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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2001
Commission File Number 000-24737
----------------
CROWN CASTLE INTERNATIONAL CORP.
(Exact name of registrant as specified in its charter)
Delaware 76-0470458
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
510 Bering Drive 77057-1457
Suite 500 (Zip Code)
Houston, Texas
(Address of principal executive
offices)
(713) 570-3000
(Registrant's telephone number, including area code)
----------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [_]
Number of shares of common stock outstanding at August 1, 2001: 214,530,852
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CROWN CASTLE INTERNATIONAL CORP.
INDEX
Page
----
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet at December 31, 2000 and June 30, 2001........ 3
Consolidated Statement of Operations and Comprehensive Loss for the three
and six months ended June 30, 2000 and 2001............................. 4
Consolidated Statement of Cash Flows for the six months ended June 30,
2000 and 2001........................................................... 5
Condensed Notes to Consolidated Financial Statements..................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................... 17
Item 3. Quantitative and Qualitative Disclosures About Market Risk........ 26
PART II--OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders............... 27
Item 6. Exhibits and Reports on Form 8-K.................................. 27
Signatures................................................................ 28
2
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands of dollars, except share amounts)
December 31, June 30,
2000 2001
------------ -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents........................... $ 453,833 $ 659,034
Receivables:
Trade, net of allowance for doubtful accounts of
$18,722 and $24,964 at December 31, 2000 and June
30, 2001, respectively........................... 168,184 198,746
Other............................................. 4,942 2,660
Short-term investments.............................. 38,000 37,500
Inventories......................................... 78,640 160,149
Prepaid expenses and other current assets........... 28,535 29,152
---------- ----------
Total current assets.............................. 772,134 1,087,241
Property and equipment, net of accumulated
depreciation of $305,520 and $415,738 at December
31, 2000 and June 30, 2001, respectively............ 4,303,037 4,694,745
Investments.......................................... 137,000 100,000
Escrow deposit for investment in affiliate........... -- 362,020
Goodwill and other intangible assets, net of
accumulated amortization of $101,085 and $131,910 at
December 31, 2000 and June 30, 2001, respectively... 1,112,876 1,079,778
Deferred financing costs and other assets, net of
accumulated amortization of $10,733 and $15,619 at
December 31, 2000 and June 30, 2001, respectively... 114,794 148,042
---------- ----------
$6,439,841 $7,471,826
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................... $ 100,766 $ 93,928
Accrued interest.................................... 47,604 38,809
Accrued compensation and related benefits........... 11,901 8,246
Deferred rental revenues and other accrued
liabilities........................................ 164,605 267,607
---------- ----------
Total current liabilities......................... 324,876 408,590
Long-term debt....................................... 2,602,687 3,354,844
Other liabilities.................................... 93,354 120,569
---------- ----------
Total liabilities................................. 3,020,917 3,884,003
---------- ----------
Commitments and contingencies
Minority interests................................... 155,344 169,252
Redeemable preferred stock........................... 842,718 860,248
Stockholders' equity:
Common stock, $.01 par value; 690,000,000 shares
authorized; shares issued: December 31, 2000--
198,912,094 and June 30, 2001--214,519,352......... 1,989 2,145
Additional paid-in capital.......................... 2,894,095 3,272,129
Accumulated other comprehensive loss................ (25,100) (73,271)
Accumulated deficit................................. (450,122) (642,680)
---------- ----------
Total stockholders' equity........................ 2,420,862 2,558,323
---------- ----------
$6,439,841 $7,471,826
========== ==========
See condensed notes to consolidated financial statements.
3
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)
(In thousands of dollars, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- --------------------
2000 2001 2000 2001
-------- --------- --------- ---------
Net revenues:
Site rental and broadcast
transmission..................... $109,503 $ 139,800 $ 203,244 $ 273,842
Network services and other........ 38,856 89,616 69,359 168,527
-------- --------- --------- ---------
148,359 229,416 272,603 442,369
-------- --------- --------- ---------
Operating expenses:
Costs of operations (exclusive of
depreciation and amortization):
Site rental and broadcast
transmission.................... 48,563 59,555 88,850 117,294
Network services and other....... 20,007 63,551 35,908 119,007
General and administrative........ 19,495 30,465 34,348 56,360
Corporate development............. 2,122 3,758 4,193 7,211
Asset write-down charges.......... -- 12,272 -- 12,272
Non-cash general and
administrative compensation
charges.......................... 350 1,380 811 2,775
Depreciation and amortization..... 56,647 74,756 101,769 148,847
-------- --------- --------- ---------
147,184 245,737 265,879 463,766
-------- --------- --------- ---------
Operating income (loss)............ 1,175 (16,321) 6,724 (21,397)
Other income (expense):
Interest and other income
(expense)........................ 6,665 4,544 12,369 7,636
Interest expense and amortization
of deferred financing costs...... (66,728) (73,175) (108,489) (139,830)
-------- --------- --------- ---------
Loss before income taxes, minority
interests and extraordinary item.. (58,888) (84,952) (89,396) (153,591)
Provision for income taxes......... (25) -- (36) (60)
Minority interests................. (317) 219 (1,858) 863
-------- --------- --------- ---------
Loss before extraordinary item..... (59,230) (84,733) (91,290) (152,788)
Extraordinary item--loss on early
extinguishment of debt............ -- -- (1,495) --
-------- --------- --------- ---------
Net loss........................... (59,230) (84,733) (92,785) (152,788)
Dividends on preferred stock....... (11,725) (20,265) (23,218) (39,770)
-------- --------- --------- ---------
Net loss after deduction of
dividends on preferred stock....... $(70,955) $(104,998) $(116,003) $(192,558)
======== ========= ========= =========
Net loss........................... $(59,230) $ (84,733) $ (92,785) $(152,788)
Other comprehensive income (loss):
Foreign currency translation
adjustments...................... (10,750) (17,872) (13,130) (45,465)
Derivative instruments:
Net change in fair value of cash
flow hedging instruments........ -- 323 -- (3,018)
Amounts reclassified into results
of operations................... -- 356 -- 134
-------- --------- --------- ---------
Comprehensive loss before
cumulative effect of change in
accounting principle.............. (69,980) (101,926) (105,915) (201,137)
Cumulative effect of change in
accounting principle for
derivative financial
instruments...................... -- -- -- 178
-------- --------- --------- ---------
Comprehensive loss................. $(69,980) $(101,926) $(105,915) $(200,959)
======== ========= ========= =========
Per common share--basic and
diluted:
Loss before extraordinary item.... $ (0.43) $ (0.49) $ (0.71) $ (0.91)
Extraordinary item................ -- -- (0.01) --
-------- --------- --------- ---------
Net loss.......................... $ (0.43) $ (0.49) $ (0.72) $ (0.91)
======== ========= ========= =========
Common shares outstanding--basic
and diluted (in thousands)........ 165,625 214,059 162,095 212,627
======== ========= ========= =========
See condensed notes to consolidated financial statements.
4
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(In thousands of dollars)
Six Months Ended June
30,
-----------------------
2000 2001
----------- ----------
Cash flows from operating activities:
Net loss............................................. $ (92,785) $ (152,788)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization....................... 101,769 148,847
Amortization of deferred financing costs and
discounts on long-term debt........................ 39,121 44,878
Asset write-down charges............................ -- 12,272
Non-cash general and administrative compensation
charges............................................ 811 2,775
Minority interests.................................. 1,858 (863)
Extraordinary loss on early extinguishment of debt.. 1,495 --
Changes in assets and liabilities, excluding the
effects of acquisitions:
Increase in deferred rental revenues and other
liabilities....................................... 49,320 131,782
Increase in inventories, prepaid expenses and other
assets............................................ (28,892) (88,006)
Increase in receivables............................ (16,428) (32,475)
Decrease in accrued interest....................... (8,593) (8,403)
Increase (decrease) in accounts payable............ 31,769 (5,142)
----------- ----------
Net cash provided by operating activities......... 79,445 52,877
----------- ----------
Cash flows from investing activities:
Maturities of investments............................ -- 175,000
Investments in affiliates and other, including escrow
deposit............................................. (618) (415,249)
Capital expenditures................................. (258,605) (408,694)
Acquisitions of businesses and assets, net of cash
acquired............................................ (856,082) (151,129)
Purchase of investments.............................. -- (137,500)
----------- ----------
Net cash used for investing activities............ (1,115,305) (937,572)
----------- ----------
Cash flows from financing activities:
Proceeds from issuance of long-term debt............. 900,000 450,000
Proceeds from issuance of capital stock.............. 9,011 352,295
Net borrowings under revolving credit agreements..... 39,000 281,829
Proceeds from issuance of subsidiary stock to
minority shareholder................................ -- 16,434
Incurrence of financing costs........................ (43,879) (11,791)
Principal payments on long-term debt................. (82,000) --
----------- ----------
Net cash provided by financing activities......... 822,132 1,088,767
----------- ----------
Effect of exchange rate changes on cash............... (3,551) 1,129
----------- ----------
Net increase (decrease) in cash and cash equivalents.. (217,279) 205,201
Cash and cash equivalents at beginning of period...... 549,328 453,833
----------- ----------
Cash and cash equivalents at end of period............ $ 332,049 $ 659,034
=========== ==========
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............... $ 1,102,619 $ --
Escrow deposits for acquisitions.................... (50,000) --
Minority interests.................................. 67,154 --
Issuance of common stock............................ 129,383 --
Supplemental disclosure of cash flow information:
Interest paid........................................ $ 75,694 $ 104,267
Income taxes paid.................................... 48 60
See condensed notes to consolidated financial statements.
5
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General
The information contained in the following notes to the consolidated
financial statements is condensed from that which would appear in the annual
consolidated financial statements; accordingly, the consolidated financial
statements included herein should be reviewed in conjunction with the
consolidated financial statements for the fiscal year ended December 31, 2000,
and related notes thereto, included in the Annual Report on Form 10-K (the
"Form 10-K") filed by Crown Castle International Corp. with the Securities and
Exchange Commission. All references to the "Company" include Crown Castle
International Corp. and its subsidiary companies unless otherwise indicated or
the context indicates otherwise.
The consolidated financial statements included herein are unaudited;
however, they include all adjustments (consisting only of normal recurring
adjustments) which, in the opinion of management, are necessary to present
fairly the consolidated financial position of the Company at June 30, 2001,
the consolidated results of operations for the three and six months ended June
30, 2000 and 2001, and the consolidated cash flows for the six months ended
June 30, 2000 and 2001. Accounting measurements at interim dates inherently
involve greater reliance on estimates than at year end. The results of
operations for the interim periods presented are not necessarily indicative of
the results to be expected for the entire year.
2. New Accounting Pronouncements
Derivative Instruments
On January 1, 2001, the Company adopted the requirements of Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities ("SFAS 133"). SFAS 133 requires that derivative
instruments be recognized as either assets or liabilities in the consolidated
balance sheet based on their fair values. Changes in the fair values of such
derivative instruments are recorded either in results of operations or in
other comprehensive income (loss), depending on the intended use of the
derivative instrument. The initial application of SFAS 133 is reported as the
effect of a change in accounting principle. The adoption of SFAS 133 resulted
in a net transition adjustment gain of approximately $178,000 in accumulated
other comprehensive income (loss), the recognition of approximately $363,000
of derivative instrument assets and the recognition of approximately $185,000
of derivative instrument liabilities. The amounts for this transition
adjustment are based on current fair value measurements at the date of
adoption of SFAS 133. The Company expects that the adoption of SFAS 133 will
increase the volatility of other comprehensive income (loss) as reported in
its future financial statements.
The derivative instruments recognized upon the Company's adoption of SFAS
133 consist of interest rate swap agreements. Such agreements are used to
manage interest rate risk on a portion of the Company's floating rate
indebtedness, and are designated as cash flow hedging instruments in
accordance with SFAS 133. The interest rate swap agreements have notional
amounts aggregating $150,000,000 and effectively convert the interest payments
on an equal amount of debt from a floating rate to a fixed rate. As such, the
Company is protected from future increases in market interest rates on that
portion of its indebtedness. To the extent that the interest rate swap
agreements are effective in hedging the Company's interest rate risk, the
changes in their fair values are recorded as other comprehensive income
(loss). Amounts recorded as other comprehensive income (loss) are reclassified
into results of operations in the same periods that the hedged interest costs
are recorded in interest expense. The Company estimates that such reclassified
amounts will be approximately $1,725,000 for the year ending December 31,
2001. To the extent that any portions of the interest rate swap agreements are
deemed ineffective, the related changes in fair values are recognized in
results of operations. As of June 30, 2001, the accumulated other
comprehensive loss in consolidated stockholders' equity includes $2,706,000 in
losses related to derivative instruments.
6
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Business Combinations and Goodwill
In July 2001, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 141, Business Combinations
("SFAS 141"), and Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets ("SFAS 142"). SFAS 141 prohibits the use
of the pooling-of-interests method of accounting for business combinations,
and requires that the purchase method be used for all business combinations
after June 30, 2001. SFAS 141 also changes the manner in which acquired
intangible assets are identified and recognized apart from goodwill. Further,
SFAS 141 requires additional disclosures regarding the reasons for business
combinations, the allocation of the purchase price to recognized assets and
liabilities and the recognition of goodwill and other intangible assets. The
Company has used the purchase method of accounting since its inception, so the
adoption of SFAS 141 will not change its method of accounting for business
combinations. The Company will adopt the other recognition and disclosure
requirements of SFAS 141 as of July 1, 2001 for any future business
combinations. The transition provisions of SFAS 141 require that the carrying
amounts for goodwill and other intangible assets acquired in prior purchase
method business combinations be reviewed and reclassified in accordance with
the new recognition rules; such reclassifications are to be made in
conjunction with the adoption of SFAS 142. The Company will apply these
transition provisions of SFAS 141 as of January 1, 2002, and has not yet
determined the effect that they will have on its consolidated financial
statements.
SFAS 142 changes the accounting and disclosure requirements for acquired
goodwill and other intangible assets. The most significant provision of SFAS
142 is that goodwill and other intangible assets with indefinite useful lives
will no longer be amortized, but rather will be tested for impairment on an
annual basis. This annual impairment test will involve (1) a step to identify
potential impairment at a reporting unit level based on fair values, and (2) a
step to measure the amount of the impairment, if any. Intangible assets with
finite useful lives will continue to be amortized over such lives, and tested
for impairment in accordance with the Company's existing policies. SFAS 142
requires disclosures about goodwill and other intangible assets in the periods
subsequent to their acquisition, including (1) changes in the carrying amount
of goodwill, in total and by operating segment, (2) the carrying amounts of
intangible assets subject to amortization and those which are not subject to
amortization, (3) information about impairment losses recognized, and (4) the
estimated amount of intangible asset amortization expense for the next five
years. The provisions of SFAS 142 are effective for fiscal years beginning
after December 15, 2001. The Company will adopt the requirements of SFAS 142
as of January 1, 2002. In addition, the nonamortization provisions of SFAS 142
are to be immediately applied for goodwill and other intangible assets
acquired in business combinations subsequent to June 30, 2001. SFAS 142
requires that transitional impairment tests be performed at its adoption, and
provides that resulting impairment losses for goodwill and other intangible
assets be reported as the effect of a change in accounting principle. The
Company has not yet determined the effect that the adoption of SFAS 142 will
have on its consolidated financial statements.
3. Investment in Affiliate
On April 27, 2001, a wholly owned subsidiary of the Company entered into a
Share Purchase Agreement for the acquisition of 49% of the outstanding capital
stock of RaiWay S.p.A. ("RaiWay", a corporation organized under the laws of
Italy). RaiWay is a subsidiary of RAI Radio Televisione Italiana S.p.A.
("RAI"), the Italian state-owned television and radio broadcaster. RaiWay
manages over 2,300 broadcast transmission sites across Italy. The cost of the
Company's investment in RaiWay amounted to approximately $383,820,000 in cash,
and such amount was deposited into a Euro-denominated escrow account upon
execution of the Share Purchase Agreement. The transaction is expected to
close in the fourth quarter of 2001, and is subject to approval by the Italian
regulatory authorities. The Company will account for its investment in RaiWay
utilizing the equity method of accounting. The Share Purchase Agreement
contemplates that the Company may transfer up to 5% of its shares in RaiWay to
Poste Italiana S.p.A. ("Poste"), the Italian state-owned post office service.
7
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. Long-term Debt
Long-term debt consists of the following:
December 31, June 30,
2000 2001
------------ ----------
(In thousands of
dollars)
2000 Credit Facility............................... $ 500,000 $ 700,000
CCUK Credit Facility............................... 138,932 166,172
Crown Atlantic Credit Facility..................... 239,000 285,000
9% Guaranteed Bonds due 2007....................... 181,820 171,430
10 5/8% Senior Discount Notes due 2007, net of
discount.......................................... 206,768 217,753
10 3/8% Senior Discount Notes due 2011, net of
discount.......................................... 355,482 373,922
9% Senior Notes due 2011........................... 180,000 180,000
11 1/4% Senior Discount Notes due 2011, net of
discount.......................................... 175,685 185,567
9 1/2% Senior Notes due 2011....................... 125,000 125,000
10 3/4% Senior Notes due 2011...................... 500,000 500,000
9 3/8% Senior Notes due 2011....................... -- 450,000
---------- ----------
$2,602,687 $3,354,844
========== ==========
Crown Atlantic Credit Facility
In March 2001, the Crown Atlantic Credit Facility was amended to increase
the available borrowings to $345,000,000. Under the amended facility, the
amount of available borrowings will begin to decrease on March 31, 2003.
9 3/8% Senior Notes due 2011 (the "9 3/8% Senior Notes")
On May 10, 2001, the Company issued $450,000,000 aggregate principal amount
of its 9 3/8% Senior Notes for proceeds of $441,000,000 (after underwriting
discounts of $9,000,000). The proceeds from the sale of these securities will
be used to fund the initial interest payments on the 9 3/8% Senior Notes and
for general corporate purposes. Semi-annual interest payments for the 9 3/8%
Senior Notes are due on each February 1 and August 1, commencing on August 1,
2001. The maturity date of the 9 3/8% Senior Notes is August 1, 2011.
The 9 3/8% Senior Notes are redeemable at the option of the Company, in
whole or in part, on or after August 1, 2006 at a price of 104.688% of the
principal amount plus accrued interest. The redemption price is reduced
annually until August 1, 2009, after which time the 9 3/8% Senior Notes are
redeemable at par. Prior to August 1, 2004, the Company may redeem up to 35%
of the aggregate principal amount of the 9 3/8% Senior Notes, at a price of
109.375% of the principal amount thereof, with the net cash proceeds from a
public offering of the Company's common stock.
CCUK Letter of Credit
In April 2001, CCUK issued a letter of credit to one of its customers in
connection with a site development agreement. The letter of credit was issued
through one of CCUSA's lenders in the amount of (Pounds)100,000,000
(approximately $141,900,000) and expires on April 16, 2002.
8
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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.
Summarized financial information for (1) the Company and its Restricted
Subsidiaries and (2) the Company's Unrestricted Subsidiaries is as follows:
June 30, 2001
----------------------------------------------------
Company and
Restricted Unrestricted Consolidation Consolidated
Subsidiaries Subsidiaries Eliminations Total
------------ ------------ ------------- ------------
(In thousands of dollars)
Cash and cash
equivalents............ $ 482,307 $ 176,727 $ -- $ 659,034
Other current assets.... 318,475 109,732 -- 428,207
Property and equipment,
net.................... 3,298,323 1,396,422 -- 4,694,745
Investments............. 100,000 -- -- 100,000
Escrow deposit for
investment in
affiliate.............. -- 362,020 -- 362,020
Investments in
Unrestricted
Subsidiaries........... 2,051,342 -- (2,051,342) --
Goodwill and other
intangible assets,
net.................... 183,820 895,958 -- 1,079,778
Other assets, net....... 127,783 20,259 -- 148,042
---------- ---------- ----------- ----------
$6,562,050 $2,961,118 $(2,051,342) $7,471,826
========== ========== =========== ==========
Current liabilities..... $ 278,379 $ 130,211 $ -- $ 408,590
Long-term debt.......... 2,732,242 622,602 -- 3,354,844
Other liabilities....... 38,746 81,823 -- 120,569
Minority interests...... 94,112 75,140 -- 169,252
Redeemable preferred
stock.................. 860,248 -- -- 860,248
Stockholders' equity.... 2,558,323 2,051,342 (2,051,342) 2,558,323
---------- ---------- ----------- ----------
$6,562,050 $2,961,118 $(2,051,342) $7,471,826
========== ========== =========== ==========
9
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Three Months Ended June 30, 2001 Six Months Ended June 30, 2001
-------------------------------------- --------------------------------------
Company and Company and
Restricted Unrestricted Consolidated Restricted Unrestricted Consolidated
Subsidiaries Subsidiaries Total Subsidiaries Subsidiaries Total
------------ ------------ ------------ ------------ ------------ ------------
(In thousands of dollars)
Net revenues............ $143,930 $ 85,486 $229,416 $ 269,701 $172,668 $ 442,369
Costs of operations
(exclusive of
depreciation and
amortization).......... 78,377 44,729 123,106 145,573 90,728 236,301
General and
administrative......... 22,613 7,852 30,465 44,160 12,200 56,360
Corporate development... 2,917 841 3,758 6,322 889 7,211
Asset write-down
charges................ 7,720 4,552 12,272 7,720 4,552 12,272
Non-cash general and
administrative
compensation charges... 872 508 1,380 1,744 1,031 2,775
Depreciation and
amortization........... 42,767 31,989 74,756 84,508 64,339 148,847
-------- -------- -------- --------- -------- ---------
Operating loss.......... (11,336) (4,985) (16,321) (20,326) (1,071) (21,397)
Interest and other
income (expense)....... 2,312 2,232 4,544 3,889 3,747 7,636
Interest expense and
amortization of
deferred financing
costs.................. (61,530) (11,645) (73,175) (116,135) (23,695) (139,830)
Provision for income
taxes.................. -- -- -- -- (60) (60)
Minority interests...... 682 (463) 219 1,407 (544) 863
-------- -------- -------- --------- -------- ---------
Net loss................ $(69,872) $(14,861) $(84,733) $(131,165) $(21,623) $(152,788)
======== ======== ======== ========= ======== =========
Tower Cash Flow and Adjusted Consolidated Cash Flow for the Company and its
Restricted Subsidiaries is as follows under (1) the indenture governing the 10
5/8% Senior Discount Notes and the Certificate (the "1997 and 1998
Securities") and (2) the indentures governing the 10 3/8% Discount Notes, the
9% Senior Notes, the 11 1/4% Discount Notes, the 9 1/2% Senior Notes, the 10
3/4% Senior Notes and the 9 3/8% Senior Notes (the "1999, 2000 and 2001
Securities"):
1997 and 1998 1999, 2000 and
Securities 2001 Securities
------------- ---------------
(In thousands of dollars)
Tower Cash Flow, for the three months ended June
30, 2001....................................... $ 35,795 $ 35,795
========= =========
Consolidated Cash Flow, for the twelve months
ended June 30, 2001............................ $ 137,253 $ 149,658
Less: Tower Cash Flow, for the twelve months
ended June 30, 2001............................ (120,816) (120,816)
Plus: four times Tower Cash Flow, for the three
months ended June 30, 2001..................... 143,180 143,180
--------- ---------
Adjusted Consolidated Cash Flow, for the twelve
months ended June 30, 2001..................... $ 159,617 $ 172,022
========= =========
10
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5. Redeemable Preferred Stock
Redeemable preferred stock ($.01 par value, 20,000,000 shares authorized)
consists of the following:
December 31, June 30,
2000 2001
------------ --------
(In thousands of
dollars)
12 3/4% Senior Exchangeable Preferred Stock; shares
issued:
December 31, 2000--257,067 and June 30, 2001--273,716
(stated at mandatory redemption and aggregate
liquidation value)................................... $258,433 $275,171
8 1/4% Cumulative Convertible Redeemable Preferred
Stock; shares issued:
200,000 (stated net of unamortized value of warrants;
mandatory redemption and aggregate liquidation value
of $200,000)......................................... 195,383 195,588
6.25% Convertible Preferred Stock; shares issued:
8,050,000 (stated net of unamortized issue costs;
mandatory redemption and aggregate liquidation value
of $402,500)......................................... 388,902 389,489
-------- --------
$842,718 $860,248
======== ========
6. Stockholders' Equity
On January 11, 2001, the Company sold shares of its common stock in an
underwritten public offering. The Company had granted the underwriters an
over-allotment option to purchase additional shares in the offering. On
January 12, 2001, the over-allotment option was partially exercised. As a
result, the Company sold a total of 13,445,200 shares of its common stock at a
price of $26.25 per share and received proceeds of $342,853,000 (after
underwriting discounts of $10,084,000). The proceeds from this offering will
be used for general corporate purposes.
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.
11
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
A reconciliation of the numerators and denominators of the basic and
diluted per share computations is as follows:
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
2000 2001 2000 2001
--------- --------- --------- ---------
(In thousands of dollars, except per
share amounts)
Loss before extraordinary item.... $ (59,230) $ (84,733) $ (91,290) $(152,788)
Dividends on preferred stock...... (11,725) (20,265) (23,218) (39,770)
--------- --------- --------- ---------
Loss before extraordinary item
applicable to common stock for
basic and diluted computations... (70,955) (104,998) (114,508) (192,558)
Extraordinary item................ -- -- (1,495) --
--------- --------- --------- ---------
Net loss applicable to common
stock for basic and diluted
computations..................... $ (70,955) $(104,998) $(116,003) $(192,558)
========= ========= ========= =========
Weighted-average number of common
shares outstanding during the
period for basic and diluted
computations (in thousands)...... 165,625 214,059 162,095 212,627
========= ========= ========= =========
Per common share--basic and
diluted:
Loss before extraordinary item.. $ (0.43) $ (0.49) $ (0.71) $ (0.91)
Extraordinary item.............. -- -- (0.01) --
--------- --------- --------- ---------
Net loss........................ $ (0.43) $ (0.49) $ (0.72) $ (0.91)
========= ========= ========= =========
The calculations of common shares outstanding for the diluted computations
exclude the following potential common shares as of June 30, 2001: (1) options
to purchase 22,327,045 shares of common stock at exercise prices ranging from
$-0- to $39.75 per share, (2) warrants to purchase 639,990 shares of common
stock at an exercise price of $7.50 per share, (3) warrants to purchase
1,000,000 shares of common stock at an exercise price of $26.875 per share,
(4) shares of the Company's 8 1/4% Cumulative Convertible Redeemable Preferred
Stock which are convertible into 7,441,860 shares of common stock and (5)
shares of the Company's 6.25% Convertible Preferred Stock which are
convertible into 10,915,254 shares of common stock. The inclusion of such
potential common shares in the diluted per share computations would be
antidilutive since the Company incurred net losses for all periods presented.
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
general and administrative compensation charges, asset write-down charges and
restructuring charges. EBITDA is not intended as an alternative measure of
operating results or cash flow from operations (as determined in accordance
12
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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 financial results for the Company's operating segments are as follows:
Three Months Ended June 30, 2001
--------------------------------------------------------------------
Corporate
Crown Office and Consolidated
CCUSA CCAL CCUK Atlantic Other Total
---------- -------- ---------- -------- ---------- ------------
(In thousands of dollars)
Net revenues:
Site rental and
broadcast
transmission......... $ 64,609 $ 4,471 $ 50,694 $ 20,026 $ -- $ 139,800
Network services and
other................ 74,325 525 6,240 8,526 -- 89,616
---------- -------- ---------- -------- ---------- ----------
138,934 4,996 56,934 28,552 -- 229,416
---------- -------- ---------- -------- ---------- ----------
Costs of operations
(exclusive of
depreciation and
amortization).......... 76,106 2,271 31,663 13,066 -- 123,106
General and
administrative......... 16,872 1,735 5,316 2,536 4,006 30,465
Corporate development... -- -- -- -- 3,758 3,758
---------- -------- ---------- -------- ---------- ----------
EBITDA.................. 45,956 990 19,955 12,950 (7,764) 72,087
Asset write-down
charges................ 3,969 -- 3,785 767 3,751 12,272
Non-cash general and
administrative
compensation charges... 532 -- 508 -- 340 1,380
Depreciation and
amortization........... 39,255 3,064 22,051 9,938 448 74,756
---------- -------- ---------- -------- ---------- ----------
Operating income
(loss)................. 2,200 (2,074) (6,389) 2,245 (12,303) (16,321)
Interest and other
income (expense)....... 665 219 815 155 2,690 4,544
Interest expense and
amortization of
deferred financing
costs.................. (13,798) (752) (6,497) (5,148) (46,980) (73,175)
Provision for income
taxes.................. -- -- -- -- -- --
Minority interests...... (171) 853 -- (463) -- 219
---------- -------- ---------- -------- ---------- ----------
Net loss................ $ (11,104) $ (1,754) $ (12,071) $ (3,211) $ (56,593) $ (84,733)
========== ======== ========== ======== ========== ==========
Capital expenditures.... $ 98,475 $ 171 $ 28,818 $ 27,248 $ 2,122 $ 156,834
========== ======== ========== ======== ========== ==========
Total assets (at period
end)................... $3,560,588 $265,155 $1,638,159 $878,602 $1,129,322 $7,471,826
========== ======== ========== ======== ========== ==========
13
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Six Months Ended June 30, 2001
--------------------------------------------------------------
Corporate
Crown Office Consolidated
CCUSA CCAL CCUK Atlantic and Other Total
-------- ------- -------- -------- --------- ------------
(In thousands of dollars)
Net revenues:
Site rental and
broadcast
transmission......... $126,785 $ 7,461 $100,062 $39,534 $ -- $ 273,842
Network services and
other................ 134,930 525 16,016 17,056 -- 168,527
-------- ------- -------- ------- --------- ---------
261,715 7,986 116,078 56,590 -- 442,369
-------- ------- -------- ------- --------- ---------
Costs of operations
(exclusive of
depreciation and
amortization).......... 142,207 3,366 63,692 27,036 -- 236,301
General and
administrative......... 33,194 3,226 7,019 5,181 7,740 56,360
Corporate development... -- -- 48 -- 7,163 7,211
-------- ------- -------- ------- --------- ---------
EBITDA.................. 86,314 1,394 45,319 24,373 (14,903) 142,497
Asset write-down
charges................ 3,969 -- 3,785 767 3,751 12,272
Non-cash general and
administrative
compensation charges... 1,063 -- 1,031 -- 681 2,775
Depreciation and
amortization........... 78,882 4,760 44,270 20,069 866 148,847
-------- ------- -------- ------- --------- ---------
Operating income
(loss)................. 2,400 (3,366) (3,767) 3,537 (20,201) (21,397)
Interest and other
income (expense)....... 1,539 75 1,746 170 4,106 7,636
Interest expense and
amortization of
deferred financing
costs.................. (27,265) (795) (13,532) (10,163) (88,075) (139,830)
Provision for income
taxes.................. -- -- (27) (33) -- (60)
Minority interests...... (369) 1,776 -- (544) -- 863
-------- ------- -------- ------- --------- ---------
Net loss................ $(23,695) $(2,310) $(15,580) $(7,033) $(104,170) $(152,788)
======== ======= ======== ======= ========= =========
Capital expenditures.... $212,338 $ 657 $139,647 $53,349 $ 2,703 $ 408,694
======== ======= ======== ======= ========= =========
14
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Three Months Ended June 30, 2000
------------------------------------------------------------
Corporate
Crown Office Consolidated
CCUSA CCAL CCUK Atlantic and Other Total
-------- ------ ------- -------- --------- ------------
(In thousands of dollars)
Net revenues:
Site rental and
broadcast
transmission......... $ 44,551 $1,814 $47,995 $15,143 $ -- $109,503
Network services and
other................ 26,090 -- 5,730 7,036 -- 38,856
-------- ------ ------- ------- -------- --------
70,641 1,814 53,725 22,179 -- 148,359
-------- ------ ------- ------- -------- --------
Costs of operations
(exclusive of
depreciation and
amortization).......... 32,149 1,031 25,613 9,777 -- 68,570
General and
administrative......... 12,228 1,355 2,631 2,034 1,247 19,495
Corporate development... -- -- 285 -- 1,837 2,122
-------- ------ ------- ------- -------- --------
EBITDA.................. 26,264 (572) 25,196 10,368 (3,084) 58,172
Non-cash general and
administrative
compensation charges... -- -- 10 -- 340 350
Depreciation and
amortization........... 30,509 1,291 16,647 7,888 312 56,647
-------- ------ ------- ------- -------- --------
Operating income
(loss)................. (4,245) (1,863) 8,539 2,480 (3,736) 1,175
Interest and other
income (expense)....... 1,936 227 141 225 4,136 6,665
Interest expense and
amortization of
deferred financing
costs.................. (11,892) (46) (8,420) (4,065) (42,305) (66,728)
Provision for income
taxes.................. (4) -- (21) -- -- (25)
Minority interests...... 510 965 (1,030) (762) -- (317)
-------- ------ ------- ------- -------- --------
Net income (loss)....... $(13,695) $ (717) $ (791) $(2,122) $(41,905) $(59,230)
======== ====== ======= ======= ======== ========
Capital expenditures.... $ 97,685 $ 440 $22,688 $26,771 $ 594 $148,178
======== ====== ======= ======= ======== ========
15
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Six Months Ended June 30, 2000
--------------------------------------------------------------
Corporate
Crown Office Consolidated
CCUSA CCAL CCUK Atlantic and Other Total
-------- ------- -------- -------- --------- ------------
(In thousands of dollars)
Net revenues:
Site rental and
broadcast
transmission......... $ 75,921 $ 1,814 $ 96,574 $28,935 $ -- $ 203,244
Network services and
other................ 44,145 -- 12,276 12,904 34 69,359
-------- ------- -------- ------- -------- ---------
120,066 1,814 108,850 41,839 34 272,603
-------- ------- -------- ------- -------- ---------
Costs of operations
(exclusive of
depreciation and
amortization).......... 51,532 1,031 53,547 18,599 49 124,758
General and
administrative......... 22,208 1,355 3,657 3,831 3,297 34,348
Corporate development... -- -- 570 -- 3,623 4,193
-------- ------- -------- ------- -------- ---------
EBITDA.................. 46,326 (572) 51,076 19,409 (6,935) 109,304
Non-cash general and
administrative
compensation charges... 67 -- 64 -- 680 811
Depreciation and
amortization........... 51,663 1,291 32,200 16,007 608 101,769
-------- ------- -------- ------- -------- ---------
Operating income
(loss)................. (5,404) (1,863) 18,812 3,402 (8,223) 6,724
Interest and other
income (expense)....... 2,712 227 326 696 8,408 12,369
Interest expense and
amortization of
deferred financing
costs.................. (15,626) (46) (16,705) (8,441) (67,671) (108,489)
Provision for income
taxes.................. (15) -- (21) -- -- (36)
Minority interests...... 410 965 (2,333) (900) -- (1,858)
Extraordinary item...... (1,495) -- -- -- -- (1,495)
-------- ------- -------- ------- -------- ---------
Net income (loss)....... $(19,418) $ (717) $ 79 $(5,243) $(67,486) $ (92,785)
======== ======= ======== ======= ======== =========
Capital expenditures.... $164,626 $ 440 $ 43,592 $49,006 $ 941 $ 258,605
======== ======= ======== ======= ======== =========
10. Asset Write-Down Charges and Restructuring Charge
The Company has recorded non-cash charges of $12,272,000 during the second
quarter of 2001 related to the write-down of certain inventories, property and
equipment, and other assets.
In July 2001, the Company announced a restructuring of its business in
order to increase operational efficiency and better align costs with
anticipated revenues. As part of the restructuring, the Company has reduced
its global staff by approximately 275 full-time employees, is closing five
offices in the United States and is closing its development office in Brazil.
The Company anticipates that the actions to be taken for the restructuring
will be substantially completed by the end of 2001. In connection with the
restructuring, the Company expects to record non-recurring cash charges of
approximately $16,000,000 during the third quarter of 2001 related to employee
severance payments and costs of office closures.
16
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion is intended to assist in understanding our
consolidated financial condition as of June 30, 2001 and our consolidated
results of operations for the three- and six-month periods ended June 30, 2000
and 2001. The statements in this discussion regarding the industry outlook,
our expectations regarding the future performance of our businesses and the
other nonhistorical statements in this discussion are forward-looking
statements. These forward-looking statements are subject to numerous risks and
uncertainties, including but not limited to the uncertainties relating to
decisions on capital expenditures to be made in the future by wireless
carriers and broadcasters. This discussion should be read in conjunction with
the response to Part I, Item 1 of this report and the consolidated financial
statements of the Company, including the related notes, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in the Form 10-K. Any capitalized terms used but not defined in this
Item have the same meaning given to them in the Form 10-K.
Results of Operations
During 2000 we completed the transactions with BellSouth, BellSouth DCS and
GTE. Additionally, during 2000 Crown Atlantic acquired the Frontier towers
from Bell Atlantic Mobile, and CCAL completed the substantial portion of the
transaction with Cable & Wireless Optus. Results of operations of these
acquired towers are included in our consolidated financial statements for the
periods subsequent to the respective dates of acquisition. As such, our
results of operations for the three and six months ended June 30, 2000 are not
comparable to the results of operations for the three and six months ended
June 30, 2001.
The following information is derived from our historical Consolidated
Statements of Operations for the periods indicated.
Three Months Three Months
Ended June 30, Ended June 30, Six Months Ended Six Months Ended
2000 2001 June 30, 2000 June 30, 2001
------------------ ------------------ ------------------- -------------------
Percent Percent Percent Percent
of Net of Net of Net of Net
Amount Revenues Amount Revenues Amount Revenues Amount Revenues
-------- -------- -------- -------- --------- -------- --------- --------
(In thousands of dollars)
Net revenues:
Site rental and
broadcast
transmission......... $109,503 73.8% $139,800 60.9% $ 203,244 74.6% $ 273,842 61.9%
Network services and
other................ 38,856 26.2 89,616 39.1 69,359 25.4 168,527 38.1
-------- ----- -------- ----- --------- ----- --------- -----
Total net revenues... 148,359 100.0 229,416 100.0 272,603 100.0 442,369 100.0
-------- ----- -------- ----- --------- ----- --------- -----
Operating expenses:
Costs of operations:
Site rental and
broadcast
transmission......... 48,563 44.3 59,555 42.6 88,850 43.7 117,294 42.8
Network services and
other................ 20,007 51.5 63,551 70.9 35,908 51.8 119,007 70.6
-------- -------- --------- ---------
Total costs of
operations.......... 68,570 46.2 123,106 53.7 124,758 45.8 236,301 53.4
General and
administrative....... 19,495 13.2 30,465 13.3 34,348 12.6 56,360 12.7
Corporate
development.......... 2,122 1.4 3,758 1.6 4,193 1.5 7,211 1.6
Asset write-down
charges.............. -- -- 12,272 5.3 -- -- 12,272 2.8
Non-cash general and
administrative
compensation
charges.............. 350 0.2 1,380 0.6 811 0.3 2,775 0.6
Depreciation and
amortization......... 56,647 38.2 74,756 32.6 101,769 37.3 148,847 33.7
-------- ----- -------- ----- --------- ----- --------- -----
Operating income
(loss)................. 1,175 0.8 (16,321) (7.1) 6,724 2.5 (21,397) (4.8)
Other income (expense):
Interest and other
income (expense)..... 6,665 4.5 4,544 2.0 12,369 4.5 7,636 1.7
Interest expense and
amortization of
deferred financing
costs................ (66,728) (45.0) (73,175) (31.9) (108,489) (39.8) (139,830) (31.6)
-------- ----- -------- ----- --------- ----- --------- -----
Loss before income
taxes, minority
interests and
extraordinary item..... (58,888) (39.7) (84,952) (37.0) (89,396) (32.8) (153,591) (34.7)
Provision for income
taxes.................. (25) -- -- -- (36) -- (60) --
Minority interests...... (317) (0.2) 219 0.1 (1,858) (0.7) 863 0.2
-------- ----- -------- ----- --------- ----- --------- -----
Loss before
extraordinary item..... (59,230) (39.9) (84,733) (36.9) (91,290) (33.5) (152,788) (34.5)
Extraordinary item--loss
on early extinguishment
of debt................ -- -- -- -- (1,495) (0.5) -- --
-------- ----- -------- ----- --------- ----- --------- -----
Net loss................ $(59,230) (39.9)% $(84,733) (36.9)% $ (92,785) (34.0)% $(152,788) (34.5)%
======== ===== ======== ===== ========= ===== ========= =====
17
Comparison of Three Months Ended June 30, 2001 and 2000
Consolidated revenues for the three months ended June 30, 2001 were $229.4
million, an increase of $81.1 million from the three months ended June 30,
2000. This increase was primarily attributable to:
(1) a $30.3 million, or 27.7%, increase in site rental and broadcast
transmission revenues, of which $2.7 million was attributable to CCUK,
$4.9 million was attributable to Crown Atlantic, $2.7 million was
attributable to CCAL and $20.1 million was attributable to CCUSA,
(2) a $48.2 million increase in network services and other revenues from
CCUSA,
(3) a $0.5 million increase in network services and other revenues from
CCUK,
(4) a $1.5 million increase in network services and other revenues from
Crown Atlantic, and
(5) $0.5 million in network services and other revenues from CCAL.
Costs of operations for the three months ended June 30, 2001 were $123.1
million, an increase of $54.5 million from the three months ended June 30,
2000. This increase was primarily attributable to:
(1) an $11.0 million increase in site rental and broadcast transmission
costs, of which $4.8 million was attributable to CCUK, $1.5 million was
attributable to Crown Atlantic, $0.8 million was attributable to CCAL
and $3.9 million was attributable to CCUSA,
(2) a $40.0 million increase in network services costs related to CCUSA,
(3) a $1.3 million increase in network services costs from CCUK,
(4) a $1.8 million increase in network services costs from Crown Atlantic,
and
(5) $0.5 million in network services costs from CCAL.
Costs of operations for site rental and broadcast transmission as a percentage
of site rental and broadcast transmission revenues were 42.6% for the three
months ended June 30, 2001 as compared to 44.3% for the three months ended
June 30, 2000, as higher margins attributable to the CCUSA, CCAL and Crown
Atlantic operations were offset by lower margins from the CCUK operations.
Costs of operations for network services and other as a percentage of network
services and other revenues increased to 70.9% for the three months ended June
30, 2001 from 51.5% for the three months ended June 30, 2000, primarily due to
lower margins from the CCUSA, CCUK and Crown Atlantic operations.
General and administrative expenses for the three months ended June 30,
2001 were $30.5 million, an increase of $11.0 million from the three months
ended June 30, 2000. This increase was primarily attributable to:
(1) a $4.6 million increase in expenses related to the CCUSA operations,
(2) a $2.8 million increase in expenses at our corporate office,
(3) a $0.5 million increase in expenses at Crown Atlantic,
(4) a $2.7 million increase in expenses at CCUK, and
(5) a $0.4 million increase in expenses at CCAL.
General and administrative expenses as a percentage of revenues were 13.3% for
the three months ended June 30, 2001 as compared to 13.2% for the three months
ended June 30, 2000. Higher overhead costs as a percentage of revenues for
CCUK were largely offset by lower overhead costs as a percentage of revenues
for CCUSA, CCAL and Crown Atlantic.
Corporate development expenses for the three months ended June 30, 2001
were $3.8 million, compared to $2.1 million for the three months ended June
30, 2000. This increase was primarily attributable to an increase in expenses
at our corporate office.
18
For the three months ended June 30, 2001, we recorded asset write-down
charges of $12.3 million in connection with a restructuring of our business
announced in July 2001 (see "--Restructuring Charge"). Such non-cash charges
related to write-downs of certain inventories, property and equipment, and
other assets.
For the three months ended June 30, 2001, we recorded non-cash general and
administrative compensation charges of $1.4 million related to the issuance of
stock and stock options to certain employees and executives, compared to $0.4
million for the three months ended June 30, 2000.
Depreciation and amortization for the three months ended June 30, 2001 was
$74.8 million, an increase of $18.1 million from the three months ended June
30, 2000. This increase was primarily attributable to:
(1) a $5.4 million increase in depreciation and amortization related to the
property and equipment and goodwill from CCUK,
(2) a $2.1 million increase in depreciation and amortization related to the
property and equipment and goodwill from Crown Atlantic,
(3) a $1.8 million increase in depreciation and amortization related to
property and equipment from CCAL, and
(4) an $8.7 million increase in depreciation and amortization related to
the property and equipment, goodwill and other intangible assets
related to the CCUSA operations.
Interest and other income (expense) for the three months ended June 30,
2001 resulted primarily from:
(1) the investment of the net proceeds from our recent offerings, partially
offset by
(2) costs incurred in connection with unsuccessful acquisition attempts.
Interest expense and amortization of deferred financing costs for the three
months ended June 30, 2001 was $73.2 million, an increase of $6.4 million, or
9.7%, from the three months ended June 30, 2000. This increase was primarily
attributable to interest on indebtedness at CCUSA, CCUK and Crown Atlantic,
and interest on the 10 3/4% senior notes and the 9 3/8% senior notes.
Minority interests represent the minority shareholder's 20% interest in
CCUK's operations (prior to July 2000), the minority partner's 43.1% interest
in Crown Atlantic's operations, the minority partner's 18.0% interest in the
operations of the GTE joint venture and the minority shareholder's 22.9%
interest in the CCAL operations.
Comparison of Six Months Ended June 30, 2001 and 2000
Consolidated revenues for the six months ended June 30, 2001 were $442.4
million, an increase of $169.8 million from the six months ended June 30,
2000. This increase was primarily attributable to:
(1) a $70.6 million, or 34.7%, increase in site rental and broadcast
transmission revenues, of which $3.5 million was attributable to CCUK,
$10.6 million was attributable to Crown Atlantic, $5.6 million was
attributable to CCAL and $50.9 million was attributable to CCUSA,
(2) a $90.8 million increase in network services and other revenues from
CCUSA,
(3) a $3.7 million increase in network services and other revenues from
CCUK,
(4) a $4.2 million increase in network services and other revenues from
Crown Atlantic, and
(5) $0.5 million in network services and other revenues from CCAL.
Costs of operations for the six months ended June 30, 2001 were $236.3
million, an increase of $111.5 million from the six months ended June 30,
2000. This increase was primarily attributable to:
(1) a $28.4 million increase in site rental and broadcast transmission
costs, of which $5.1 million was attributable to CCUK, $3.8 million was
attributable to Crown Atlantic, $1.9 million was attributable to CCAL
and $17.6 million was attributable to CCUSA,
19
(2) a $73.1 million increase in network services costs related to CCUSA,
(3) a $5.1 million increase in network services costs from CCUK,
(4) a $4.6 million increase in network services costs from Crown Atlantic,
and
(5) $0.5 million in network services costs from CCAL.
Costs of operations for site rental and broadcast transmission as a percentage
of site rental and broadcast transmission revenues were 42.8% for the six
months ended June 30, 2001 as compared to 43.7% for the six months ended June
30, 2000, as higher margins attributable to the CCUSA, CCAL and Crown Atlantic
operations were offset by lower margins from the CCUK operations. Costs of
operations for network services and other as a percentage of network services
and other revenues increased to 70.6% for the six months ended June 30, 2001
from 51.8% for the six months ended June 30, 2000, primarily due to lower
margins from the CCUSA, CCUK and Crown Atlantic operations.
General and administrative expenses for the six months ended June 30, 2001
were $56.4 million, an increase of $22.0 million from the six months ended
June 30, 2000. This increase was primarily attributable to:
(1) an $11.0 million increase in expenses related to the CCUSA operations,
(2) a $4.4 million increase in expenses at our corporate office,
(3) a $1.4 million increase in expenses at Crown Atlantic,
(4) a $3.4 million increase in expenses at CCUK, and
(5) a $1.9 million increase in expenses at CCAL.
General and administrative expenses as a percentage of revenues were 12.7% for
the six months ended June 30, 2001 as compared to 12.6% for the six months
ended June 30, 2000. Higher overhead costs as a percentage of revenues for
CCUK were largely offset by lower overhead costs as a percentage of revenues
for CCUSA and CCAL.
Corporate development expenses for the six months ended June 30, 2001 were
$7.2 million, compared to $4.2 million for the six months ended June 30, 2000.
This increase was primarily attributable to an increase in expenses at our
corporate office.
For the six months ended June 30, 2001, we recorded asset write-down
charges of $12.3 million in connection with a restructuring of our business
announced in July 2001 (see "--Restructuring Charge"). Such non-cash charges
related to write-downs of certain inventories, property and equipment, and
other assets.
For the six months ended June 30, 2001, we recorded non-cash general and
administrative compensation charges of $2.8 million related to the issuance of
stock and stock options to certain employees and executives, compared to $0.8
million for the six months ended June 30, 2000.
Depreciation and amortization for the six months ended June 30, 2001 was
$148.8 million, an increase of $47.1 million from the six months ended June
30, 2000. This increase was primarily attributable to:
(1) a $12.1 million increase in depreciation and amortization related to
the property and equipment and goodwill from CCUK,
(2) a $4.1 million increase in depreciation and amortization related to the
property and equipment and goodwill from Crown Atlantic,
(3) a $3.5 million increase in depreciation and amortization related to
property and equipment from CCAL, and
(4) a $27.2 million increase in depreciation and amortization related to
the property and equipment, goodwill and other intangible assets
related to the CCUSA operations.
20
Interest and other income (expense) for the six months ended June 30, 2001
resulted primarily from:
(1) the investment of the net proceeds from our recent offerings, partially
offset by
(2) costs incurred in connection with unsuccessful acquisition attempts.
Interest expense and amortization of deferred financing costs for the six
months ended June 30, 2001 was $139.8 million, an increase of $31.3 million,
or 28.9%, from the six months ended June 30, 2000. This increase was primarily
attributable to interest on indebtedness at CCUSA, CCUK and Crown Atlantic,
and interest on the 10 3/4% senior notes and the 9 3/8% senior notes.
Minority interests represent the minority shareholder's 20% interest in
CCUK's operations (prior to July 2000), the minority partner's 43.1% interest
in Crown Atlantic's operations, the minority partner's 18.0% interest in the
operations of the GTE joint venture and the minority shareholder's 22.9%
interest in the CCAL operations.
The extraordinary loss on early extinguishment of debt for the six months
ended June 30, 2000 represents the write-off of unamortized deferred financing
costs related to CCUSA's prior credit facility.
Liquidity and Capital Resources
Our business strategy contemplates substantial capital expenditures in
connection with the expansion of our tower portfolios by pursuing build-to-
suit opportunities in the markets in which we currently operate.
Since its inception, CCIC has generally funded its activities, other than
acquisitions and investments, through excess proceeds from contributions of
equity capital and cash provided by operations. CCIC has financed acquisitions
and investments with the proceeds from equity contributions, borrowings under
our senior credit facilities, issuances of debt securities and the issuance of
promissory notes to sellers. Since its inception, CCUK has generally funded
its activities, other than the acquisition of the BBC home service
transmission business, through cash provided by operations and borrowings
under CCUK's credit facility. CCUK financed the acquisition of the BBC home
service transmission business with the proceeds from equity contributions and
the issuance of the CCUK bonds.
For the six months ended June 30, 2000 and 2001, our net cash provided by
operating activities was $79.4 million and $52.9 million, respectively. For
the six months ended June 30, 2000 and 2001, our net cash provided by
financing activities was $822.1 million and $1,088.8 million, respectively.
Our primary financing-related activities in the first six months of 2001
included the following:
January 2001 Offering
On January 11, 2001, we sold shares of our common stock in an underwritten
public offering. We had granted the underwriters an over-allotment option to
purchase additional shares in the offering. On January 12, 2001, the over-
allotment option was partially exercised. As a result, we sold a total of
13,445,200 shares of our common stock at a price of $26.25 per share and
received proceeds of $342.9 million (after underwriting discounts of $10.1
million). The proceeds from this offering will be used for general corporate
purposes.
Crown Atlantic Credit Facility
In March 2001, the Crown Atlantic credit facility was amended to increase
the available borrowings to $345.0 million. Under the amended facility, the
amount of available borrowings will begin to decrease on March 31, 2003.
May 2001 Debt Offering
On May 10, 2001, we issued $450.0 million aggregate principal amount of our
9 3/8% Senior Notes for proceeds of $441.0 million (after underwriting
discounts of $9.0 million). The proceeds from the sale of these
21
securities will be used to fund the initial interest payments on the 9 3/8%
senior notes and for general corporate purposes.
Capital expenditures were $408.7 million for the six months ended June 30,
2001, of which $2.7 million were for CCIC, $212.3 million were for CCUSA,
$53.3 million were for Crown Atlantic, $139.6 million were for CCUK and $0.7
million were for CCAL. We anticipate that we will build, through the end of
2001, approximately 750 towers in the United States at a cost of approximately
$172.5 million and approximately 750 towers in the United Kingdom at a cost of
approximately $150.0 million. We also expect to spend approximately $120.0
million in the United States to improve the structural capacity of our
domestic towers.
In addition to capital expenditures in connection with build-to-suits, we
have applied a significant amount of capital to finance the cash consideration
paid in connection with an investment in Italy. On April 27, 2001, we entered
into a Share Purchase Agreement for the acquisition of 49% of the outstanding
capital stock of RaiWay S.p.A. ("RaiWay"). RaiWay is a subsidiary of RAI Radio
Televisione Italiana S.p.A. ("RAI"), the Italian state-owned television and
radio broadcaster. RaiWay manages over 2,300 broadcast transmission sites
across Italy. The cost of our investment in RaiWay amounted to approximately
$383.8 million in cash, and such amount was deposited into a Euro-denominated
escrow account upon execution of the Share Purchase Agreement. The transaction
is expected to close in the fourth quarter of 2001, and is subject to approval
by the Italian regulatory authorities. We will account for our investment in
RaiWay utilizing the equity method of accounting. The Share Purchase Agreement
contemplates that we may transfer up to 5% of our shares in RaiWay to Poste
Italiana S.p.A. ("Poste"), the Italian state-owned post office service.
We expect that the completion of the recent transactions and the execution
of our new tower build, or build-to-suit program, will have a material impact
on our liquidity. We expect that once integrated, these transactions will have
a positive impact on liquidity, but will require some period of time to offset
the initial adverse impact on liquidity. In addition, we believe that as new
towers become operational and we begin to add tenants, they should result in a
long-term increase in liquidity.
To fund the execution of our business strategy, including the recent
transactions described above and the construction of new towers that we have
agreed to build, we expect to use the net proceeds of our recent offerings and
borrowings available under our U.S. and U.K. credit facilities. We will have
additional cash needs to fund our operations in the future. We may also have
additional cash needs in the future if additional tower acquisitions or build-
to-suit opportunities arise. If we do not otherwise have cash available, or
borrowings under our credit facilities have otherwise been utilized, when our
cash need arises, we would be forced to seek additional debt or equity
financing or to forego the opportunity. In the event we determine to seek
additional debt or equity financing, there can be no assurance that any such
financing will be available, on commercially acceptable terms or at all, or
permitted by the terms of our existing indebtedness.
As of June 30, 2001, we had consolidated cash and cash equivalents of
$659.0 million (including $23.7 million at CCUSA, $88.9 million at CCUK, $7.9
million at Crown Atlantic and $20.3 million at CCAL), consolidated long-term
debt of $3,354.8 million, consolidated redeemable preferred stock of $860.2
million and consolidated stockholders' equity of $2,558.3 million.
As of August 1, 2001, Crown Atlantic had unused borrowing availability
under its amended credit facility of approximately $60.0 million, and CCUK had
unused borrowing availability under its credit facility of approximately
(Pounds)30.0 million ($43.0 million). As of August 1, 2001, our subsidiaries
had approximately $500.0 million of unused borrowing availability under the
2000 credit facility. Our various credit facilities require our subsidiaries
to maintain certain financial covenants and place restrictions on the ability
of our subsidiaries to, among other things, incur debt and liens, pay
dividends, make capital expenditures, undertake transactions with affiliates
and make investments. These facilities also limit the ability of the borrowing
subsidiaries to pay dividends to CCIC.
If we are unable to refinance our subsidiary debt or renegotiate the terms
of such debt, we may not be able to meet our debt service requirements,
including interest payments on the notes, in the future. Our 9% senior
22
notes, our 9 1/2% senior notes, our 10 3/4% senior notes and our 9 3/8% senior
notes require annual cash interest payments of approximately $16.2 million,
$11.9 million, $53.8 million, and $42.2 million, respectively. Prior to
November 15, 2002, May 15, 2004 and August 1, 2004, the interest expense on
our 10 5/8% discount notes, our 10 3/8% discount notes and our 11 1/4%
discount notes, respectively, will be comprised solely of the amortization of
original issue discount. Thereafter, the 10 5/8% discount notes, the 10 3/8%
discount notes and the 11 1/4% discount notes will require annual cash
interest payments of approximately $26.7 million, $51.9 million and $29.3
million, respectively. Prior to December 15, 2003, we do not expect to pay
cash dividends on our exchangeable preferred stock or, if issued, cash
interest on the exchange debentures. Thereafter, assuming all dividends or
interest have been paid-in-kind, our exchangeable preferred stock or, if
issued, the exchange debentures will require annual cash dividend or interest
payments of approximately $47.8 million. Annual cash interest payments on the
CCUK bonds are (Pounds)11.25 million ($15.8 million). In addition, our various
credit facilities will require periodic interest payments on amounts borrowed
thereunder, which amounts could be substantial.
As a holding company, CCIC will require distributions or dividends from its
subsidiaries, or will be forced to use capital raised in debt and equity
offerings, to fund its debt obligations, including interest payments on the
cash-pay notes and eventually the 10 5/8% discount notes, the 10 3/8% discount
notes and the 11 1/4% discount notes. The terms of the indebtedness of our
subsidiaries significantly limit their ability to distribute cash to CCIC. As
a result, we will be required to apply a portion of the net proceeds from the
recent debt offerings to fund interest payments on the cash-pay notes. If we
do not retain sufficient funds from the offerings or any future financing, we
may not be able to make our interest payments on the cash-pay notes.
Our ability to make scheduled payments of principal of, or to pay interest
on, our debt obligations, and our ability to refinance any such debt
obligations, will depend on our future performance, which, to a certain
extent, is subject to general economic, financial, competitive, legislative,
regulatory and other factors that are beyond our control. We anticipate that
we may need to refinance all or a portion of our indebtedness on or prior to
its scheduled maturity. There can be no assurance that we will be able to
effect any required refinancings of our indebtedness on commercially
reasonable terms or at all.
Restructuring Charge
In July 2001, we announced a restructuring of our business in order to
increase operational efficiency and better align costs with anticipated
revenues. As part of the restructuring, we have reduced our global staff by
approximately 275 full-time employees, we are closing five offices in the
United States and we are closing our development office in Brazil. We
anticipate that the actions to be taken for the restructuring will be
substantially completed by the end of 2001. In connection with the
restructuring, we expect to record non-recurring cash charges of approximately
$16.0 million during the third quarter of 2001 related to employee severance
payments and costs of office closures.
Reporting Requirements Under the Indentures Governing the Company's Debt
Securities (the "Indentures") and the Certificate of Designations Governing
the Company's 12 3/4% Senior Exchangeable Preferred Stock (the
"Certificate")
The following information (as such capitalized terms are defined in the
Indentures and the Certificate) is presented solely as a requirement of the
Indentures and the Certificate; such information is not intended as an
alternative measure of financial position, operating results or cash flow from
operations (as determined in accordance with generally accepted accounting
principles). Furthermore, our measure of the following information may not be
comparable to similarly titled measures of other companies.
23
Summarized financial information for (1) CCIC and our Restricted
Subsidiaries and (2) our Unrestricted Subsidiaries is as follows:
June 30, 2001
----------------------------------------------------
Company and
Restricted Unrestricted Consolidation Consolidated
Subsidiaries Subsidiaries Eliminations Total
------------ ------------ ------------- ------------
(In thousands of dollars)
Cash and cash
equivalents............. $ 482,307 $ 176,727 $ -- $ 659,034
Other current assets..... 318,475 109,732 -- 428,207
Property and equipment,
net..................... 3,298,323 1,396,422 -- 4,694,745
Investments.............. 100,000 -- -- 100,000
Escrow deposit for
investment in
affiliate............... -- 362,020 -- 362,020
Investments in
Unrestricted
Subsidiaries............ 2,051,342 -- (2,051,342) --
Goodwill and other
intangible assets, net.. 183,820 895,958 -- 1,079,778
Other assets, net........ 127,783 20,259 -- 148,042
---------- ---------- ----------- ----------
$6,562,050 $2,961,118 $(2,051,342) $7,471,826
========== ========== =========== ==========
Current liabilities...... $ 278,379 $ 130,211 $ -- $ 408,590
Long-term debt........... 2,732,242 622,602 -- 3,354,844
Other liabilities........ 38,746 81,823 -- 120,569
Minority interests....... 94,112 75,140 -- 169,252
Redeemable preferred
stock................... 860,248 -- -- 860,248
Stockholders' equity..... 2,558,323 2,051,342 (2,051,342) 2,558,323
---------- ---------- ----------- ----------
$6,562,050 $2,961,118 $(2,051,342) $7,471,826
========== ========== =========== ==========
Three Months Ended June 30, 2001 Six Months Ended June 30, 2001
-------------------------------------- --------------------------------------
Company and Company and
Restricted Unrestricted Consolidated Restricted Unrestricted Consolidated
Subsidiaries Subsidiaries Total Subsidiaries Subsidiaries Total
------------ ------------ ------------ ------------ ------------ ------------
(In thousands of dollars)
Net revenues............ $143,930 $ 85,486 $229,416 $ 269,701 $172,668 $ 442,369
Costs of operations
(exclusive
of depreciation and
amortization).......... 78,377 44,729 123,106 145,573 90,728 236,301
General and
administrative......... 22,613 7,852 30,465 44,160 12,200 56,360
Corporate development... 2,917 841 3,758 6,322 889 7,211
Asset write-down
charges................ 7,720 4,552 12,272 7,720 4,552 12,272
Non-cash general and
administrative
compensation charges... 872 508 1,380 1,744 1,031 2,775
Depreciation and
amortization........... 42,767 31,989 74,756 84,508 64,339 148,847
-------- -------- -------- --------- -------- ---------
Operating loss.......... (11,336) (4,985) (16,321) (20,326) (1,071) (21,397)
Interest and other
income (expense)....... 2,312 2,232 4,544 3,889 3,747 7,636
Interest expense and
amortization of
deferred financing
costs.................. (61,530) (11,645) (73,175) (116,135) (23,695) (139,830)
Provision for income
taxes.................. -- -- -- -- (60) (60)
Minority interests...... 682 (463) 219 1,407 (544) 863
-------- -------- -------- --------- -------- ---------
Net loss................ $(69,872) $(14,861) $(84,733) $(131,165) $(21,623) $(152,788)
======== ======== ======== ========= ======== =========
24
Tower Cash Flow and Adjusted Consolidated Cash Flow for CCIC and our
Restricted Subsidiaries is as follows under (1) the indenture governing the 10
5/8% Discount Notes and the Certificate (the "1997 and 1998 Securities") and
(2) the indentures governing the 10 3/8% Discount Notes, the 9% Senior Notes,
the 11 1/4% Discount Notes, the 9 1/2% Senior Notes, the 10 3/4% Senior Notes
and the 9 3/8% Senior Notes (the "1999, 2000 and 2001 Securities"):
1997 and 1998 1999, 2000 and
Securities 2001 Securities
------------- ---------------
(In thousands of dollars)
Tower Cash Flow, for the three months ended June
30, 2001....................................... $ 35,795 $ 35,795
========= =========
Consolidated Cash Flow, for the twelve months
ended June 30, 2001............................ $ 137,253 $ 149,658
Less: Tower Cash Flow, for the twelve months
ended June 30, 2001............................ (120,816) (120,816)
Plus: four times Tower Cash Flow, for the three
months ended June 30, 2001..................... 143,180 143,180
--------- ---------
Adjusted Consolidated Cash Flow, for the twelve
months ended
June 30, 2001.................................. $ 159,617 $ 172,022
========= =========
Impact of Recently Issued Accounting Standards
In July 2001, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 141, Business Combinations
("SFAS 141"), and Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets ("SFAS 142"). SFAS 141 prohibits the use
of the pooling-of-interests method of accounting for business combinations,
and requires that the purchase method be used for all business combinations
after June 30, 2001. SFAS 141 also changes the manner in which acquired
intangible assets are identified and recognized apart from goodwill. Further,
SFAS 141 requires additional disclosures regarding the reasons for business
combinations, the allocation of the purchase price to recognized assets and
liabilities and the recognition of goodwill and other intangible assets. We
have used the purchase method of accounting since our inception, so the
adoption of SFAS 141 will not change our method of accounting for business
combinations. We will adopt the other recognition and disclosure requirements
of SFAS 141 as of July 1, 2001 for any future business combinations. The
transition provisions of SFAS 141 require that the carrying amounts for
goodwill and other intangible assets acquired in prior purchase method
business combinations be reviewed and reclassified in accordance with the new
recognition rules; such reclassifications are to be made in conjunction with
the adoption of SFAS 142. We will apply these transition provisions of SFAS
141 as of January 1, 2002, and have not yet determined the effect that they
will have on our consolidated financial statements.
SFAS 142 changes the accounting and disclosure requirements for acquired
goodwill and other intangible assets. The most significant provision of SFAS
142 is that goodwill and other intangible assets with indefinite useful lives
will no longer be amortized, but rather will be tested for impairment on an
annual basis. This annual impairment test will involve (1) a step to identify
potential impairment at a reporting unit level based on fair values, and (2) a
step to measure the amount of the impairment, if any. Intangible assets with
finite useful lives will continue to be amortized over such lives, and tested
for impairment in accordance with our existing policies. SFAS 142 requires
disclosures about goodwill and other intangible assets in the periods
subsequent to their acquisition, including (1) changes in the carrying amount
of goodwill, in total and by operating segment, (2) the carrying amounts of
intangible assets subject to amortization and those which are not subject to
amortization, (3) information about impairment losses recognized, and (4) the
estimated amount of intangible asset amortization expense for the next five
years. The provisions of SFAS 142 are effective for fiscal years beginning
after December 15, 2001. We will adopt the requirements of SFAS 142 as of
January 1, 2002. In addition, the nonamortization provisions of SFAS 142 are
to be immediately applied for goodwill and other intangible assets acquired in
business combinations subsequent to June 30, 2001. SFAS 142 requires that
transitional impairment tests be performed at its adoption, and provides that
resulting impairment losses for goodwill and other intangible assets be
reported as the effect of a change in accounting principle. We have not yet
determined the effect that the adoption of SFAS 142 will have on our
consolidated financial statements.
25
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a result of our international operating, investing and financing
activities, we are exposed to market risks, which include changes in foreign
currency exchange rates and interest rates which may adversely affect our
results of operations and financial position. In attempting to minimize the
risks and/or costs associated with such activities, we seek to manage exposure
to changes in interest rates and foreign currency exchange rates where
economically prudent to do so.
Certain of the financial instruments we have used to obtain capital are
subject to market risks from fluctuations in market interest rates. The
majority of our financial instruments, however, are long-term fixed interest
rate notes and debentures. Therefore, fluctuations in market interest rates of
one percentage point in 2001 would not have a material effect on our
consolidated financial results.
The majority of our foreign currency transactions are denominated in the
British pound sterling or the Australian dollar, which are the functional
currencies of CCUK and CCAL, respectively. As a result of CCUK's and CCAL's
transactions being denominated and settled in such functional currencies, the
risks associated with currency fluctuations are generally limited to foreign
currency translation adjustments. We do not currently hedge against foreign
currency translation risks and believe that foreign currency exchange risk is
not significant to our operations.
As discussed in "Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources", we have
deposited approximately $383.8 million in cash into a Euro-denominated escrow
account in connection with our investment in RaiWay. At the time of the
deposit, the funds were exchanged at an average rate of Euro 1.00 = $0.8984.
On June 30, 2001, the balance in the escrow account was translated into U.S.
dollars for financial reporting purposes using an exchange rate of Euro 1.00 =
$0.8474, resulting in a foreign currency translation loss of approximately
$21.8 million. This currency translation loss has been recorded in our
financial statements in other comprehensive income (loss). As of August 1,
2001, the exchange rate was Euro 1.00 = $0.8793; as such, the foreign currency
translation loss has been reduced to approximately $8.2 million. Should
approval of the transaction not be received from the Italian regulatory
authorities, the escrow deposit would be returned to us and any foreign
exchange gain or loss at that date would be recognized in our results of
operations as other income (expense).
26
PART II--OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of the stockholders of the Company was held on June 5,
2001, at which meeting the stockholders voted to (1) elect Randall A. Hack,
Edward C. Hutcheson, Jr., J. Landis Martin, and Ted B. Miller, Jr. as Class
III Directors, (2) approve an amendment to the Company's Restated Certificate
of Incorporation to increase the authorized number of shares of preferred
stock, par value $.01 per share, of the Company from 10,000,000 to 20,000,000
shares, (3) approve the Company's 2001 Stock Incentive Plan, and (4) ratify
the appointment of KPMG LLP as the Company's independent public accountants
for 2001.
1. ELECTION OF CLASS III DIRECTORS
Randall A. Hack--173,655,810 votes for and 1,004,799 votes withheld.
Edward C. Hutcheson, Jr--166,857,435 votes for and 7,803,174 votes
withheld.
J. Landis Martin--173,666,284 votes for and 994,325 votes withheld.
Ted B. Miller, Jr.--173,543,173 votes for and 1,117,436 votes withheld.
2. AMENDMENT TO INCREASE AUTHORIZED SHARES OF PREFERRED STOCK
Common Stock: 119,579,060 votes for, 47,121,560 votes against, and
45,018 votes abstaining.
Preferred Stock: 9,474,364 votes for, 1,920,402 votes against, and 463
votes abstaining.
3. APPROVAL OF THE COMPANY'S 2001 STOCK INCENTIVE PLAN
133,431,907 votes for, 41,155,027 votes against, and 73,675 votes
abstaining.
4. RATIFICATION OF APPOINTMENT OF KPMG LLP AS INDEPENDENT AUDITORS FOR 2001
174,252,071 votes for, 380,304 votes against, and 28,233 votes
abstaining.
All votes shown above represent votes on behalf of holders of the Company's
common stock, except where otherwise indicated with respect to Proposal 2
above. In addition, the holders of the Company's 8 1/4% Convertible Preferred
Stock were entitled to vote on an as converted basis on each of the four
proposals with the common stock, voting as a single class, and such votes are
included in the voting results of the common stock set forth for each of the
proposals above. The holders of the Company's 8 1/4% Convertible Preferred
Stock were also entitled to vote their shares with respect to Proposal 2 as
part of the preferred stock class, voting as a single class.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
11.1 Computation of Net Loss Per Common Share
12.1 Computation of Ratios of Earnings to Fixed Charges and Earnings to
Combined Fixed Charges and Preferred Stock Dividends
(b) Reports on Form 8-K:
The Company filed a Current Report on Form 8-K dated April 11, 2001 and
filed with the SEC on April 11, 2001 reporting under Item 5 thereof that
the Company's Common Stock would begin trading on the New York Stock
Exchange under the ticker symbol "CCI" on April 25, 2001.
The Company filed a Current Report on Form 8-K dated April 27, 2001 and
filed with the SEC on April 27, 2001, reporting under Item 5 thereof that
RAI Radio Televisione Italiana S.p.A. and CCR S.r.l., an indirect
subsidiary of the Company, had entered into a Share Purchase Agreement,
pursuant to which CCR would purchase 49% of the outstanding capital stock
of RAI Way S.p.A., a wholly-owned subsidiary of RAI, subject to certain
regulatory approvals being obtained.
The Company filed a Current Report on Form 8-K dated May 9, 2001 and
filed with the SEC on May 10, 2001, reporting under Item 5 thereof that the
Company intends to sell certain senior notes due 2011.
27
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: August 13, 2001 /s/ W. Benjamin Moreland
By: _________________________________
W. Benjamin Moreland
Senior Vice President, Chief
Financial Officer and Treasurer
(Principal Financial Officer)
Date: August 13, 2001 /s/ Wesley D. Cunningham
By: _________________________________
Wesley D. Cunningham
Senior Vice President, Chief
Accounting
Officer and Corporate Controller
(Principal Accounting Officer)
28