
using the purchase method, and will include Crown Atlantic's results of
operations and cash flows in the Company's consolidated financial statements for
periods subsequent to formation. The Company recognized goodwill of
approximately $63,944,000 in connection with this acquisition.
BellSouth Mobility Inc. and BellSouth Telecommunications Inc. ("BellSouth")
In March 1999, the Company entered into an agreement with BellSouth to
acquire the operating rights for approximately 1,850 of their towers. The
transaction is structured as a lease agreement and will be treated as a sale of
the towers for tax purposes. The Company will pay BellSouth total consideration
of $610,000,000, consisting of $430,000,000 in cash and $180,000,000 in shares
of its common stock. As of September 30, 1999, the Company has closed on 1,452
of the towers and has paid $342,447,000 in cash and issued 7,129,733 shares of
its common stock. The Company is accounting for this transaction as a purchase
of tower assets.
Powertel, Inc. ("Powertel")
In March 1999, the Company entered into an agreement with Powertel to
purchase approximately 650 of their towers and related assets. The total
purchase price for these towers will be $275,000,000 in cash. As of September
30, 1999, the Company has closed on 619 of the towers and has paid $261,885,000
in cash. The Company is accounting for this transaction as an acquisition using
the purchase method.
BellSouth DCS
In July 1999, the Company entered into an agreement with certain affiliates
of BellSouth ("BellSouth DCS") to acquire the operating rights for approximately
773 of their towers. The transaction is structured as a lease agreement and
will be treated as a sale of the towers for tax purposes. The Company will pay
BellSouth DCS total consideration of $316,930,000 in cash. As of September 30,
1999, the Company has closed on 648 of these towers and has paid $266,857,000 in
cash. The Company is accounting for this transaction as a purchase of tower
assets.
7
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31, September 30,
1998 1999
------------ -------------
(In thousands of dollars)
<S> <C> <C>
Senior Credit Facility $ 5,500 $ 27,000
CTI Credit Facility 55,177 119,323
Crown Atlantic Credit Facility -- 180,000
10 5/8% Senior Discount Notes due 2007, net of discount 168,099 181,670
10 3/8% Senior Discount Notes due 2011, net of discount -- 313,258
9% Senior Notes due 2011 -- 180,000
11 1/4% Senior Discount Notes due 2011, net of discount -- 153,237
9 1/2% Senior Notes due 2011 -- 125,000
9% Guaranteed Bonds due 2007 200,934 199,279
-------- ----------
$429,710 $1,478,767
======== ==========
</TABLE>
CTI Credit Facility
In June 1999, the CTI Credit Facility was amended to (i) increase the
available borrowings to (Pounds)150,000,000 (approximately $246,855,000) and
(ii) extend the maturity date to June 2006. The amended facility comprises (i)
a seven year (Pounds)100,000,000 (approximately $164,570,000) revolving loan
facility which converts into a term loan facility on the third anniversary of
the amendment date and (ii) a seven year (Pounds)50,000,000 (approximately
$82,285,000) revolving loan facility. As of September 30, 1999, unused
borrowing availability under the CTI Credit Facility amounted to approximately
(Pounds)75,000,000 (approximately $123,428,000). Borrowings under the amended
CTI Credit Facility bear interest at a rate per annum equal to a Eurodollar
interbank offered rate (LIBOR) plus 1.5%. The interest rate margin may be
reduced by up to 0.875% (non-cumulatively) based on a financial test.
On the third anniversary of the amendment date, the amount drawn under the
(Pounds)100,000,000 revolving loan facility is converted into a term loan
facility and is amortized in equal semi-annual installments on June 30 and
December 31 of each year, with the final installment being due on the seventh
anniversary of the amendment date. The (Pounds)50,000,000 revolving loan
facility expires on the seventh anniversary of the amendment date.
Crown Atlantic Credit Facility
Crown Atlantic has a credit agreement with a syndicate of banks (the "Crown
Atlantic Credit Facility") which consists of a $250,000,000 secured revolving
line of credit. Available borrowings under the Crown Atlantic Credit Facility
are generally to be used to construct new towers and to finance a portion of the
purchase price for towers and related assets of Crown Atlantic. The amount of
available borrowings is determined based on the current financial performance
(as defined) of Crown Atlantic's assets. In addition, up to $25,000,000 of
borrowing availability under the Crown Atlantic Credit Facility can be used for
letters of credit.
On March 31, 1999, Crown Atlantic borrowed $180,000,000 under the Crown
Atlantic Credit Facility to fund a portion of the cash payment to BAM (see Note
2). As of September 30, 1999, approximately $27,200,000 of borrowings was
available under the Crown Atlantic Credit Facility, all of which was available
for letters of credit. There were no letters of credit outstanding as of
September 30, 1999.
The amount of available borrowings under the Crown Atlantic Credit Facility
will decrease by a stated amount at the end of each calendar quarter beginning
on September 30, 2001 until March 31, 2006, at which
8
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
time any remaining borrowings must be repaid. Under certain circumstances, Crown
Atlantic may be required to make principal prepayments under the Crown Atlantic
Credit Facility in an amount equal to 50% of excess cash flow (as defined), the
net cash proceeds from certain asset sales or the net cash proceeds from certain
sales of equity or debt securities.
The Crown Atlantic Credit Facility is secured by a pledge of the membership
interest in Crown Atlantic and a security interest in Crown Atlantic's tenant
leases. Borrowings under the Crown Atlantic Credit Facility bear interest at a
rate per annum, at Crown Atlantic's election, equal to the bank's prime rate
plus 1.25% or a Eurodollar interbank offered rate (LIBOR) plus 2.75%. The
interest rate margins may be reduced by up to 1.75% (non-cumulatively) based on
a financial test, determined quarterly. Interest on prime rate loans is due
quarterly, while interest on LIBOR loans is due at the end of the period (from
one to three months) for which such LIBOR rate is in effect. The Crown Atlantic
Credit Facility requires Crown Atlantic to maintain certain financial covenants
and places restrictions on Crown Atlantic's ability to, among other things,
incur debt and liens, pay dividends, make capital expenditures, dispose of
assets, undertake transactions with affiliates and make investments.
Interest Rate Swap Agreement
In April 1999, the Company entered into an interest rate swap agreement in
connection with amounts borrowed under the Crown Atlantic Credit Facility. This
interest rate swap agreement has an initial notional amount of $100,000,000,
decreasing on a quarterly basis beginning September 30, 2003 until the
termination of the agreement on March 31, 2006. The Company will pay a fixed
rate of 5.79% on the notional amount and received a floating rate based on
LIBOR. This agreement effectively changes the interest rate on a portion of the
borrowings under the Crown Atlantic Credit Facility from a floating rate to a
fixed rate of 5.79% plus the applicable margin. The Company does not believe
there is any significant exposure to credit risk due to the creditworthiness of
the counterparty. In the event of nonperformance by the counterparty, the
Company's loss would be limited to any unfavorable interest rate differential.
10 3/8% Senior Discount Notes due 2011 (the "10 3/8% Discount Notes") and 9%
Senior Notes due 2011 (the "9% Notes")
On May 12, 1999, the Company issued (i) $500,000,000 aggregate principal
amount (at maturity) of its 10 3/8% Discount Notes for proceeds of $292,644,000
(net of original issue discount of $198,305,000 and after underwriting discounts
of $9,051,000) and (ii) $180,000,000 aggregate principal amount of its 9% Notes
for proceeds of $174,600,000 (after underwriting discounts of $5,400,000). The
Company used a portion of the proceeds from the sale of these securities to
repay $100,000,000 in outstanding borrowings, including accrued interest
thereon, under a term loan credit facility (see Note 4).
The 10 3/8% Discount Notes will not pay any interest until November 15, 2004,
at which time semi-annual interest payments will commence and become due on each
May 15 and November 15 thereafter. Semi-annual interest payments for the 9%
Notes are due on each May 15 and November 15, commencing on November 15, 1999.
The maturity date of the 10 3/8% Discount Notes and the 9% Notes is May 15,
2011.
The 10 3/8% Discount Notes and the 9% Notes are redeemable at the option of
the Company, in whole or in part, on or after May 15, 2004 at prices of 105.187%
and 104.5%, respectively, of the principal amount plus accrued interest. The
redemption prices are reduced annually until May 15, 2007, after which time the
10 3/8% Discount Notes and the 9% Notes are redeemable at par. Prior to May 15,
2002, the Company may redeem up to 35% of the aggregate principal amount of the
10 3/8% Discount Notes and the 9% Notes, at prices of 110.375% and 109%,
respectively, of the accreted value thereof, with the net cash proceeds from a
public offering of the Company's common stock.
9
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The 10 3/8% Discount Notes and the 9% Notes are senior indebtedness of the
Company; however, they are unsecured and effectively subordinate to the
liabilities of the Company's subsidiaries, which include outstanding borrowings
under the Senior Credit Facility, the CTI Credit Facility, the Crown Atlantic
Credit Facility and the CTI Bonds. The indentures governing the 10 3/8% Discount
Notes and the 9% Notes place restrictions on the Company's ability to, among
other things, pay dividends and make capital distributions, make investments,
incur additional debt and liens, issue additional preferred stock, dispose of
assets and undertake transactions with affiliates.
11 1/4% Senior Discount Notes due 2011 (the "11 1/4% Discount Notes") and
9 1/2% Senior Notes due 2011 (the "9 1/2% Notes")
On July 27, 1999, the Company issued (i) $260,000,000 aggregate principal
amount (at maturity) of its 11 1/4% Discount Notes for proceeds of $147,501,000
(net of original issue discount of $109,489,000 and after underwriting discounts
of $3,010,000) and (ii) $125,000,000 aggregate principal amount of its 9 1/2%
Notes for proceeds of $122,500,000 (after underwriting discounts of $2,500,000)
(collectively, the "July Offerings"). The proceeds from the sale of these
securities will be used to pay the purchase price for the BellSouth DCS
transaction (see Note 2), to fund the initial interest payments on the 9 1/2%
Notes and for general corporate purposes.
The 11 1/4% Discount Notes will not pay any interest until February 1, 2005,
at which time semi-annual interest payments will commence and become due on each
February 1 and August 1 thereafter. Semi-annual interest payments for the
9 1/2% Notes are due on each February 1 and August 1, commencing on February 1,
2000. The maturity date of the 11 1/4% Discount Notes and the 9 1/2% Notes is
August 1, 2011.
The 11 1/4% Discount Notes and the 9 1/2% Notes are redeemable at the option
of the Company, in whole or in part, on or after August 1, 2004 at prices of
105.625% and 104.75%, respectively, of the principal amount plus accrued
interest. The redemption prices are reduced annually until August 1, 2007,
after which time the 11 1/4% Discount Notes and the 9 1/2% Notes are redeemable
at par. Prior to August 1, 2002, the Company may redeem up to 35% of the
aggregate principal amount of the 11 1/4% Discount Notes and the 9 1/2% Notes,
at prices of 111.25% and 109.5%, respectively, of the accreted value thereof,
with the net cash proceeds from a public offering of the Company's common stock.
The 11 1/4% Discount Notes and the 9 1/2% Notes are senior indebtedness of
the Company; however, they are unsecured and effectively subordinate to the
liabilities of the Company's subsidiaries, which include outstanding borrowings
under the Senior Credit Facility, the CTI Credit Facility, the Crown Atlantic
Credit Facility and the CTI Bonds. The indentures governing the 11 1/4%
Discount Notes and the 9 1/2% Notes place restrictions on the Company's ability
to, among other things, pay dividends and make capital distributions, make
investments, incur additional debt and liens, issue additional preferred stock,
dispose of assets and undertake transactions with affiliates.
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.
10
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company has designated Crown Atlantic as an Unrestricted Subsidiary (see
Note 2). Summarized financial information for (i) the Company and its Restricted
Subsidiaries and (ii) the Company's Unrestricted Subsidiaries is as follows:
<TABLE>
<CAPTION>
September 30, 1999
-----------------------------------------------------------
Company and
Restricted Unrestricted Consolidation Consolidated
Subsidiaries Subsidiaries Eliminations Total
------------ ------------ -------------- ------------
<S> <C> <C> <C> <C>
(In thousands of dollars)
Cash and cash equivalents $ 423,437 $ 68,722 $ -- $ 492,159
Other current assets 50,170 32,474 -- 82,644
Property and equipment, net 1,243,520 1,103,497 -- 2,347,017
Investments in Unrestricted Subsidiaries 997,386 -- (997,386) --
Goodwill and other intangible assets, net 136,870 471,185 -- 608,055
Other assets, net 39,698 12,060 -- 51,758
---------- ---------- --------- ----------
$2,891,081 $1,687,938 $(997,386) $3,581,633
========== ========== ========= ==========
Current liabilities $ 29,616 $ 75,518 $ -- $ 105,134
Long-term debt 980,165 498,602 -- 1,478,767
Other liabilities 2,712 61,959 -- 64,671
Minority interests -- 54,473 -- 54,473
Redeemable preferred stock 220,909 -- -- 220,909
Stockholders' equity 1,657,679 997,386 (997,386) 1,657,679
---------- ---------- --------- ----------
$2,891,081 $1,687,938 $(997,386) $3,581,633
========== ========== ========= ==========
</TABLE>
11
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
Three Months Ended September 30, 1999 Nine Months Ended September 30, 1999
--------------------------------------------- ---------------------------------------------------
Company and Company and
Restricted Unrestricted Consolidated Restricted Unrestricted Consolidated
Subsidiaries Subsidiaries Total Subsidiaries Subsidiaries Total
------------- ------------- ------------- ------------- ------------- -------------------
(In thousands of dollars)
<S> <C> <C> <C> <C> <C> <C>
Net revenues $ 33,436 $ 65,491 $ 98,927 $ 63,483 $168,080 $231,563
Costs of operations 14,068 30,578 44,646 25,410 79,477 104,887
(exclusive of depreciation
and amortization)
General and administrative 9,060 3,474 12,534 22,474 7,602 30,076
Corporate development 1,151 43 1,194 3,403 731 4,134
Restructuring charges -- -- -- 1,814 -- 1,814
Non-cash compensation charges 340 161 501 1,064 608 1,672
Depreciation and amortization 15,494 24,356 39,850 26,103 63,266 89,369
-------- -------- -------- -------- -------- --------
Operating income (loss) (6,677) 6,879 202 (16,785) 16,396 (389)
Interest and other income 6,974 949 7,923 5,595 7,207 12,802
(expense)
Interest expense and (23,060) (11,446) (34,506) (44,450) (27,898) (72,348)
amortization of deferred
financing costs
Provision for income taxes (71) -- (71) (268) -- (268)
Minority interests -- (615) (615) -- (1,187) (1,187)
Cumulative effect of change -- -- -- (2,414) -- (2,414)
in accounting principle for -------- -------- -------- -------- -------- --------
costs of start-up activities
Net loss $(22,834) $ (4,233) $(27,067) $(58,322) $ (5,482) $(63,804)
======== ======== ======== ======== ======== ========
</TABLE>
12
<PAGE>
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 (i) the indenture governing the
10 3/8% Senior Discount Notes and the Certificate (the "1997 and 1998
Securities") and (ii) the indentures governing the 10 3/8% Discount Notes, the
9% Notes, the 11 1/4% Discount Notes and the 9 1/2% Notes (the "1999
Securities"):
<TABLE>
<CAPTION>
1997 and 1998 1999
Securities Securities
-------------- -----------
(In thousands of dollars)
<S> <C> <C>
Tower Cash Flow, for the three months ended September 30, 1999 $ 11,032 $ 11,032
======== ========
Consolidated Cash Flow, for the twelve months ended September 30, 1999 $ 13,487 $ 18,677
Less: Tower Cash Flow, for the twelve months ended September 30, 1999 (24,551) (24,551)
Plus: four times Tower Cash Flow, for the three months ended September 30, 44,128 44,128
1999 -------- --------
Adjusted Consolidated Cash Flow, for the twelve months ended September 30, $ 33,064 $ 38,254
1999 ======== ========
</TABLE>
4. REDEEMABLE PREFERRED STOCK
On September 14, 1999, the Company entered into an agreement with General
Electric Capital Corporation ("GECC") under which GECC has agreed to purchase
$200,000,000 in aggregate liquidation preference of the Company's 8.25%
Mandatorily Redeemable, Convertible Preferred Stock (the "Convertible Preferred
Stock"). GECC's investment in the Convertible Preferred Stock is expected to
close during the fourth quarter of 1999. The Company will receive net proceeds
of approximately $191,500,000 (after structuring and underwriting fees of
$8,500,000 but before other expenses of the transaction). The net proceeds will
be used to pay a portion of the purchase price for the GTE joint venture (see
Note 10).
GECC will be entitled to receive cumulative dividends at the rate of 8 1/4%
per annum payable on March 31, June 30, September 30 and December 31 of each
year. The Company will have the option to pay dividends in cash or in shares of
its Common Stock having a current market value equal to the stated dividend
amount. GECC will also receive warrants to purchase 1,000,000 shares of the
Company's Common Stock at an exercise price of $26.875 per share. The warrants
will be exercisable, in whole or in part, at any time for a period of five years
following the issue date.
The Company will be required to redeem all outstanding shares of the
Convertible Preferred Stock 12 1/2 years following the issue date at a price
equal to the liquidation preference plus accumulated and unpaid dividends. On
or after October 1, 2002, the shares will be redeemable at the option of the
Company, in whole or in part, at a price of 104.125% of the liquidation
preference. The redemption price will be reduced on an annual basis until
October 1, 2005, at which time the shares will be redeemable at the liquidation
preference. The shares will be convertible at the option of GECC, in whole or in
part at any time, into shares of the Company's Common Stock at a conversion
price of $26.875 per share of Common Stock.
The Company's obligations with respect to the Convertible Preferred Stock
will be subordinate to all indebtedness and the Exchangeable Preferred Stock of
the Company, and will be effectively subordinate to all debt and liabilities of
the Company's subsidiaries. The certificate of designations governing the
Convertible Preferred Stock will place restrictions on the Company similar to
those imposed by the Company's existing debt instruments and the Exchangeable
Preferred Stock.
13
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. STOCKHOLDERS' EQUITY
On May 12, 1999, the Company sold shares of its common stock and debt
securities in concurrent underwritten public offerings (collectively, the "May
Offerings") (see Note 3). The Company sold 21,000,000 shares of its common
stock at a price of $17.50 per share and received proceeds of $352,800,000
(after underwriting discounts of $14,700,000). The Company had granted the
underwriters for the Offerings an over-allotment option to purchase an
additional 3,150,000 shares of the Company's common stock. On May 13, 1999, the
underwriters exercised this over-allotment option in full. As a result, the
Company received additional proceeds of $52,920,000 (after underwriting
discounts of $2,205,000). The proceeds from the Offerings will be used to pay
the remaining purchase price for the BellSouth and Powertel transactions, to
fund the initial interest payments on the 9% Notes and for general corporate
purposes.
On June 15, 1999, the Company sold shares of its common stock to a subsidiary
of TeleDiffusion de France International S.A. ("TDF") pursuant to TDF's
preemptive rights related to two recent acquisitions. The Company sold
5,395,539 shares at $12.63 per share and 125,066 shares at $13.00 per share.
The aggregate proceeds of approximately $69,772,000 will be used for general
corporate purposes.
On July 20, 1999, the Company sold shares of its common stock to a subsidiary
of TDF pursuant to TDF's preemptive rights related to the Offerings. The
Company sold 8,351,791 shares at $16.80 per share. The aggregate proceeds of
approximately $140,310,000 will be used for general corporate purposes.
6. RESTRUCTURING CHARGES
In connection with the formation of Crown Atlantic (see Note 2), the Company
completed a restructuring of its United States operations during the first
quarter of 1999. The objective of this restructuring was to transition from a
centralized organization to a regionally-based organization in the United
States. Coincident with the restructuring, the Company incurred one-time
charges of $1,814,000 related to severance payments for staff reductions, as
well as costs related to non-cancelable leases of excess office space.
7. 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.
14
<PAGE>
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:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -------------------------------
1998 1999 1998 1999
---------- ---------- ---------- ------------------
(In thousands of dollars, except per share amounts)
<S> <C> <C> <C> <C>
Loss before cumulative effect of change in $(17,444) $(27,067) $(30,476) $(61,390)
accounting principle
Dividends on preferred stock (216) (6,824) (4,348) (19,846)
-------- -------- -------- --------
Loss before cumulative effect of change in (17,660) (33,891) (34,824) (81,236)
accounting principle applicable to common stock
for basic and diluted computations
Cumulative effect of change in accounting principle -- -- -- (2,414)
-------- -------- -------- --------
Net loss applicable to common stock for basic and $(17,660) $(33,891) $(34,824) $(83,650)
diluted computations ======== ======== ======== ========
Weighted-average number of common shares 53,879 149,621 25,262 123,067
outstanding during the period for basic and diluted ======== ======== ======== ========
computations (in thousands)
Per common share - basic and diluted:
Loss before cumulative effect of change in $ (0.33) $ (0.23) $ (1.38) $ (0.66)
accounting principle
Cumulative effect of change in accounting -- -- -- (0.02)
principle -------- -------- -------- --------
Net loss $ (0.33) $ (0.23) $ (1.38) $ (0.68)
======== ======== ======== ========
</TABLE>
The calculations of common shares outstanding for the diluted computations
exclude the following potential common shares as of September 30, 1999: (i)
options to purchase 19,113,385 shares of common stock at exercise prices ranging
from $-0- to $25.62 per share; (ii) warrants to purchase 1,194,990 shares of
common stock at an exercise price of $7.50 per share; and (iii) shares of Castle
Transmission Services (Holdings) Ltd ("CTI") stock which are convertible into
17,443,500 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.
8. 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.
9. 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
15
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 measures
of other companies. There are no significant revenues resulting from
transactions between the Company's operating segments.
The Company is presenting the financial results of Crown Atlantic as a
reportable operating segment for periods subsequent to its formation (see Note
2). The financial results for the Company's operating segments are as follows:
<TABLE>
<CAPTION>
Three Months Ended September 30, 1999
-------------------------------------------------------------------
Corporate
Crown Office Consolidated
CCI CTI Atlantic and Other Total
------------ ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
(In thousands of dollars)
Net revenues:
Site rental and broadcast $ 19,549 $ 43,863 $ 12,220 $ -- $ 75,632
transmission
Network services and other 13,730 5,400 4,008 157 23,295
---------- -------- -------- -------- ----------
33,279 49,263 16,228 157 98,927
---------- -------- -------- -------- ----------
Costs of operations (exclusive of 13,943 23,091 7,487 125 44,646
depreciation and amortization)
General and administrative 7,887 1,672 1,802 1,173 12,534
Corporate development -- 43 -- 1,151 1,194
---------- -------- -------- -------- ----------
EBITDA 11,449 24,457 6,939 (2,292) 40,553
Non-cash compensation charges -- 161 -- 340 501
Depreciation and amortization 15,195 16,283 8,073 299 39,850
---------- -------- -------- -------- ----------
Operating income (loss) (3,746) 8,013 (1,134) (2,931) 202
Interest and other income (expense) 8 137 812 6,966 7,923
Interest expense and amortization of (1,189) (7,301) (4,145) (21,871) (34,506)
deferred financing costs
Provision for income taxes (12) -- -- (59) (71)
Minority interests -- (1,012) 397 -- (615)
---------- -------- -------- -------- ----------
Net loss $ (4,939) $ (163) $ (4,070) $(17,895) $ (27,067)
========== ======== ======== ======== ==========
Capital expenditures $ 36,991 $ 42,395 $ 6,579 $ 98 $ 86,063
========== ======== ======== ======== ==========
Total assets (at period end) $1,438,864 $981,004 $706,934 $454,831 $3,581,633
========== ======== ======== ======== ==========
</TABLE>
16
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1999
----------------------------------------------------------------
Corporate
Crown Office Consolidated
CCI CTI Atlantic and Other Total
---------- ---------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
(In thousands of dollars)
Net revenues:
Site rental and broadcast $ 34,428 $124,600 $24,107 $ -- $183,135
transmission
Network services and other 27,615 14,866 4,507 1,440 48,428
-------- -------- ------- -------- --------
62,043 139,466 28,614 1,440 231,563
-------- -------- ------- -------- --------
Costs of operations (exclusive of 24,328 66,142 13,335 1,082 104,887
depreciation and amortization)
General and administrative 18,775 4,732 2,870 3,699 30,076
Corporate development -- 731 -- 3,403 4,134
-------- -------- ------- -------- --------
EBITDA 18,940 67,861 12,409 (6,744) 92,466
Restructuring charges 1,814 -- -- -- 1,814
Non-cash compensation charges 67 608 -- 997 1,672
Depreciation and amortization 25,231 47,404 15,862 872 89,369
-------- -------- ------- -------- --------
Operating income (loss) (8,172) 19,849 (3,453) (8,613) (389)
Interest and other income (expense) (450) 391 3,973 8,888 12,802
Interest expense and amortization of (2,999) (19,828) (8,070) (41,451) (72,348)
deferred financing costs
Provision for income taxes (57) -- -- (211) (268)
Minority interests -- (2,608) 1,421 -- (1,187)
Cumulative effect of change in (2,014) -- -- (400) (2,414)
accounting principle for costs of -------- -------- ------- -------- --------
start-up activities
Net loss $(13,692) $ (2,196) $(6,129) $(41,787) $(63,804)
======== ======== ======= ======== ========
Capital expenditures $ 80,209 $125,034 $ 7,697 $ 687 $213,627
======== ======== ======= ======== ========
</TABLE>
17
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
Three Months Ended September 30, 1998 Nine Months Ended September 30, 1998
----------------------------------------------- --------------------------------------------------
Corporate Consoli- Corporate Consoli-
Office dated Office dated
CCI CTI and Other Total CCI CTI and Other Total
---------- ---------- ----------- ---------- ---------- ---------- ----------- -----------
(In thousands of dollars)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues:
Site rental and broadcast $ 5,682 $12,326 $ -- $ 18,008 $16,130 $12,326 $ -- $ 28,456
transmission
Network services and other 8,878 1,942 66 10,886 21,598 1,942 265 23,805
------- ------- -------- -------- ------- ------- -------- --------
14,560 14,268 66 28,894 37,728 14,268 265 52,261
------- ------- -------- -------- ------- ------- -------- --------
Costs of operations 6,804 6,255 -- 13,059 16,377 6,255 -- 22,632
(exclusive of depreciation
and amortization)
General and administrative 4,679 752 823 6,254 12,115 752 2,155 15,022
Corporate development -- -- 816 816 -- -- 2,838 2,838
------- ------- -------- -------- ------- ------- -------- --------
EBITDA 3,077 7,261 (1,573) 8,765 9,236 7,261 (4,728) 11,769
Non-cash compensation charges -- 1,977 9,384 11,361 -- 1,977 9,384 11,361
Depreciation and amortization 4,156 5,063 191 9,410 11,597 5,063 445 17,105
------- ------- -------- -------- ------- ------- -------- --------
Operating income (loss) (1,079) 221 (11,148) (12,006) (2,361) 221 (14,557) (16,697)
Equity in earnings of -- -- 1,530 1,530 -- -- 2,055 2,055
unconsolidated affiliate
Interest and other income 4 54 865 923 15 54 2,224 2,293
(expense)
Interest expense and (1,499) (1,677) (4,378) (7,554) (3,138) (1,677) (12,766) (17,581)
amortization of deferred
financing costs
Provision for income taxes (9) -- -- (9) (218) -- -- (218)
Minority interests -- (328) -- (328) -- (328) -- (328)
------- ------- -------- -------- ------- ------- -------- --------
Net loss $(2,583) $(1,730) $(13,131) $(17,444) $(5,702) $(1,730) $(23,044) $(30,476)
======= ======= ======== ======== ======= ======= ======== ========
Capital expenditures $10,848 $12,234 $ 1,894 $ 24,976 $62,105 $12,234 $ 3,389 $ 77,728
======= ======= ======== ======== ======= ======= ======== ========
</TABLE>
10. SUBSEQUENT EVENTS
Agreement With GTE Corporation ("GTE")
On November 7, 1999, the Company entered into an agreement with GTE to form a
joint venture ("Crown Castle GT") to own and operate a significant majority of
GTE's towers. Upon formation of Crown Castle GT (which is expected to occur in
2000), (i) the Company will contribute $725,000,000 in cash (less an amount
borrowed by Crown Castle GT under an anticipated bank credit agreement) and
$1,000,000 in shares of its Common Stock in exchange for a 75.2% ownership
interest in Crown Castle GT, and (ii) GTE will contribute approximately 2,322
towers in exchange for a cash distribution of $700,000,000 from Crown Castle GT
and a 24.8% interest in Crown Castle GT. Upon dissolution of Crown Castle GT,
GTE would receive (i) the shares of the Company's Common Stock contributed to
Crown Castle GT and (ii) a payment equal to 14.5% of the fair market value of
Crown Castle GT's other net assets; the Company would then receive the remaining
assets and liabilities of Crown Castle GT. The Company will account for its
investment in Crown Castle GT as a purchase of tower assets, and will include
Crown Castle GT's results of operations and cash flows in the Company's
consolidated financial statements for periods subsequent to formation. Upon
entering into this agreement, the Company placed $50,000,000 into an escrow
account; such funds would be forfeited if the Company failed to close this
transaction because it was unable to obtain adequate financing.
18
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion is intended to assist in understanding the Company's
consolidated financial condition as of September 30, 1999 and its results of
operations for the three- and nine-month periods ended September 30, 1998 and
1999. The statements in this discussion regarding the industry outlook, the
Company's expectations regarding the future performance of its 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
capital expenditures decisions to be made in the future by wireless
communications carriers and broadcasters and the risks and uncertainties
described in "Risk Factors" in the Company's Registration Statement on Form S-1,
as amended (Reg. No. 333-74553) (the "Registration Statement") filed with the
Securities and Exchange Commission (the "SEC"). 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 notes thereto,
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
In August 1998, the Company consummated a share exchange with the
shareholders of CTI, pursuant to which the Company's ownership of CTI increased
from approximately 34.3% to 80%. Results of operations of CTI are included in
the Company's consolidated financial statements for the periods subsequent to
the date the exchange was consummated. On March 31, 1999, the Company formed
Crown Atlantic, and in June 1999, the Company closed on the initial tower
purchases from the BellSouth and Powertel transactions. In July through
September 1999, the Company closed on additional tower purchases from the
BellSouth transaction and the initial tower purchases from the BellSouth DCS
transaction. Results of operations of Crown Atlantic are included in the
Company's consolidated financial statements subsequent to the date of formation,
and results of operations from the BellSouth, Powertel and BellSouth DCS towers
are included subsequent to the respective purchase dates. As a result of these
transactions, the Company's results of operations for the three and nine months
ended September 30, 1998 are not comparable to the results of operations for the
three and nine months ended September 30, 1999.
The following information is derived from the Company's Consolidated
Statements of Operations for the periods indicated.
19
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended
September 30, 1998 September 30, 1999 September 30, 1998 September 30, 1999
----------------------- ---------------------- ----------------------- ----------------------
Percent Percent Percent Percent
of of of of
Net Net Net Net
Amount Revenues Amount Revenues Amount Revenues Amount Revenues
----------- --------- ----------- ---------- ----------- --------- ----------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues:
Site rental and broadcast $ 18,008 62.3% $ 75,632 76.5% $ 28,456 54.4% $183,135 79.1%
transmission
Network services and other 10,886 37.7 23,295 23.5 23,805 45.6 48,428 20.9
-------- ------ -------- ------ -------- ------ -------- ------
Total net revenues 28,894 100.0 98,927 100.0 52,261 100.0 231,563 100.0
-------- ------ -------- ------ -------- ------ -------- ------
Operating expenses:
Costs of operations:
Site rental and broadcast 5,980 33.2 32,934 43.5 8,398 29.5 78,018 42.6
transmission
Network services and other 7,079 65.0 11,712 50.3 14,234 59.8 26,869 55.5
-------- -------- -------- --------
Total costs of operations 13,059 45.2 44,646 45.1 22,632 43.3 104,887 45.3
General and administrative 6,254 21.7 12,534 12.7 15,022 28.8 30,076 13.0
Corporate development 816 2.8 1,194 1.2 2,838 5.4 4,134 1.8
Restructuring charges -- -- -- -- -- -- 1,814 0.8
Non-cash compensation 11,361 39.3 501 0.5 11,361 21.7 1,672 0.7
charges
Depreciation and 9,410 32.6 39,850 40.3 17,105 32.7 89,369 38.6
amortization -------- ------ -------- ------ -------- ------ -------- ------
Operating income (loss) (12,006) (41.6) 202 0.2 (16,697) (31.9) (389) (0.2)
Other income (expense):
Equity in earnings of 1,530 5.3 -- -- 2,055 3.9 -- --
unconsolidated affiliate
Interest and other income 923 3.2 7,923 8.0 2,293 4.4 12,802 5.5
(expense)
Interest expense and (7,554) (26.1) (34,506) (34.9) (17,581) (33.7) (72,348) (31.2)
amortization of deferred -------- ------ -------- ------ -------- ------ -------- ------
financing costs
Loss before income taxes, (17,107) (59.2) (26,381) (26.7) (29,930) (57.3) (59,935) (25.9)
minority interests and
cumulative effect of change
in accounting principle
Provision for income taxes (9) (0.1) (71) (0.1) (218) (0.4) (268) (0.1)
Minority interests (328) (1.1) (615) (0.6) (328) (0.6) (1,187) (0.5)
-------- ------ -------- ------ -------- ------ -------- ------
Loss before cumulative (17,444) (60.4) (27,067) (27.4) (30,476) (58.3) (61,390) (26.5)
effect of change in
accounting principle
Cumulative effect of change -- -- -- -- -- -- (2,414) (1.1)
in accounting principle for -------- ------ -------- ------ -------- ------ -------- ------
costs of start-up activities
Net loss $(17,444) (60.4)% $(27,067) (27.4)% $(30,476) (58.3)% $(63,804) (27.6)%
======== ====== ======== ====== ======== ====== ======== ======
</TABLE>
Comparison of Three Months Ended September 30, 1999 and 1998
Consolidated revenues for the three months ended September 30, 1999 were
$98.9 million, an increase of $70.0 million from the three months ended
September 30, 1998. This increase was primarily attributable to (i) a $57.6
million, or 320.0%, increase in site rental and broadcast transmission revenues,
of which $31.5 million was attributable to CTI, $12.2 million was attributable
to Crown Atlantic and $13.9 million was attributable to the Crown operations;
(ii) a $4.9 million increase in network services and other revenues from the
Crown operations; (iii) a $3.5 million increase in network services and other
revenues from CTI; and (iv) $4.0 million in network services and other revenues
from Crown Atlantic.
Costs of operations for the three months ended September 30, 1999 were $44.6
million, an increase of $31.6 million from the three months ended September 30,
1998. This increase was primarily attributable to (i) a $27.0 million increase
in site rental and broadcast transmission costs, of which $15.6 million was
attributable to CTI, $5.6 million was attributable to Crown Atlantic and $5.8
million was attributable to the Crown operations; (ii) a $1.3 million increase
in network services costs related to the Crown operations; (iii) a $1.3 million
increase in network services costs from CTI; and (iv) $1.9 million 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 increased to 43.5% for the three months ended September 30, 1999 from
33.2% for the three months ended September 30, 1998 because of higher costs
attributable to the CTI, Crown Atlantic and Crown operations. Costs of
operations for network services and other as a percentage of network services
and other revenues decreased to 50.3% for the three months ended September 30,
1999 from 65.0% for the three months ended September 30, 1998 due to higher
margins from the CTI, Crown Atlantic and Crown operations.
General and administrative expenses for the three months ended September 30,
1999 were $12.5 million, an increase of $6.3 million from the three months ended
September 30, 1998. This increase was primarily attributable to (i) a $3.2
million increase in expenses related to the Crown operations; (ii) a $0.4
million increase
20
<PAGE>
in expenses at the Company's corporate office; (iii) a $0.9 million increase in
expenses at CTI; and (iv) $1.8 million in expenses at Crown Atlantic. General
and administrative expenses as a percentage of revenues decreased for the three
months ended September 30, 1999 to 12.7% from 21.7% for the three months ended
September 30, 1998 because of lower overhead costs as a percentage of revenues
for CTI, Crown Atlantic and Crown.
Corporate development expenses for the three months ended September 30, 1999
were $1.2 million, compared to $0.8 million for the three months ended September
30, 1998. This increase was primarily attributable to an increase in expenses
at the Company's corporate office.
For the three months ended September 30, 1999, the Company has recorded non-
cash compensation charges of $0.5 million related to the issuance of stock
options to certain employees and executives, compared to $11.4 million for the
three months ended September 30, 1998.
Depreciation and amortization for the three months ended September 30, 1999
was $39.9 million, an increase of $30.4 million from the three months ended
September 30, 1998. This increase was primarily attributable to (i) $11.2
million of depreciation and amortization related to the property and equipment
and goodwill from CTI; (ii) $8.1 million of depreciation and amortization
related to the property and equipment and goodwill from Crown Atlantic; and
(iii) a $11.0 million increase in depreciation and amortization related to the
property and equipment, goodwill and other intangible assets related to the
Crown operations.
The equity in earnings of unconsolidated affiliate represents the Company's
34.3% share of CTI's net earnings (losses) for the periods prior to August 1998
(at which time the share exchange with CTI's shareholders was consummated). For
the two months ended August 31, 1998, after making appropriate adjustments to
CTI's results of operations for such period to conform to generally accepted
accounting principles of the United States, CTI had net revenues, operating
income, interest expense (including amortization of deferred financing costs)
and net income of $25.4 million, $7.4 million, $3.1 million and $4.5 million,
respectively. Included in CTI's results of operations for such period are non-
cash compensation charges for approximately $0.6 million related to the issuance
of stock options to certain members of CTI's management.
Interest and other income (expense) for the three months ended September 30,
1999 resulted primarily from (i) the investment of the remaining portion of the
cash contribution from the formation of Crown Atlantic in March 1999; (ii) the
investment of the excess proceeds from the sale of the Company's common stock,
10 3/8% Discount Notes and 9% Notes in May 1999; and (iii) the investment of the
net proceeds from the sale of the Company's 11 1/4% Discount Notes and 9 1/2%
Notes in July 1999; partially offset by costs incurred in connection with
unsuccessful acquisition attempts and an offering of common stock by one of the
Company's shareholders. Interest and other income (expense) for the three months
ended September 30, 1998 resulted primarily from (i) the investment of the
excess proceeds from the sale of the Company's 10 3/8% Senior Discount Notes
(the "10 3/8% Discount Notes") in November 1997; and (ii) the investment of the
net proceeds from the Company's initial public offering of common stock in
August 1998 (the "IPO").
Interest expense and amortization of deferred financing costs for the three
months ended September 30, 1999 was $34.5 million, an increase of $27.0 million,
or 356.8%, from the three months ended September 30, 1998. This increase was
primarily attributable to interest on indebtedness at CTI and Crown Atlantic,
amortization of the original issue discount on the 10 3/8% Discount Notes and
the 11 1/4% Discount Notes, and interest on the 9% Notes and the 9 1/2% Notes.
Minority interests represent the minority shareholder's 20% interest in CTI's
operations and the minority partner's 38.5% interest in Crown Atlantic's
operations.
21
<PAGE>
Comparison of Nine Months Ended September 30, 1999 and 1998
Consolidated revenues for the nine months ended September 30, 1999 were
$231.6 million, an increase of $179.3 million from the nine months ended
September 30, 1998. This increase was primarily attributable to (i) a $154.7
million, or 543.6%, increase in site rental and broadcast transmission revenues,
of which $112.3 million was attributable to CTI, $24.1 million was attributable
to Crown Atlantic and $18.3 million was attributable to the Crown operations;
(ii) a $6.0 million increase in network services and other revenues from the
Crown operations; (iii) a $12.9 million increase in network services and other
revenues from CTI; and (iv) $4.5 million in network services and other revenues
from Crown Atlantic.
Costs of operations for the nine months ended September 30, 1999 were $104.9
million, an increase of $82.3 million from the nine months ended September 30,
1998. This increase was primarily attributable to (i) a $69.6 million increase
in site rental and broadcast transmission costs, of which $50.9 million was
attributable to CTI, $11.2 million was attributable to Crown Atlantic and $7.5
million was attributable to the Crown operations; (ii) a $0.5 million increase
in network services costs related to the Crown operations; (iii) an $8.9 million
increase in network services costs from CTI; and (iv) $2.1 million 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 increased to 42.6% for the nine months ended September 30, 1999 from
29.5% for the nine months ended September 30, 1998 because of higher costs
attributable to the CTI, Crown Atlantic and Crown operations. Costs of
operations for network services and other as a percentage of network services
and other revenues decreased to 55.5% for the nine months ended September 30,
1999 from 59.8% for the nine months ended September 30, 1998, primarily due to
higher margins from the CTI, Crown Atlantic and Crown operations.
General and administrative expenses for the nine months ended September 30,
1999 were $30.1 million, an increase of $15.1 million from the nine months ended
September 30, 1998. This increase was primarily attributable to (i) a $6.7
million increase in expenses related to the Crown operations; (ii) a $1.5
million increase in expenses at the Company's corporate office; (iii) a $4.0
million increase in expenses at CTI; and (iv) $2.9 million in expenses at Crown
Atlantic. General and administrative expenses as a percentage of revenues
decreased for the nine months ended September 30, 1999 to 13.0% from 28.8% for
the nine months ended September 30, 1998 because of lower overhead costs as a
percentage of revenues for CTI, Crown Atlantic and Crown.
Corporate development expenses for the nine months ended September 30, 1999
were $4.1 million, compared to $2.8 million for the nine months ended September
30, 1998. This increase was attributable to (i) a $0.6 million increase in
expenses at the Company's corporate office and (ii) $0.7 million in expenses at
CTI. Corporate development expenses for the nine months ended September 30, 1998
include discretionary bonuses related to the Company's performance totaling
approximately $0.8 million for certain members of the Company's management.
In connection with the formation of Crown Atlantic, the Company completed a
restructuring of its United States operations during the first quarter of 1999.
The objective of this restructuring was to transition from a centralized
organization to a regionally-based organization in the United States. For the
nine months ended September 30, 1999, the Company has recorded one-time charges
of $1.8 million related to severance payments for staff reductions, as well as
costs related to non-cancelable leases of excess office space.
For the nine months ended September 30, 1999, the Company has recorded non-
cash compensation charges of $1.7 million related to the issuance of stock
options to certain employees and executives, compared to $11.4 million for the
nine months ended September 30, 1998.
Depreciation and amortization for the nine months ended September 30, 1999
was $89.4 million, an increase of $72.3 million from the nine months ended
September 30, 1998. This increase was primarily attributable to (i) $42.3
million of depreciation and amortization related to the property and equipment
and goodwill from CTI; (ii) $15.9 million of depreciation and amortization
related to the property and equipment
22
<PAGE>
and goodwill from Crown Atlantic; and (iii) a $13.6 million increase in
depreciation and amortization related to the property and equipment, goodwill
and other intangible assets related to the Crown operations.
The equity in earnings of unconsolidated affiliate represents the Company's
34.3% share of CTI's net earnings (losses) for the periods prior to August 1998
(at which time the share exchange with CTI's shareholders was consummated). For
the eight months ended August 31, 1998, after making appropriate adjustments to
CTI's results of operations for such period to conform to generally accepted
accounting principles of the United States, CTI had net revenues, operating
income, interest expense (including amortization of deferred financing costs)
and net income of $97.2 million, $18.6 million, $13.4 million and $6.0 million,
respectively. Included in CTI's results of operations for such period are non-
cash compensation charges for approximately $3.8 million related to the issuance
of stock options to certain members of CTI's management.
Interest and other income (expense) for the nine months ended September 30,
1999 resulted primarily from (i) the investment of the net proceeds from the
Company's IPO; (ii) the investment of the excess proceeds from the sale of the
12 3/4% Senior Exchangeable Preferred Stock in December 1998 (the "Exchangeable
Preferred Stock"); (iii) the investment of the excess proceeds from the sale of
the Company's common stock, 10 3/8% Discount Notes and 9% Notes in May 1999; and
(iv) the investment of the net proceeds from the sale of the Company's 11 1/4%
Discount Notes and 9 1/2% Notes in July 1999; partially offset by costs incurred
in connection with unsuccessful acquisition attempts, costs incurred in
connection with an offering of common stock by one of the Company's shareholders
and a loss incurred upon the disposition of an investment in an affiliate.
Interest and other income (expense) for the nine months ended September 30, 1998
resulted primarily from (i) the investment of the excess proceeds from the sale
of the Company's 10 3/8% Discount Notes in November 1997; and (ii) the
investment of the net proceeds from the Company's IPO in August 1998.
Interest expense and amortization of deferred financing costs for the nine
months ended September 30, 1999 was $72.3 million, an increase of $54.8 million,
or 311.5%, from the nine months ended September 30, 1998. This increase was
primarily attributable to interest on indebtedness at CTI and Crown Atlantic,
amortization of the original issue discount on the 10 3/8% Discount Notes and
the 11 1/4% Discount Notes, interest on the 9% Notes and the 9 1/2% Notes, and
interest and fees on the term loans used to finance the escrow deposits for the
BellSouth and Powertel transactions.
Minority interests represent the minority shareholder's 20% interest in CTI's
operations and the minority partner's 38.5% interest in Crown Atlantic's
operations.
The cumulative effect of the change in accounting principle for costs of
start-up activities represents the charge recorded by the Company upon the
adoption of SOP 98-5 on January 1, 1999.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1999, the Company had consolidated cash and cash
equivalents of $492.2 million (including $18.2 million at CTI and $50.5 million
at Crown Atlantic), consolidated long-term debt of $1,478.8 million,
consolidated redeemable preferred stock of $220.9 million and consolidated
stockholders' equity of $1,657.7 million.
The Company's business strategy contemplates substantial capital expenditures
(i) in connection with the expansion of its 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 (ii) to acquire existing transmission networks globally as
opportunities arise. Since its inception, the Company has generally funded its
activities (other than acquisitions and investments) through excess proceeds
from contributions of equity capital and cash provided by operations. The
Company has financed acquisitions and investments with the proceeds from equity
contributions, borrowings under the Senior Credit Facility, issuances of debt
securities and the issuance of promissory notes to sellers. Since its
inception, CTI has
23
<PAGE>
generally funded its activities (other than the acquisition of the BBC Home
Service Transmission Business) through cash provided by operations and
borrowings under the CTI Credit Facility. CTI financed the acquisition of the
BBC Home Service Transmission Business with the proceeds from equity
contributions and the issuance of the CTI Bonds.
For the nine months ended September 30, 1998 and 1999, the Company's net cash
provided by operating activities was $3.4 million and $75.7 million,
respectively. For the nine months ended September 30, 1998 and 1999, the
Company's net cash provided by financing activities was $219.2 million and
$1,437.0 million, respectively. The Company's primary financing-related
activities in the first nine months of 1999 were borrowings under revolving
credit agreements amounting to $84.8 million, the consummation of the May and
July Offerings and the sale of stock to TdF pursuant to TdF's preemptive rights.
On May 12, 1999, the Company consummated the May Offerings. The Company sold
(i) 21,000,000 shares of its common stock at a price of $17.50 per share and
received proceeds of $352.8 million (after underwriting discounts of $14.7
million); (ii) $500.0 million aggregate principal amount (at maturity) of its
10 3/8% Discount Notes for proceeds of $292.6 million (net of original issue
discount of $198.3 million and after underwriting discounts of $9.1 million);
and (iii) $180.0 million aggregate principle amount of its 9% Notes for proceeds
of $174.6 million (after underwriting discounts of $5.4 million). The Company
had granted the underwriters for the Offerings an over-allotment option to
purchase an additional 3,150,000 shares of the Company's common stock. On May
13, 1999, the underwriters exercised this over-allotment option in full. As a
result, the Company received additional proceeds of $52.9 million (after
underwriting discounts of $2.2 million). A portion of the proceeds from the
Offerings was used to repay amounts drawn under the term loans in connection
with the BellSouth and Powertel transactions. The remaining proceeds from the
Offerings will be used to pay the remaining purchase price for such
transactions, to fund the initial interest payments on the 9% Notes and for
general corporate purposes.
On June 15, 1999, the Company sold shares of its common stock to a subsidiary
of TDF pursuant to TDF's preemptive rights related to two recent acquisitions.
The Company sold 5,395,539 shares at $12.63 per share and 125,066 shares at
$13.00 per share. The aggregate proceeds of approximately $69.8 million will be
used for general corporate purposes. On July 20, 1999, the Company sold shares
of its common stock to a subsidiary of TDF pursuant to TDF's preemptive rights
related to the Offerings. The Company sold 8,351,791 shares at $16.80 per
share. The aggregate proceeds of approximately $140.3 million will be used for
general corporate purposes.
On July 27, 1999, the Company sold debt securities in a private placement.
The Company sold (i) $260.0 million aggregate principal amount (at maturity) of
its 11 1/4% Discount Notes for proceeds of $147.5 million (net of original issue
discount of $109.5 million and after underwriting discounts of $3.0 million) and
(ii) $125.0 million aggregate principle amount of its 9 1/2% Notes for proceeds
of $122.5 million (after underwriting discounts of $2.5 million). The proceeds
from the sale of these securities will be used to pay the purchase price for the
BellSouth DCS transaction, to fund the initial interest payments on the 9 1/2%
Notes and for general corporate purposes.
On September 14, 1999, the Company entered into an agreement under which GECC
has agreed to purchase $200.0 million in aggregate liquidation preference of the
Company's Convertible Preferred Stock (see Note 4). GECC's investment in the
Convertible Preferred Stock is expected to close during the fourth quarter of
1999. The Company will receive net proceeds of approximately $191.5 million
(after structuring and underwriting fees of $8.5 million but before other
expenses of the transaction). The net proceeds will be used to pay a portion of
the purchase price for the GTE joint venture (see Note 10). GECC will also
receive warrants to purchase 1.0 million shares of the Company's Common Stock at
an exercise price of $26.875 per share. The warrants will be exercisable, in
whole or in part, at any time for a period of five years following the issue
date.
Capital expenditures were $213.6 million for the nine months ended September
30, 1999, of which $0.7 million were for CCIC, $80.2 million were for Crown,
$7.7 million were for Crown Atlantic and $125.0 million
24
<PAGE>
were for CTI. The Company anticipates that it will build, through the end of
1999, between 900 and 1,200 towers at an aggregate cost of between $170.0
million and $220.0 million. The Company also expects that the capital
expenditure requirements related to the roll-out of digital broadcast
transmission in the United Kingdom will be approximately (Pounds)40.0 million
($65.8 million).
In addition to capital expenditures in connection with build-to-suits, the
Company expects to apply a significant amount of capital to finance the
remaining cash portion of the consideration being paid in connection with the
recent transactions.
In connection with Crown Atlantic, the Company issued approximately 15.6
million shares of its common stock and contributed $250.0 million in cash to
Crown Atlantic. Crown Atlantic borrowed approximately $180.0 million under the
Crown Atlantic Credit Facility, following which Crown Atlantic made a $380.0
million cash distribution to BAM.
In connection with the BellSouth transaction, through September 30, 1999, the
Company has issued approximately 7.1 million shares of its common stock and paid
BellSouth $342.4 million in cash. The Company expects to (i) issue an
additional 2.0 million shares of its common stock and (ii) use a portion of the
net proceeds from the May Offerings to finance the remaining $267.6 million cash
purchase price for this transaction.
In connection with the Powertel acquisition, the Company paid Powertel $261.5
million in cash on June 1, 1999. The Company expects to use a portion of the
net proceeds from the May Offerings to finance the remaining $13.5 million cash
purchase price for this transaction.
In connection with the BellSouth DCS transaction, through September 30, 1999,
the Company has paid BellSouth DCS $266.9 million in cash. The Company expects
to use a portion of the net proceeds from the July Offerings to finance the
remaining $50.1 million cash purchase price for this transaction.
On November 7, 1999, the Company entered into an agreement with GTE to form a
joint venture ("Crown Castle GT") to own and operate a significant majority of
GTE's towers. Upon formation of Crown Castle GT (which is expected to occur in
2000), (i) the Company will contribute $725.0 million in cash (less an amount
borrowed by Crown Castle GT under an anticipated bank credit agreement) and $1.0
million in shares of its Common Stock in exchange for a 75.2% ownership interest
in Crown Castle GT, and (ii) GTE will contribute approximately 2,322 towers in
exchange for a cash distribution of $700.0 million from Crown Castle GT and a
24.8% interest in Crown Castle GT. Upon dissolution of Crown Castle GT, GTE
would receive (i) the shares of the Company's Common Stock contributed to Crown
Castle GT and (ii) a payment equal to 14.5% of the fair market value of Crown
Castle GT's other net assets; the Company would then receive the remaining
assets and liabilities of Crown Castle GT. The Company will account for its
investment in Crown Castle GT as a purchase of tower assets, and will include
Crown Castle GT's results of operations and cash flows in the Company's
consolidated financial statements for periods subsequent to formation. Upon
entering into this agreement, the Company placed $50.0 million into an escrow
account; such funds would be forfeited if the Company failed to close this
transaction because it was unable to obtain adequate financing.
The Company expects that the completion of the recent transactions and the
execution of its new tower build, or build-to-suit program, will have a material
impact on its liquidity. The Company expects 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,
the Company believes that as new towers become operational and tenants are
added, they should result in a long-term increase in liquidity.
The Company's liquidity may also be materially impacted if it fails to
complete the GTE joint venture transaction. The Company is currently
investigating various financing alternatives for this proposed transaction.
There can be no assurance, however, that the Company will be able to obtain any
such financing, and it may be forced to forego this transaction. If that were
to occur, the Company would likely be forced to forfeit the related escrow
payment. If the Company were to fail to consummate the proposed transaction and
forfeit the
25
<PAGE>
$50.0 million escrow payment made in connection with the proposed transaction,
it would have a material adverse effect on the Company's financial condition,
including its ability to implement its current business strategy.
To fund the execution of the Company's business strategy, including the
recent transactions described above and the construction of new towers that the
Company has agreed to build, the Company and its subsidiaries expect to use the
net proceeds from the May and July Offerings, the borrowings available under the
Senior Credit Facility, the borrowings available under the CTI Credit Facility,
the borrowings available under the Crown Atlantic Credit Facility and the
remaining net proceeds from the sale in 1997 of the 10 3/8% Discount Notes. The
Company will have additional cash needs to fund its operations in the future.
The Company may also have additional cash needs in the near-term if additional
tower acquisitions or build-to-suit opportunities arise. Some of the
opportunities that the Company is currently pursuing could require significant
additional capital. In the event the Company does not otherwise have cash
available, or borrowings under its credit facilities have otherwise been
utilized, when cash needs arise, the Company would be forced to seek additional
debt or equity financing or to forego the opportunity. In the event the Company
determines 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 the Company's existing
indebtedness.
As of November 1, 1999, (i) the Company's subsidiaries had approximately
$36.3 million of unused borrowing availability under the Senior Credit Facility;
(ii) CTI had unused borrowing availability under the CTI Credit Facility of
approximately (Pounds)75.0 million ($123.4 million); and (iii) Crown Atlantic
had approximately $27.2 million of unused borrowing availability under the Crown
Atlantic Credit Facility. The Company's various credit facilities require its
subsidiaries to maintain certain financial covenants and place restrictions on
the ability of the Company's 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 the Company.
If the Company is unable to refinance its subsidiary debt or renegotiate the
terms of such debt, it may not be able to meet its debt service requirements,
including interest payments on the notes, in the future. The 9% Notes and the
9 1/2% Notes will require annual cash interest payments of approximately $16.2
million and $11.9 million, respectively. Prior to November 15, 2002, May 15,
2004 and August 1, 2004, the interest expense on the 10 3/8% Discount Notes, the
10 3/8% Discount Notes and the 11 1/4% Discount Notes, respectively, will be
comprised solely of the amortization of original issue discount. Thereafter,
the 10 3/8% 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, the
Company does not expect to pay cash dividends on the Exchangeable Preferred
Stock or, if issued, cash interest on the exchange debentures. Thereafter,
assuming all dividends or interest have been paid-in-kind, the 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 CTI Bonds are (Pounds)11.25 million ($18.5 million). In
addition, the Senior Credit Facility, the CTI Credit Facility and the Crown
Atlantic Credit Facility will require periodic interest payments on amounts
borrowed thereunder.
As a holding company, the Company 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 3/8% Discount Notes, the 10 3/8%
Discount Notes and the 11 1/4% Discount Notes. As described above, the terms of
the indebtedness of the Company's subsidiaries significantly limit such
subsidiaries' ability to distribute cash to the Company. As a result, the
Company 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 the Company
does not retain sufficient funds from the offerings or any future financing, it
may not be able to make its interest payments on the cash-pay notes.
The Company's ability to make scheduled payments of principal of, or to pay
interest on, its debt obligations, and its ability to refinance any such debt
obligations, will depend on its future performance, which,
26
<PAGE>
to a certain extent, is subject to general economic, financial, competitive,
legislative, regulatory and other factors that are beyond its control. The
Company anticipates that it may need to refinance all or a portion of its
indebtedness on or prior to its scheduled maturity. There can be no assurance
that the Company will be able to effect any required refinancings of its
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, the Company's measure of the following information
may not be comparable to similarly titled measures of other companies.
The Company has designated Crown Atlantic as an Unrestricted Subsidiary.
Summarized financial information for (i) the Company and its Restricted
Subsidiaries and (ii) the Company's Unrestricted Subsidiaries is as follows:
<TABLE>
<CAPTION>
September 30, 1999
-----------------------------------------------------------
Company and
Restricted Unrestricted Consolidation Consolidated
Subsidiaries Subsidiaries Eliminations Total
------------ ------------ -------------- ------------
(In thousands of dollars)
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 423,437 $ 68,722 $ -- $ 492,159
Other current assets 50,170 32,474 -- 82,644
Property and equipment, net 1,243,520 1,103,497 -- 2,347,017
Investments in Unrestricted Subsidiaries 997,386 -- (997,386) --
Goodwill and other intangible assets, net 136,870 471,185 -- 608,055
Other assets, net 39,698 12,060 -- 51,758
---------- ---------- --------- ----------
$2,891,081 $1,687,938 $(997,386) $3,581,633
========== ========== ========= ==========
Current liabilities $ 29,616 $ 75,518 $ -- $ 105,134
Long-term debt 980,165 498,602 -- 1,478,767
Other liabilities 2,712 61,959 -- 64,671
Minority interests -- 54,473 -- 54,473
Redeemable preferred stock 220,909 -- -- 220,909
Stockholders' equity 1,657,679 997,386 (997,386) 1,657,679
---------- ---------- --------- ----------
$2,891,081 $1,687,938 $(997,386) $3,581,633
========== ========== ========= ==========
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended September 30, 1999 Nine Months Ended September 30, 1999
--------------------------------------------- --------------------------------------------------
Company and Company and
Restricted Unrestricted Consolidated Restricted Unrestricted Consolidated
Subsidiaries Subsidiaries Total Subsidiaries Subsidiaries Total
------------- ------------- ------------- ------------- ------------- -------------------
(In thousands of dollars)
<S> <C> <C> <C> <C> <C> <C>
Net revenues $ 33,436 $ 65,491 $ 98,927 $ 63,483 $168,080 $231,563
Costs of operations 14,068 30,578 44,646 25,410 79,477 104,887
(exclusive of depreciation
and amortization)
General and administrative 9,060 3,474 12,534 22,474 7,602 30,076
Corporate development 1,151 43 1,194 3,403 731 4,134
Restructuring charges -- -- -- 1,814 -- 1,814
Non-cash compensation charges 340 161 501 1,064 608 1,672
Depreciation and amortization 15,494 24,356 39,850 26,103 63,266 89,369
-------- -------- -------- -------- -------- --------
Operating income (loss) (6,677) 6,879 202 (16,785) 16,396 (389)
Interest and other income 6,974 949 7,923 5,595 7,207 12,802
(expense)
Interest expense and (23,060) (11,446) (34,506) (44,450) (27,898) (72,348)
amortization of deferred
financing costs
Provision for income taxes (71) -- (71) (268) -- (268)
Minority interests -- (615) (615) -- (1,187) (1,187)
Cumulative effect of change -- -- -- (2,414) -- (2,414)
in accounting principle for -------- -------- -------- -------- -------- --------
costs of start-up activities
Net loss $(22,834) $ (4,233) $(27,067) $(58,322) $ (5,482) $(63,804)
======== ======== ======== ======== ======== ========
</TABLE>
Tower Cash Flow and Adjusted Consolidated Cash Flow for the Company and its
Restricted Subsidiaries is as follows under (i) the indenture governing the
10 3/8% Senior Discount Notes and the Certificate (the "1997 and 1998
Securities") and (ii) the indentures governing the 10 3/8% Discount Notes, the
9% Notes, the 11 1/4% Discount Notes and the 9 1/2% Notes (the "1999
Securities"):
<TABLE>
<CAPTION>
1997 and 1998 1999
Securities Securities
-------------- -----------
(In thousands of dollars)
<S> <C> <C>
Tower Cash Flow, for the three months ended September 30, 1999 $ 11,032 $ 11,032
======== ========
Consolidated Cash Flow, for the twelve months ended September 30, 1999 $ 13,487 $ 18,677
Less: Tower Cash Flow, for the twelve months ended September 30, 1999 (24,551) (24,551)
Plus: four times Tower Cash Flow, for the three months ended September 30, 44,128 44,128
1999 -------- --------
Adjusted Consolidated Cash Flow, for the twelve months ended September 30, $ 33,064 $ 38,254
1999 ======== ========
</TABLE>
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In April 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position 98-5,
Reporting on the Costs of Start-Up Activities ("SOP 98-5").
28
<PAGE>
SOP 98-5 requires that costs of start-up activities be charged to expense as
incurred and broadly defines such costs. The Company has deferred certain costs
incurred in connection with potential business initiatives and new geographic
markets, and SOP 98-5 requires that such deferred costs be charged to results of
operations upon its adoption. SOP 98-5 is effective for fiscal years beginning
after December 15, 1998. The Company has adopted the requirements of SOP 98-5 as
of January 1, 1999. The cumulative effect of the change in accounting principle
for the adoption of SOP 98-5 resulted in a charge to results of operations for
$2.4 million in the Company's financial statements for the three months ended
March 31, 1999.
In June 1998, the FASB issued 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 will be recorded
either in results of operations or in other comprehensive income, depending on
the intended use of the derivative instrument. The initial application of SFAS
133 will be reported as the effect of a change in accounting principle. SFAS
133, as amended, is effective for all fiscal quarters of fiscal years beginning
after June 15, 2000. The Company will adopt the requirements of SFAS 133 in its
financial statements for the three months ending March 31, 2001. The Company
has not yet determined the effect that the adoption of SFAS 133 will have on its
consolidated financial statements.
YEAR 2000 COMPLIANCE
The year 2000 problem is the result of computer programs having been written
using two digits (rather than four) to define the applicable year. Any of our
computer programs that have date-sensitive software may recognize a date using
"00" as 1900 rather than the year 2000, or may not recognize the date at all.
This could result in a system failure or miscalculations causing disruption of
operations including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.
In 1997 we established a year 2000 project to ensure that the issue received
appropriate priority and that necessary resources were made available. This
project includes the replacement of our worldwide business computer systems with
systems that use programs primarily from J.D. Edwards, Inc. The new systems are
expected to make approximately 90% of our business computer systems year 2000
compliant and are in production today. Remaining business software programs,
including those supplied by vendors, will be made year 2000 compliant through
the year 2000 project or they will be retired. None of our other information
technology projects has been delayed due to the implementation of the year 2000
project.
Our year 2000 project is divided into the following phases: (1) inventorying
year 2000 items; (2) assigning priorities to identified items; (3) assessing the
year 2000 compliance of items determined to be material to us; (4) repairing or
replacing material items that are determined not to be year 2000 compliant; (5)
testing material items; and (6) designing and implementing contingency and
business continuation plans for each organization and company location. We have
completed the inventory, priority assessment and compliance assessment phases.
We are now continuing with the testing phase of the year 2000 project. All
critical broadcast equipment and non-information technology related equipment
has been tested and is either year 2000 compliant or has been designated as year
2000 ready. A year 2000 ready designation implies the equipment or system will
function without adverse effects beyond year 2000 but may not be aware of the
century. All critical information technology systems have been designated year
2000 compliant or are scheduled to be retired or remediated by November 1999.
The testing phase is ongoing as hardware or system software is remediated,
upgraded or replaced. Testing as well as remediation is scheduled for
completion in November 1999. The final phase of our year 2000 project,
contingency planning, will be completed and tested to the extent possible by
November 1999.
We have expended approximately $7.5 million on the year 2000 project through
September 30, 1999, of which approximately $6.8 million related to the
implementation of the J.D. Edwards Systems and related hardware. Funds for the
year 2000 project are provided from a separate budget of approximately $0.4
million for all remaining items.
29
<PAGE>
The failure to correct a material year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect our results of
operations, liquidity and financial condition. Due to the general uncertainty
inherent in the year 2000 problem, resulting in part from the uncertainty of the
year 2000 readiness of third-party suppliers and customers, we are unable to
determine at this time whether the consequences of year 2000 failures will have
a material impact on our results of operations, liquidity or financial
condition. The year 2000 project is expected to significantly reduce our level
of uncertainty about the year 2000 problem and, in particular, about the year
2000 compliance and readiness of our material business partners. We believe
that, with the implementation of new business systems and completion of the
project as scheduled, the possibility of significant interruptions of normal
operations should be reduced.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company, as a result of its international operating, investing and
financing activities, is exposed to market risks, which include changes in
foreign currency exchange rates and interest rates which may adversely affect
its results of operations and financial position. In seeking to minimize the
risks and/or costs associated with such activities, the Company manages exposure
to changes in interest rates and foreign currency exchange rates.
Certain financial instruments used to obtain capital are subject to market
risks from fluctuations in market 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 1999 would not have a
material effect on the Company's consolidated financial results.
The majority of our foreign currency transactions are denominated in the
British pound sterling, which is the functional currency of CTI. As these
contracts are denominated and settled in the functional currency, risks
associated with currency fluctuations are minimized to foreign currency
translation adjustments. The Company does not currently hedge against foreign
currency translation risks and believes that foreign currency exchange risk is
not significant to its operations.
30
<PAGE>
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On March 31, 1999, the Company contributed via its wholly owned subsidiary,
CCA Investment Corp. ("CCA"), 15,597,783 shares of common stock of the Company
along with $250.0 million in cash to a joint venture ("Crown Atlantic") between
CCA and Cellco Partnership, a Delaware general partnership doing business as
Bell Atlantic Mobile ("BAM"), which owns and operates the wireless communication
towers contributed by BAM to Crown Atlantic. The common stock contributed by
CCA to Crown Atlantic was valued at $197.0 million for purposes of structuring
the transaction. CCA has approximately a 61.5% membership interest in Crown
Atlantic and BAM has approximately a 38.5% membership interest in Crown Atlantic
along with a .001% interest in Crown Atlantic's operating subsidiary. BAM
contributed 1,322 towers along with related assets and liabilities to Crown
Atlantic plus the economic benefit of 136 towers and was distributed $380.0
million in cash. BAM has entered into a global lease for space on the towers
contributed to Crown Atlantic. Crown Atlantic has also entered into a build-to
suit agreement with BAM as to 500 towers for the BAM wireless communication
business and has a right of first refusal on the Company's next 300 build-to-
suit tower opportunities not affiliated with BAM within the region of the
contributed towers. The stock was issued and contributed in an exempt
transaction pursuant to Section 4(2) of the Securities Act of 1933, as amended
(the "Act").
On June 15, 1999, the Company issued 5,520,605 shares of common stock to
Digital Future Investments B.V. ("DFI"), a subsidiary of TeleDiffusion de France
International S.A. ("TDF"), pursuant to preemptive rights contained in the
Governance Agreement between the Company, TDF and DFI. DFI acquired 5,395,539
shares at $12.63 per share pursuant to its preemptive right relating to the
Company's joint venture with BAM which closed on March 31, 1999. The additional
125,066 shares were issued to DFI at $13.00 per share pursuant to its preemptive
right relating to the acquisition of Millennium Communications Limited by CTI in
October 1998. The shares were issued in an exempt transaction pursuant to
Section 4(2) of the Act.
On July 20, 1999, the Company issued 8,351,791 shares of common stock to DFI
pursuant to its preemptive rights relating to the Company's public offering of
common stock in May 1999. The shares were acquired at a price of $16.80. The
shares were issued in an exempt transaction pursuant to Section 4(2) of the Act.
The Company has also issued 7,129,733 shares of common stock to
TeleAggregation Group Inc. ("BellSouth"), an affiliate of BellSouth Corporation,
pursuant to five closings relating to the Agreement to Sublease ("Agreement of
Sublease") dated June 1, 1999 among BellSouth Mobility Inc., BellSouth
Telecommunications, Inc., the transferring entities named therein, the Company
and Crown Castle South Inc. (a wholly owned subsidiary of the Company). The
transactions pursuant to the Agreement of Sublease will involve a series of
closings with approximately 30% of the consideration being Company common stock.
The Company contemplates that up to 9.1 million shares of Company common stock
will be issued to BellSouth pursuant to the Agreement of Sublease. BellSouth was
issued 1,104,814 shares on June 1, 1999, 235,694 shares on June 16, 1999,
1,163,737 shares on July 1, 1999, 93,295 shares on August 3, 1999 and 4,532,193
shares on September 30,1999. The shares were issued in an exempt transaction
pursuant to Section 4(2) of the Act.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS:
4.1 Amendment Number Three, dated as of August 11, 1999, to Stockholders
Agreement between Crown Castle International Corp. and certain
stockholders listed on Schedule 1 thereto, dated as of August 21,
1998
31
<PAGE>
4.2 Amendment Number Four, dated as of October 1, 1999, to Stockholders
Agreement between Crown Castle International Corp. and certain
stockholders listed on Schedule 1 thereto, dated as of August 21,
1998
11.1 Computation of Net Loss Per Common Share
27.1 Financial Data Schedule
(B) REPORTS ON FORM 8-K:
The Registrant filed a Current Report on Form 8-K dated July 12, 1999 and
filed with the SEC on July 13, 1999 reporting under Item 5 thereof the
execution of a letter agreement with BellSouth DCS for the Sublease of its
towers.
The Registrant filed a Current Report on Form 8-K dated July 22, 1999 and
filed with the SEC on July 22, 1999 reporting under Item 5 thereof the exercise
of preemptive rights to purchase shares of the Company's common stock by
TeleDiffusion de France International S.A.
The Registrant filed a Current Report on Form 8-K dated September 14, 1999
and filed with the SEC on October 12, 1999 reporting (i) under Item 5 thereof
the execution of an agreement with GECC under which GECC has agreed to purchase
shares of the Company's Convertible Preferred Stock; and (ii) under Item 7
thereof certain pro forma financial statements for the Company.
32
<PAGE>
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 12, 1999 By: /s/ CHARLES C. GREEN, III
---------------------------------
Charles C. Green, III
Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
Date: November 12, 1999 By: /s/ WESLEY D. CUNNINGHAM
---------------------------------
Wesley D. Cunningham
Senior Vice President, Corporate Controller
and Chief Accounting Officer
(Principal Accounting Officer)
33
<PAGE>
EXHIBIT 4.1
AMENDMENT NUMBER THREE
TO STOCKHOLDERS AGREEMENT
AMENDMENT, dated as of August 11, 1999, to the Stockholders Agreement (the
"Stockholders Agreement") dated as of August 21, 1998, as previously amended by
amendments number one and two, among CROWN CASTLE INTERNATIONAL CORP., a
Delaware corporation (the "Company") and each of the STOCKHOLDERS of the Company
listed on Schedule I thereto (collectively, the "Stockholders" and each
individually, a "Stockholder");
WHEREAS, Robert A. Crown, Barbara A. Crown, RC Investors Corp., BC
Investors Corp., the Grantor Retained Annuity Trust of Robert A. Crown, the
Grantor Retained Annuity Trust of Barbara A. Crown, RACG Holdings LLC, BACG
Holdings LLC and Crown Management Services (collectively, the "Crown Group") and
the Company have entered into an agreement dated August 5, 1999 (the "Crown
Agreement") with respect to certain separation arrangements involving the Crown
Group;
WHEREAS, the Company and the Crown Group have proposed to enter into
certain transactions (the "DECS Transactions") involving the issuance and sale
by DECS Trust V, a Delaware business trust (the "DECS Trust"), of a minimum of
5,000,000 and a maximum of 5,645,000 DECS securities as set forth in greater
detail in the registration statement on Form N-2 (Registration No. 333-83965)
filed by the DECS Trust with the Securities and Exchange Commission and in an
Underwriting Agreement among the DECS Trust, the Company, the Crown Group,
Salomon Smith Barney Inc. and Goldman, Sachs & Co. and four Forward Purchase
Agreements among RC Investors, BC Investors, BACG and RACG, respectively, and
the DECS Trust;
WHEREAS, the Crown Group entered into the Crown Agreement in part as
consideration for participation by the Company in the consummation of the DECS
Transactions;
WHEREAS, pursuant to Section 6.04 of the Stockholders Agreement, the
Stockholders Agreement may be amended by the mutual agreement of the parties
thereto;
WHEREAS, the Company and the Stockholders (including Robert A. Crown and
Barbara A. Crown) have agreed to amend the Stockholders Agreement in the manner
hereinafter set forth;
NOW, THEREFORE, in consideration of the promises and the respective
agreements, acknowledgments and confirmations hereinafter set forth and set
forth in the Stockholders Agreement, the parties hereto agree as follows:
<PAGE>
SECTION 1. Amendment. (a) The Company and the Stockholders hereby agree
that all rights, responsibilities or other obligations of any kind or nature
whatsoever relating to the Crown Group and arising under the Stockholders
Agreement other than the rights of the Crown Group as set forth in Section 3.10
of the Stockholders Agreement shall hereby be terminated, including, without
limitation, the Crown Group's existing obligation (as set forth in Section 3.05
of the Stockholders Agreement) to vote or act by written consent in favor of, or
against, the election of any persons nominated to be a Director of the Company.
(b) Section 3.10 of the Stockholders Agreement is amended to read as
follows:
"SECTION 3.10. Company Name. So long as the Ownership Interest of the
Crown Group is at least 1% or they otherwise consent in writing, the
Company covenants and agrees (subject to the limitations below) to use its
best efforts to (i) retain a name beginning with "Crown Castle", (ii)
retain or cause the name of its principal affiliate owning communication
towers in the United States to begin with "Crown," (iii) upon a merger,
consolidation, amalgamation, roll-up or any other transaction with a
similar effect involving the Company (including, without limitation, a
merger or roll-up involving Castle Transmission Services (Holdings) Ltd. or
any of its Affiliates), cause the successor or surviving entity to retain
or have a name beginning with "Crown Castle," (iv) cause the corporate
names of all of the Company's subsidiaries conducting significant business
in the United States to begin with "Crown" other than The TEA Group Inc.,
TeleStructures Inc. and Spectrum Site Management Corporation and any other
subsidiary with goodwill associated with the corporate name as determined
by the Board in its reasonable discretion, and (v) cause Crown Castle and
all of its subsidiaries worldwide to retain the "CCIC Logo". For purposes
of this Agreement, the "CCIC Logo" shall be a logo in the form attached
hereto as Exhibit "A" which is incorporated herein by reference.
Notwithstanding the above, the above covenants and agreement shall not (a)
require the Company (including any successor entity), any stockholder of
the Company or member of the Board to incur any costs, expenses or losses
of any nature or amount including, without limitation, losses relating to
potential corporate opportunity or foregone stockholder value (price,
content or any other item), (b) prevent or delay the Company (including any
successor entity) from consummating or negotiating any proposed transaction
or (c) require any member of the Board to breach any duty and obligation to
the Company or its stockholders. Consent of the Crown Group shall be
deemed given if written consent is obtained from members of the Crown Group
holding more than 50% of the Common Stock held by such persons at the time
of the determination."
SECTION 2. Acknowledgments. The Company and each Stockholder acknowledges
and confirms the following:
<PAGE>
(a) For purposes solely of Section 3.10 of the Stockholders
Agreement, the Crown Group shall be deemed to retain their
Ownership Interest in the Shares subject to the DECS Transactions
(the "DECS Shares"), so long as either (i) the Crown Group
retains beneficial ownership of the DECS Shares or (ii) the DECS
Shares continue to be held by a custodian pursuant to the terms
of the Forward Purchase Agreements.
(b) In connection with the DECS Transactions, the Crown Group has
complied in all respects with its obligations under the
provisions of Article II of the Stockholders Agreement.
(c) Any tag-along or transfer rights or other restrictions (as set
forth in Article V of the Stockholders Agreement) with respect to
any present or future sale of the Shares in connection with the
Crown Group's DECS Transactions and any right to register Company
securities (as set forth in Article IV of the Stockholders
Agreement) by means of the DECS Registration Statement filed as
part of the Crown Group's DECS Transactions have been waived by
such Stockholder.
SECTION 3. Construction: Continuing Effect. This Agreement shall be
construed in connection with and as part of the Stockholders Agreement and each
reference to the Stockholders Agreement contained in any other document shall
mean the Stockholders Agreement as amended hereby. As amended hereby, the
Stockholders Agreement shall continue in full force and effect. Terms used but
not defined in this Amendment Number Three to Stockholders Agreement shall have
the meaning ascribed to such term in the Stockholders Agreement.
SECTION 4. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but which together shall
constitute but one instrument. It shall not be necessary for each party to sign
each counterpart so long as every party has signed at least one counterpart.
IN WITNESS WHEREOF, each party hereto has executed this Agreement as of the
day and year first above written.
<PAGE>
CROWN CASTLE INTERNATIONAL CORP.
Amendment Number Three to Stockholders Agreement
August ____, 1999 CROWN CASTLE INTERNATIONAL CORP.
By: ____________________________________
Name:
Title:
<PAGE>
CROWN CASTLE INTERNATIONAL CORP.
Amendment Number Three to Stockholders Agreement
August ____, 1999 TELEDIFFUSION DE FRANCE
INTERNATIONAL S.A.
By: ____________________________________
Name:
Title:
August ____, 1999 DIGITAL FUTURE INVESTMENTS B.V.
By: ____________________________________
Name:
Title:
<PAGE>
CROWN CASTLE INTERNATIONAL CORP.
Amendment Number Three to Stockholders Agreement
August ____, 1999 CANDOVER INVESTMENTS, PLC
By: ____________________________________
Name:
Title:
August ____, 1999 CANDOVER (TRUSTEES) LIMITED
By: ____________________________________
Name:
Title:
August ____, 1999 CANDOVER PARTNERS LIMITED
(as general partner of the Candover 1994
UK Limited Partnership)
By: ____________________________________
Name:
Title:
August ____, 1999 CANDOVER PARTNERS LIMITED
(as general partner of the Candover 1994
UK No. 2 Limited Partnership)
By: ____________________________________
Name:
Title:
<PAGE>
August ____, 1999 CANDOVER PARTNERS LIMITED
(as general partner of the Candover 1994
US No. 1 Limited Partnership)
By: ____________________________________
Name:
Title:
CROWN CASTLE INTERNATIONAL CORP.
Amendment Number Three to Stockholders Agreement
August ____, 1999 CANDOVER PARTNERS LIMITED
(as general partner of the Candover 1994
US No. 2 Limited Partnership)
By: ____________________________________
Name:
Title:
<PAGE>
CROWN CASTLE INTERNATIONAL CORP.
Amendment Number Three to Stockholders Agreement
August____, 1999 _________________________________________
TED B. MILLER, JR.
August ____, 1999 _________________________________________
ROBERT H. SINGLETON, Trustee
The Miller 1996 Gift Trusts
<PAGE>
CROWN CASTLE INTERNATIONAL CORP.
Amendment Number Three to Stockholders Agreement
August____, 1999 ____________________________________
ROBERT A. CROWN
August ____, 1999 ____________________________________
BARBARA A. CROWN
August ____, 1999 RC INVESTORS CORP.
a Delaware corporation
By: ________________________________
Name: ______________________________
Title: _______________________________
August ____, 1999 BC INVESTORS CORP.
a Delaware corporation
By: ________________________________
Name: ______________________________
Title: _______________________________
August ____, 1999 RACG Holdings LLC
Limited Liability Company
By: ________________________________
Name: ______________________________
Title: _______________________________
August ____, 1999 BACG Holdings LLC
Limited Liability Company
By: ________________________________
Name: ______________________________
Title: _______________________________
<PAGE>
CROWN CASTLE INTERNATIONAL CORP.
Amendment Number Three to Stockholders Agreement
August ____, 1999 BERKSHIRE FUND III,
A LIMITED PARTNERSHIP
By: ____________________________________
a Managing Member
August ____, 1999 BERKSHIRE FUND IV,
LIMITED PARTNERSHIP
By: ____________________________________
a Managing Member
August ____, 1999 BERKSHIRE INVESTORS LLC
By: ____________________________________
a Managing Member
<PAGE>
CROWN CASTLE INTERNATIONAL CORP.
Amendment Number Three to Stockholders Agreement
August ____, 1999 NASSAU CAPITAL PARTNERS II, L.P.
By Nassau Capital L.L.C.,
its General Partner
By: ____________________________________
Name:
Title:
August ____, 1999 NAS PARTNERS I, L.L.C.
By: ____________________________________
Name:
Title:
<PAGE>
CROWN CASTLE INTERNATIONAL CORP.
Amendment Number Three to Stockholders Agreement
August ____, 1999 FAY, RICHWHITE COMMUNICATIONS
LIMITED
By: ____________________________________
Name:
Title:
<PAGE>
CROWN CASTLE INTERNATIONAL CORP.
Amendment Number Three to Stockholders Agreement
August ____, 1999 PNC VENTURE CORP.
By: ____________________________________
Name:
Title:
<PAGE>
CROWN CASTLE INTERNATIONAL CORP.
Amendment Number Three to Stockholders Agreement
August ____, 1999 NEW YORK LIFE INSURANCE COMPANY
By: ____________________________________
Name:
Title:
<PAGE>
CROWN CASTLE INTERNATIONAL CORP.
Amendment Number Three to Stockholders Agreement
August ____, 1999 HARVARD PRIVATE CAPITAL
HOLDINGS, INC.
By: ____________________________________
Name:
Title:
<PAGE>
CROWN CASTLE INTERNATIONAL CORP.
Amendment Number Three to Stockholders Agreement
August ____, 1999 AMERICAN HOME ASSURANCE COMPANY
By: ____________________________________
Name:
Title:
<PAGE>
CROWN CASTLE INTERNATIONAL CORP.
Amendment Number Three to Stockholders Agreement
August ____, 1999 THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
By: ____________________________________
Name:
Title:
<PAGE>
CROWN CASTLE INTERNATIONAL CORP.
Amendment Number Three to Stockholders Agreement
August ____, 1999 CENTENNIAL FUND IV, L.P.
By: Centennial Holdings V, L.P.
its general partner
By: ____________________________________
Name:
Title:
August ____, 1999 CENTENNIAL FUND V, L.P.
By: Centennial Holdings V, L.P.
its general partner
By: ____________________________________
Name:
Title:
August ____, 1999 CENTENNIAL ENTREPRENEURS FUND V, L.P.
By: Centennial Holdings V, L.P.
its general partner
By: ____________________________________
Name:
Title:
<PAGE>
CROWN CASTLE INTERNATIONAL CORP.
Amendment Number Three to Stockholders Agreement
August ____, 1999 PRIME VIII, L.P.
By: Prime SKA I, LLC
its general partner
By: ____________________________________
Name:
Title:
<PAGE>
EXHIBIT 4.2
AMENDMENT NUMBER FOUR
TO STOCKHOLDERS AGREEMENT
AMENDMENT, dated effective October 1, 1999, to the Stockholders Agreement
(the "Stockholders Agreement") dated as of August 21, 1998, among CROWN CASTLE
INTERNATIONAL CORP., a Delaware corporation (the "Company") and each of the
STOCKHOLDERS of the Company listed on Schedule I thereto (collectively, the
"Stockholders" and each individually, a "Stockholder");
WHEREAS, the Company and the Stockholders desire to amend the Stockholders
Agreement to provide that Shares distributed by a Stockholder to a partner,
member, stockholder or beneficiary of such Stockholder shall cease to be a
subject to the Stockholders Agreement and the distribution of such Shares shall
not cause the distributee to be a Stockholder;
WHEREAS, pursuant to Section 6.04 of the Stockholders Agreement, the
Stockholders Agreement may be amended by the mutual agreement of the parties
thereto; and
WHEREAS, the Company and the Stockholders have agreed to amend the
Stockholders Agreement in the manner hereinafter set forth.
NOW, THEREFORE, in consideration of the promises and the respective
agreements, acknowledgments and confirmations hereinafter set forth and set
forth in the Stockholders Agreement, the parties hereto agree as follows:
SECTION 1. Amendment.
(a) Section 2.05 of the Agreement is amended and restated to read as
follows:
"SECTION 2.05. Certain Transferees to Execute Agreement. Each
Stockholder agrees that it will not, directly or indirectly, sell or
otherwise transfer any Shares held by such Stockholder to any of its
Affiliates or permitted transferees, unless, prior to the consummation of
any such sale or transfer, the Affiliate or permitted transferee to whom
such sale or transfer is proposed to be made (a "Prospective Transferee")
(i) executes and delivers to the Company and each other party to this
Agreement a counterpart hereof and (ii) represents and warrants in writing
to the Company that such counterpart has been duly authorized, executed and
delivered by such Prospective Transferee and is a legal, valid and binding
obligation of such Prospective Transferee enforceable against it in
accordance with its terms, subject to insolvency, bankruptcy and other laws
affecting creditors generally. Upon the execution and delivery by such
Prospective Transferee of the documents referred to in the preceding
sentence, such Prospective Transferee shall be
<PAGE>
deemed a "Stockholder" for the purposes of this Agreement, and shall have
the rights and be subject to the obligations of a Stockholder hereunder
with respect to the Shares held by such Prospective Transferee. The
provisions of this Section 2.05 shall not apply to any distribution of
Shares by a Stockholder to its partners (in the case of a partnership),
members (in the case of a limited liability company), stockholders (in the
case of a corporation) or beneficiaries (in the case of a trust) of such
Stockholder whether or not the distributee is a Stockholder, Affiliate or
permitted transferee."
(b) Section 2.06 of the Agreement is amended and restated to read as
follows:
"SECTION 2.06. Sale to a Third Party; Distributions. If a sale or
transfer of Shares is made by a Stockholder to a third party (except for
transfers within the TDF Group, the Berkshire Group, the Centennial Group,
the Candover Group, the Nassau Group or otherwise to an Affiliate or to any
permitted transferee) (a "Third Party Transferee"), such Shares shall
immediately cease to be subject to this Agreement and such Third Party
Transferee will not become a Stockholder for purposes of this Agreement.
If a sale or transfer of Shares results in the selling Stockholder or a
permitted transferee ceasing to own any Shares, such selling Stockholder
shall cease to be a Stockholder for purposes of this Agreement. If a
Stockholder distributes Shares to any of its partners (in the case of a
partnership), members (in the case of a limited liability company),
stockholders (in the case of a corporation) or beneficiaries (in the case
of a trust), such Shares shall immediately cease to be subject to this
Agreement (whether or not the distributee is a Stockholder, a member of the
TDF Group, the Berkshire Group, the Centennial Group, the Candover Group,
the Nassau Group, an Affiliate or a permitted transferee) and such partner,
member, stockholder or beneficiary will not become a Stockholder for
purposes of this Agreement as a result of such distribution."
SECTION 3. Construction: Continuing Effect. This Agreement shall be
construed in connection with and as part of the Stockholders Agreement and each
reference to the Stockholders Agreement contained in any other document shall
mean the Stockholders Agreement as amended hereby. As amended hereby, the
Stockholders Agreement shall continue in full force and effect. Terms used but
not defined in this Amendment Number Four to Stockholders Agreement shall have
the meaning ascribed to such term in the Stockholders Agreement.
SECTION 4. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but which together shall
constitute but one instrument. It shall not be necessary for each party to sign
each counterpart so long as every party has signed at least one counterpart.
IN WITNESS WHEREOF, each party hereto has executed this Agreement effective
as of the day and year first above written.
<PAGE>
CROWN CASTLE INTERNATIONAL CORP.
Amendment Number Four to Stockholders Agreement
August ____, 1999 CROWN CASTLE INTERNATIONAL CORP.
By: ____________________________________
Name:
Title:
<PAGE>
CROWN CASTLE INTERNATIONAL CORP.
Amendment Number Four to Stockholders Agreement
August ____, 1999 TELEDIFFUSION DE FRANCE
INTERNATIONAL S.A.
By: ____________________________________
Name:
Title:
August ____, 1999 DIGITAL FUTURE INVESTMENTS B.V.
By: ____________________________________
Name:
Title:
<PAGE>
CROWN CASTLE INTERNATIONAL CORP.
Amendment Number Four to Stockholders Agreement
August ____, 1999 CANDOVER INVESTMENTS, PLC
By: ____________________________________
Name:
Title:
August ____, 1999 CANDOVER (TRUSTEES) LIMITED
By: ____________________________________
Name:
Title:
August ____, 1999 CANDOVER PARTNERS LIMITED
(as general partner of the Candover 1994
UK Limited Partnership)
By: ____________________________________
Name:
Title:
August ____, 1999 CANDOVER PARTNERS LIMITED
(as general partner of the Candover 1994
UK No. 2 Limited Partnership)
By: ____________________________________
Name:
Title:
<PAGE>
August ____, 1999 CANDOVER PARTNERS LIMITED
(as general partner of the Candover 1994
US No. 1 Limited Partnership)
By: ____________________________________
Name:
Title:
<PAGE>
CROWN CASTLE INTERNATIONAL CORP.
Amendment Number Four to Stockholders Agreement
August ____, 1999
CANDOVER PARTNERS LIMITED
(as general partner of the Candover 1994
US No. 2 Limited Partnership)
By: ____________________________________
Name:
Title:
<PAGE>
CROWN CASTLE INTERNATIONAL CORP.
Amendment Number Four to Stockholders Agreement
August ____, 1999 _________________________________________
TED B. MILLER, JR.
August ____, 1999 _________________________________________
ROBERT H. SINGLETON, Trustee
The Miller 1996 Gift Trusts
<PAGE>
CROWN CASTLE INTERNATIONAL CORP.
Amendment Number Four to Stockholders Agreement
August____, 1999 ____________________________________
ROBERT A. CROWN
August ____, 1999 ____________________________________
BARBARA A. CROWN
August ____, 1999 RC INVESTORS CORP.
a Delaware corporation
By: ________________________________
Name: ______________________________
Title: _______________________________
August ____, 1999 BC INVESTORS CORP.
a Delaware corporation
By: ________________________________
Name: ______________________________
Title: _______________________________
August ____, 1999 RACG Holdings LLC
Limited Liability Company
By: ________________________________
Name: ______________________________
Title: _______________________________
August ____, 1999 BACG Holdings LLC
Limited Liability Company
By: ________________________________
Name: ______________________________
Title: _______________________________
<PAGE>
CROWN CASTLE INTERNATIONAL CORP.
Amendment Number Four to Stockholders Agreement
August ____, 1999 BERKSHIRE FUND III,
A LIMITED PARTNERSHIP
By: ____________________________________
a Managing Member
August ____, 1999 BERKSHIRE FUND IV,
LIMITED PARTNERSHIP
By: ____________________________________
a Managing Member
August ____, 1999 BERKSHIRE INVESTORS LLC
By: ____________________________________
a Managing Member
<PAGE>
CROWN CASTLE INTERNATIONAL CORP.
Amendment Number Four to Stockholders Agreement
August ____, 1999 NASSAU CAPITAL PARTNERS II, L.P.
By Nassau Capital L.L.C.,
its General Partner
By: ____________________________________
Name:
Title:
August ____, 1999 NAS PARTNERS I, L.L.C.
By: ____________________________________
Name:
Title:
<PAGE>
CROWN CASTLE INTERNATIONAL CORP.
Amendment Number Four to Stockholders Agreement
August ____, 1999 FAY, RICHWHITE COMMUNICATIONS
LIMITED
By: ____________________________________
Name:
Title:
<PAGE>
CROWN CASTLE INTERNATIONAL CORP.
Amendment Number Four to Stockholders Agreement
August ____, 1999 PNC VENTURE CORP.
By: ____________________________________
Name:
Title:
<PAGE>
CROWN CASTLE INTERNATIONAL CORP.
Amendment Number Four to Stockholders Agreement
August ____, 1999 NEW YORK LIFE INSURANCE COMPANY
By: ____________________________________
Name:
Title:
<PAGE>
CROWN CASTLE INTERNATIONAL CORP.
Amendment Number Four to Stockholders Agreement
August ____, 1999 HARVARD PRIVATE CAPITAL
HOLDINGS, INC.
By: ____________________________________
Name:
Title:
<PAGE>
CROWN CASTLE INTERNATIONAL CORP.
Amendment Number Four to Stockholders Agreement
August ____, 1999 AMERICAN HOME ASSURANCE COMPANY
By: ____________________________________
Name:
Title:
<PAGE>
CROWN CASTLE INTERNATIONAL CORP.
Amendment Number Four to Stockholders Agreement
August ____, 1999 THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
By: ____________________________________
Name:
Title:
<PAGE>
CROWN CASTLE INTERNATIONAL CORP.
Amendment Number Four to Stockholders Agreement
August ____, 1999 CENTENNIAL FUND IV, L.P.
By: Centennial Holdings V, L.P.
its general partner
By: ____________________________________
Name:
Title:
August ____, 1999 CENTENNIAL FUND V, L.P.
By: Centennial Holdings V, L.P.
its general partner
By: ____________________________________
Name:
Title:
August ____, 1999 CENTENNIAL ENTREPRENEURS FUND V, L.P.
By: Centennial Holdings V, L.P.
its general partner
By: ____________________________________
Name:
Title:
<PAGE>
CROWN CASTLE INTERNATIONAL CORP.
Amendment Number Four to Stockholders Agreement
August ____, 1999 PRIME VIII, L.P.
By: Prime SKA I, LLC
its general partner
By: ____________________________________
Name:
Title:
<PAGE>
EXHIBIT 11.1
CROWN CASTLE INTERNATIONAL CORP.
COMPUTATION OF NET LOSS PER COMMON SHARE
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- ---------------------------
1998 1999 1998 1999
---------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
(In thousands of dollars, except per share amounts)
Loss before cumulative effect of change in $(17,444) $(27,067) $(30,476) $(61,390)
accounting principle
Dividends on preferred stock (216) (6,824) (4,348) (19,846)
-------- -------- -------- --------
Loss before cumulative effect of change in (17,660) (33,891) (34,824) (81,236)
accounting principle applicable to common stock
for basic and diluted computations
Cumulative effect of change in accounting principle -- -- -- (2,414)
-------- -------- -------- --------
Net loss applicable to common stock for basic and $(17,660) $(33,891) $(34,824) $(83,650)
diluted computations ======== ======== ======== ========
Weighted-average number of common shares 53,879 149,621 25,262 123,067
outstanding during the period for basic and diluted ======== ======== ======== ========
computations (in thousands)
Per common share - basic and diluted:
Loss before cumulative effect of change in $ (0.33) $ (0.23) $ (1.38) $ (0.66)
accounting principle
Cumulative effect of change in accounting -- -- -- (0.02)
principle -------- -------- -------- --------
Net loss $ (0.33) $ (0.23) $ (1.38) $ (0.68)
======== ======== ======== ========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's consolidated balance sheet and consolidated statement of operations
and is qualified in its entirety by reference to such consolidated financial
statements togther with the related footnotes thereto.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 492,159
<SECURITIES> 0
<RECEIVABLES> 39,998
<ALLOWANCES> 971
<INVENTORY> 15,316
<CURRENT-ASSETS> 574,803
<PP&E> 2,435,412
<DEPRECIATION> 88,395
<TOTAL-ASSETS> 3,581,633
<CURRENT-LIABILITIES> 105,134
<BONDS> 1,478,767
220,909
0
<COMMON> 1,562
<OTHER-SE> 1,656,117
<TOTAL-LIABILITY-AND-EQUITY> 3,581,633
<SALES> 0
<TOTAL-REVENUES> 231,563
<CGS> 0
<TOTAL-COSTS> 104,887
<OTHER-EXPENSES> 127,065
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 72,348
<INCOME-PRETAX> (59,935)
<INCOME-TAX> 268
<INCOME-CONTINUING> (61,390)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (2,414)
<NET-INCOME> (63,804)
<EPS-BASIC> (0.68)
<EPS-DILUTED> (0.68)
</TABLE>
