EX-99.3 5 proformasexhibit993.htm UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET OF CROWN CASTLE Pro Formas Exhibit 99.3

Exhibit 99.3

Unaudited Pro Forma Condensed
Combined Financial Information

The accompanying unaudited pro forma condensed combined financial statements present the pro forma combined financial position and results of operations of the combined company based upon the historical financial statements of Crown Castle International Corp. ("Crown Castle" or "CCIC") and Tower Sites (a component of AT&T Inc., a Delaware Corporation ("AT&T")), after giving effect to (1) the acquisition by Crown Castle, through certain of its wholly owned subsidiaries, of the exclusive right to lease, operate or otherwise acquire approximately 9,675 wireless communication sites (the "Sites") from certain subsidiaries of AT&T for approximately $4.827 billion in cash (the "AT&T Transaction"), and (2) the related financings described herein (collectively, together with the AT&T Transaction, the "Transactions"). The adjustments set forth herein and described in the accompanying footnotes are intended to reflect the impact of the Transactions on Crown Castle. The accompanying unaudited pro forma condensed combined financial statements are based upon the historical financial statements and have been developed from the (1) audited consolidated financial statements of Crown Castle contained in its Annual Report on Form 10-K for the fiscal year ended December 31, 2012 and the unaudited condensed consolidated financial statements of Crown Castle contained in its periodic report on Form 10-Q for the nine months ended September 30, 2013, and (2) Statement of Revenues and Certain Expenses of Tower Sites (a component of AT&T) for the year ended December 31, 2012 and the nine months ended September 30, 2013. Tower Sites is not a legal entity and references to "Tower Sites" refer to the collective operations of the Sites. The unaudited pro forma condensed combined financial statements are prepared using the purchase method of accounting, with Crown Castle treated as the acquirer and as if the Transactions had been consummated on September 30, 2013 for purposes of preparing the unaudited condensed combined balance sheet, and on January 1, 2012 for purposes of preparing the unaudited condensed combined statement of operations for the year ended December 31, 2012 and the nine months ended September 30, 2013.
Crown Castle is in the process of obtaining a third-party valuation of certain of the assets acquired and liabilities assumed from AT&T, including property and equipment and intangible assets. Given the size and timing of the AT&T Transaction, the amount of certain assets and liabilities presented are based on preliminary valuations and are subject to adjustment as additional information is obtained and the third-party valuation is finalized. The primary areas of the purchase price allocation that are not finalized relate to fair values of property and equipment, intangibles and goodwill. However, as indicated in note (B) to the unaudited pro forma condensed combined financial statements, Crown Castle made preliminary estimates of the fair values necessary to prepare the unaudited pro forma condensed combined financial statements. The preliminary purchase price allocation is based on the assumption that substantially all of the leased Sites in the AT&T Transaction are accounted for as prepaid capital leases. Any excess purchase price over the acquired net assets, as adjusted to reflect estimated fair values, has been recorded as goodwill. Actual results may differ from these unaudited pro forma condensed combined financial statements once Crown Castle has completed the valuation studies necessary to finalize the required purchase price allocations. There can be no assurance that such finalization will not result in material changes.
On January 1, 2014, Crown Castle began operating as a real estate investment trust ("REIT") for U.S. federal income tax purposes. As a REIT, Crown Castle will generally be entitled to a deduction for dividends that it pays and therefore should not be subject to U.S. federal corporate income tax on its net taxable income that is currently distributed to its stockholders. However, Crown Castle may be subject to certain federal, state, local and foreign taxes on its income and assets, including alternative minimum taxes, taxes on any undistributed income, and state, local or foreign income, franchise, property and transfer taxes. As a result of Crown Castle's REIT election, its financial statements will no longer include deferred tax assets and liabilities related to entities included in the REIT. As a result during the fourth quarter of 2013, Crown Castle de-recognized the net deferred tax assets related to the entities included in the REIT and recorded a corresponding non-cash income tax charge, leaving (1) a remaining deferred tax asset of approximately $24 million related to foreign taxes, (2) a federal deferred tax liability of approximately $20 million and (3) a state deferred tax liability of approximately $15 million, relating to our taxable REIT subsidiaries. The de-recognition of the deferred tax assets and liabilities was recorded when Crown Castle completed all necessary actions to qualify as a REIT and obtained final approval from its board of directors in December of 2013. The assets and operations from the AT&T Transaction are included in the REIT and, as a result, no deferred income tax assets or liabilities were recognized in conjunction with the AT&T Transaction. No pro forma adjustments were made related to Crown Castle's REIT conversion; including with respect to the non-recurring de-recognition of Crown Castle's existing deferred tax assets and liabilities related to the entities included in the REIT.
The accompanying unaudited pro forma condensed combined financial statements are provided for illustrative purposes only and do not purport to represent what the actual consolidated results of operations or the consolidated financial position of Crown Castle would have been had the Transactions occurred on the dates assumed, nor are they necessarily indicative of future consolidated results of operations or consolidated financial position. The unaudited pro forma condensed combined financial statements do not include the realization of potential cost savings from operating efficiencies or restructuring costs that may result from the AT&T Transaction. The unaudited pro forma condensed combined financial statements should be read in conjunction with the separate historical consolidated financial statements and accompanying notes of Crown Castle previously filed on its

1

Exhibit 99.3

Form 10-K and Form 10-Q, and the Statements of Revenues and Certain Expenses of Tower Sites (a component of AT&T) and accompanying notes included elsewhere in this filing.

2

Unaudited Pro Forma Condensed Combined Balance Sheet
Crown Castle International Corp. and Subsidiaries
September 30, 2013
(In thousands of dollars, except share amounts)
 
Historical(A)
 
Adjustments
for the Transactions(B)
 
Pro Forma
ASSETS
 
 
 
 
 
Current assets:
 
 
 
 
 
Cash and cash equivalents
$
218,649

 
$
(42,026
)
(B1)
 
 
 
 
(1,244
)
(B2)
$
175,379

Restricted cash
157,699

 
—

 
157,699

Receivables, net
236,211

 
—

 
236,211

Prepaid expenses
117,866

 
20,428

(B2)
138,294

Deferred income tax assets
189,878

 
—

 
189,878

Other current assets
79,500

 
—

 
79,500

Total current assets
999,803

 
(22,842
)
 
976,961

Deferred site rental receivables, net
1,031,966

 
—

 
1,031,966

Property and equipment, net of accumulated depreciation
6,904,346

 
1,965,375

(B2)
8,869,721

Goodwill
3,140,308

 
1,768,535

(B2)
4,908,843

Other intangible assets, net
2,821,812

 
1,280,071

(B2)
4,101,883

Deferred income tax assets
21,311

 
—

 
21,311

Long-term prepaid rent, deferred financing costs and other assets, net
648,026

 
7,026

(B1)
 
 
 
 
3,253

(B2)
658,305

Total assets
$
15,567,572

 
$
5,001,418

 
$
20,568,990

 
 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
 
Current liabilities:
 
 
 
 
 
Accounts payable
$
119,689

 
$
—

 
$
119,689

Accrued interest
64,571

 
—

 
64,571

Deferred revenues
248,807

 
—

 
248,807

Other accrued liabilities
131,273

 
23,874

(B2)
155,147

Current maturities of debt and other obligations
115,378

 
10,000

(B1)
125,378

Total current liabilities
679,718

 
33,874

 
713,592

Debt and other long-term obligations
10,660,076

 
855,000

(B1)
11,515,076

Deferred income tax liabilities
153,967

 
—

 
153,967

Below-market tenant leases, deferred ground lease payable and other liabilities
1,076,521

 
198,133

(B2)
1,274,654

Total liabilities
12,570,282

 
1,087,007

 
13,657,289

Commitments and contingencies
 
 
 
 
 
CCIC stockholders' equity:
 
 
 
 
 
Common stock, $.01 par value; 600,000,000 shares authorized
2,927

 
414

(B3)
3,341

4.50% Mandatory Convertible Preferred Stock, Series A, par value $0.01 per share; 20,000,000 shares authorized
—

 
98

(B3)
98

Additional paid-in capital
5,553,717

 
3,926,088

(B3)
9,479,805

Accumulated other comprehensive income (loss)
(61,339
)
 
—

 
(61,339
)
Accumulated deficit
(2,512,333
)
 
(12,189
)
(B2)
(2,524,522
)
Total CCIC stockholders' equity
2,982,972

 
3,914,411

 
6,897,383

Noncontrolling interest
14,318

 
—

 
14,318

Total equity
2,997,290

 
3,914,411

 
6,911,701

Total liabilities and equity
$
15,567,572

 
$
5,001,418

 
$
20,568,990


See notes to unaudited pro forma condensed combined financial statements.


3

Unaudited Pro Forma Condensed Combined Statement of Operations
Crown Castle International Corp. and Subsidiaries
Year Ended December 31, 2012
(In thousands except per share data)
 
Historical Year Ended(C)
 
Adjustments
for the Transactions(D)
 
Pro Forma Year Ended
 
Net revenues:
 
 
 
 
 
 
Site rental
$
2,124,190

 
$
396,340

(D1)
$
2,520,530

 
Network services and other
308,490

 
10,836

(D1)
319,326

 
Net revenues
2,432,680

 
407,176

 
2,839,856

 
Operating expenses:
 
 
 
 
 
 
Cost of operations(1):
 
 
 
 
 
 
Site rental
539,239

 
192,240

(D1)
731,479

 
Network services and other
189,750

 
5,151

(D1)
194,901

 
General administrative
212,572

 
12,094

(D1)
224,666

 
Asset write-down charges
15,548

 
—

 
15,548

 
Acquisition and integration costs
18,298

 
—

 
18,298

 
Depreciation, amortization and accretion
622,592

 
227,997

(D2)
850,589

 
Total operating expenses
1,597,999

 
437,482

 
2,035,481

 
 
 
 
 
 
 
 
Operating income (loss)
834,681

 
(30,305
)
 
804,376

 
Interest expense and amortization of deferred financing costs
(601,044
)
 
(25,211
)
(D3)
(626,255
)
 
Gains (losses) on retirement of long-term obligations
(131,974
)
 
—

 
(131,974
)
 
Interest income
4,556

 
—

 
4,556

 
Other income (expense)
(5,392
)
 
—

 
(5,392
)
 
Income (loss) before income taxes
100,827

 
(55,516
)
 
45,311

 
Benefit (provision) for income taxes
100,061

 
22,206

(D4)
122,267

 
Net income (loss)
200,888

 
(33,310
)
 
167,578

 
Less: Net income (loss) attributable to the noncontrolling interest
12,304

 
—

 
12,304

 
Net income (loss) attributable to CCIC stockholders
188,584

 
(33,310
)
 
155,274

 
Dividends on preferred stock
(2,629
)
 
(43,988
)
(D5)
(46,617
)
 
Net income (loss) attributable to CCIC stockholders after deduction of dividends on preferred stock
$
185,955

 
$
(77,298
)
 
$
108,657

 
Net income (loss)
$
200,888

 
$
(33,310
)
 
$
167,578

 
Other comprehensive income (loss):
 
 
 
 
 
 
Interest rate swaps, net of taxes:
 
 
 
 
 
 
Amounts reclassified into "interest expense and amortization of deferred financing costs," net of taxes
48,124

 
—

 
48,124

 
Foreign currency translation adjustments
6,308

 
—

 
6,308

 
Total other comprehensive income (loss)
54,432

 
—

 
54,432

 
Comprehensive income (loss)
255,320

 
(33,310
)
 
222,010

 
Less: Comprehensive income (loss) attributable to the noncontrolling interest
11,531

 
—

 
11,531

 
Comprehensive income (loss) attributable to CCIC stockholders
$
243,789

 
$
(33,310
)
 
$
210,479

 
Net income (loss) attributable to CCIC common stockholders, per common share:
 
 
 
 
 
 
Basic
$
0.64

 
N/M

 
$
0.33

(D6)
Diluted
$
0.64

 
N/M

 
$
0.33

(D6)
Weighted-average common shares outstanding (in thousands):
 
 
 
 
 
 
Basic
289,285

 
41,400

(D6)
330,685

 
Diluted
291,270

 
41,400

(D6)
332,670

 
    
(1)
Exclusive of depreciation, amortization and accretion shown separately.
N/M: Not meaningful


See notes to unaudited pro forma condensed combined financial statements.

4

Unaudited Pro Forma Condensed Combined Statement of Operations
Crown Castle International Corp. and Subsidiaries
Nine Months Ended September 30, 2013
(In thousands except per share data)
 
Historical
 Nine Months
Ended (E)
 
Adjustments
for the Transactions(F)
 
Pro Forma
 Nine Months
Ended
 
Net revenues:
 
 
 
 
 
 
Site rental
$
1,853,030

 
$
306,666

(F1)
$
2,159,696

 
Network services and other
370,935

 
5,285

(F1)
376,220

 
Net revenues
2,223,965

 
311,951

 
2,535,916

 
Operating expenses:
 
 
 
 
 
 
Cost of operations(1):
 
 
 
 
 
 
Site rental
538,587

 
147,518

(F1)
686,105

 
Network services and other
229,574

 
3,400

(F1)
232,974

 
General administrative
171,539

 
10,163

(F1)
181,702

 
Asset write-down charges
10,705

 
—

 
10,705

 
Acquisition and integration costs
13,186

 
—

 
13,186

 
Depreciation, amortization and accretion
572,518

 
170,998

(F2)
743,516

 
Total operating expenses
1,536,109

 
332,079

 
1,868,188

 
 


 
 
 
 
 
Operating income (loss)
687,856

 
(20,128
)
 
667,728

 
Interest expense and amortization of deferred financing costs
(446,641
)
 
(18,908
)
(F3)
(465,549
)
 
Gains (losses) on retirement of long-term obligations
(36,487
)
 
—

 
(36,487
)
 
Interest income
861

 
—

 
861

 
Other income (expense)
(753
)
 
—

 
(753
)
 
Income (loss) before income taxes
204,836

 
(39,036
)
 
165,800

 
Benefit (provision) for income taxes
(88,254
)
 
15,614

(F4)
(72,640
)
 
Net income (loss)
116,582

 
(23,422
)
 
93,160

 
Less: Net income (loss) attributable to the noncontrolling interest
2,925

 
—

 
2,925

 
Net income (loss) attributable to CCIC stockholders
113,657

 
(23,422
)
 
90,235

 
Dividends on preferred stock
—

 
(32,991
)
(F5)
(32,991
)
 
Net income (loss) attributable to CCIC stockholders after deduction of dividends on preferred stock
$
113,657

 
$
(56,413
)
 
$
57,244

 
Net income (loss)
$
116,582

 
$
(23,422
)
 
$
93,160

 
Other comprehensive income (loss):
 
 
 
 
 
 
Interest rate swaps, net of taxes:
 
 
 
 
 
 
Amounts reclassified into "interest expense and amortization of deferred financing costs," net of taxes
31,671

 
—

 
31,671

 
Foreign currency translation adjustments
(32,344
)
 
—

 
(32,344
)
 
Total other comprehensive income (loss)
(673
)
 
—

 
(673
)
 
Comprehensive income (loss)
115,909

 
(23,422
)
 
92,487

 
Less: Comprehensive income (loss) attributable to the noncontrolling interest
1,800

 
—

 
1,800

 
Comprehensive income (loss) attributable to CCIC stockholders
$
114,109

 
$
(23,422
)
 
$
90,687

 
Net income (loss) attributable to CCIC common stockholders, per common share:
 
 
 
 
 
 
Basic
$
0.39

 
N/M

 
$
0.17

(F6)
Diluted
$
0.39

 
N/M

 
$
0.17

(F6)
Weighted-average common shares outstanding (in thousands):
 
 
 
 
 
 
Basic
290,900

 
41,400

(F6)
332,300

 
Diluted
292,043

 
41,400

(F6)
333,443

 
    
(1)
Exclusive of depreciation, amortization and accretion shown separately.
N/M: Not meaningful


See notes to unaudited pro forma condensed combined financial statements.

5
Notes to Pro Forma Condensed Combined Financial Statements (Unaudited)
Crown Castle International Corp. and Subsidiaries
(tabular dollars in thousands)



A.
Reflects Crown Castle's condensed consolidated balance sheet as of September 30, 2013 derived from Crown Castle's unaudited condensed consolidated financial statements included in Crown Castle's Form 10-Q for the nine months ended September 30, 2013, filed on November 8, 2013.

B.    Reflects the Transactions as set forth below.
B1.
The table below reflects the total purchase price and funding sources for the AT&T Transaction.
Prepaid lease and acquisition payment
 
$
4,827,700

Prorated expenses and revenues adjustment
 
(1,100
)
Total purchase price
 
$
4,826,600

 
 
 
Cash on hand
 
$
42,026

Common Stock Offering, net of fees and expenses (see B3)
 
2,977,000

Mandatory Convertible Preferred Stock Offering, net of fees and expenses (see B3)
 
949,600

CCOC Revolving Credit Facility Drawdown, net of repayment (see B3)
 
165,000

Incremental Tranche B Term Loans, net of fees and expenses (see B3)(1)
 
493,612

Incremental Tranche A Term Loans, net of fees and expenses (see B3)(1)
 
199,362

Total sources of funds
 
$
4,826,600

        
(1)
Inclusive of aggregate fees and expenses of approximately $7.0 million recorded as deferred financing costs.
B2.
The table below reflects the preliminary purchase price allocation for the AT&T Transaction.
Balance Sheet Caption
 
Amount
Prepaid expenses
 
$
23,681

Property and equipment
 
1,965,375

Goodwill
 
1,768,535

Other intangible assets
 
1,280,071

Other accrued liabilities
 
(12,929
)
Below-market leases, deferred ground lease payable and other liabilities(1)
 
(198,133
)
Net assets acquired
 
$
4,826,600

        
(1)
Predominately consists of above-market ground leases.
Additionally, accumulated deficit was reduced by $12.2 million (reflected as an increase in other accrued liabilities of $11.0 million and a decrease in cash of $1.2 million) for estimated transaction costs directly related to the AT&T Transaction that would be expensed. Estimated transaction costs have been excluded from the pro forma statement of operations as they reflect non-recurring charges directly related to the AT&T Transaction.
On January 1, 2014, Crown Castle began operating as a REIT for U.S. federal income tax purposes. The assets and operations from the AT&T Transaction are included in the REIT and, as a result, no deferred tax assets or liabilities are reflected in the preliminary purchase price allocation. No other adjustment to these pro forma financial statements were made related to Crown Castle's REIT conversion.
B3.
Equity Financings
On October 28, 2013, Crown Castle issued 41.4 million shares of its common stock ("Common Stock"), par value $0.01 per share ("Common Stock Offering"), which generated net proceeds of approximately $3.0 billion. As of September 30, 2013, pro forma for the Common Stock Offering Crown Castle had approximately 334 million shares of Common Stock outstanding. The net proceeds from the Common Stock Offering were used to partially fund the AT&T Transaction.
On October 28, 2013, Crown Castle also issued 9.8 million shares of its 4.50% Mandatory Convertible Preferred Stock, Series A, par value $0.01 per share ("4.50% Mandatory Convertible Preferred Stock"), which generated net proceeds of approximately $949.6 million. The holders of the 4.50% Mandatory Convertible Preferred Stock are entitled to receive cumulative dividends, when and if declared by Crown Castle's board of directors, at the rate of 4.50% per annum payable on February 1, May 1, August 1 and November 1 of each year, commencing on February 1, 2014, and to, and including, November 1, 2016. The dividends may be paid in cash or, subject to certain limitations, shares of Common Stock or any

6
Notes to Pro Forma Condensed Combined Financial Statements (Unaudited)
Crown Castle International Corp. and Subsidiaries
(tabular dollars in thousands)


combination of cash and shares of Common Stock. The net proceeds from the issuance of the 4.50% Mandatory Convertible Preferred Stock were used to partially fund the AT&T Transaction.
Unless converted earlier, each outstanding share of the 4.50% Mandatory Convertible Preferred Stock will automatically convert on November 1, 2016 into between 1.0811 and 1.3513 shares of Common Stock, depending on the applicable market value of the Common Stock and subject to certain anti-dilution adjustments. At any time prior to November 1, 2016, holders of the 4.50% Mandatory Convertible Preferred Stock may elect to convert all or a portion of their shares into Common Stock at the minimum conversion rate of 1.0811, subject to certain anti-dilution adjustments.
Debt Financings
Crown Castle drew $865 million from its Crown Castle Operating Company ("CCOC") Revolving Credit Facility ("Credit Facility") in order to partially fund the AT&T Transaction at closing on December 16, 2013. On December 30, 2013, Crown Castle repaid $700 million on the Credit Facility using (1) the net proceeds of $493.6 million from the $500 million tranche B-2 incremental term loans ("Incremental Tranche B Term Loans"), (2) the net proceeds of $199.4 million from the $200 million tranche A incremental term loans ("Incremental Tranche A Term Loans") and (3) cash on hand. The Incremental Tranche B Term Loans and the Incremental Tranche A Term Loans were issued pursuant to the Incremental Facility Amendment No. 3 and Maturity Date Extension dated December 30, 2013, among Crown Castle, CCOC, certain subsidiaries of CCOC, the lenders party thereto and the Royal Bank of Scotland ("RBS"), as administrator agent, to the Credit Agreement dated as of January 31, 2012 (as amended, supplemented or otherwise modified, the ("Credit Agreement") by and among CCOC, Crown Castle, the lenders and issuing banks from time to time party thereto, RBS, as administrative agent, and Morgan Stanley Senior Funding Inc., as co-documentation agent.
The Incremental Tranche B Term Loans will mature on January 31, 2021 and have substantially the same terms as the CCOC's outstanding tranche B term loans under the Credit Agreement. The Incremental Tranche B Term Loans bear interest at a per annum rate equal to LIBOR plus 2.25% to 2.50% (with LIBOR subject to a floor of 0.75% per annum), based on CCOC's total net leverage ratio.
The Incremental Tranche A Term Loans will mature on November 1, 2018, or, if the aggregate principal amount of CCOC's outstanding tranche B term loans under the Credit Agreement (the maturity date of which has not been extended to a date that is on or after July 31, 2019) is less than or equal to $500 million, January 31, 2019. The Incremental Tranche A Term Loans have substantially the same terms as the CCOC's outstanding tranche A term loans under the Credit Agreement. The Incremental Tranche A Term Loans bear interest at a per annum rate equal to LIBOR plus 1.5% to 2.25%, based on CCOC's total net leverage ratio.
The Credit Facility, Incremental Tranche A Term Loans and Incremental Tranche B Term Loans currently bear interest at 2.17%, 2.17% and 3.25%, respectively. As a result, a hypothetical unfavorable fluctuation in market interest rates on these borrowings of 1/8 of a percent point over a 12 month period would increase Crown Castle's interest expense by approximately $1 million when giving effect to its LIBOR floor and would increase its interest expense by approximately $5 million exclusive of the impact of its LIBOR floor.

C.
Reflects Crown Castle's condensed consolidated statement of operations for the year ended December 31, 2012, derived from Crown Castle's audited financial statements included in its Form 10-K filed on February 12, 2013.

D.
Reflects the Transactions as set forth below
D1.
Reflects full year 2012 revenues and certain expenses of Tower Sites (a component of AT&T Inc.) as adjusted for the items footnoted below. These amounts were derived from the audited Statement of Revenues and Certain Expenses of Tower Sites (a component of AT&T Inc.) for the year ended December 31, 2012 included elsewhere herein.

7
Notes to Pro Forma Condensed Combined Financial Statements (Unaudited)
Crown Castle International Corp. and Subsidiaries
(tabular dollars in thousands)


 
Year Ended December 31, 2012
 
As Reported
 
Adjustments
 
As Adjusted
Revenues:
 
 
 
 
 
Lease revenues
$
154,757

 
$
241,583

(i)
$
396,340

Service revenues
10,836

 
—

 
10,836

 
165,593

 
241,583

 
407,176

Certain expenses:
 
 
 
 
 
Lease expense(v)
155,282

 
19,785

(ii)
175,067

Property taxes
18,059

 
(886
)
(iii)
17,173

Network services and other expenses
—

 
5,151

(iv)
5,151

 
173,341

 
24,050

 
197,391

Selling, general & administrative expenses
12,094

 
—

 
12,094

Total certain expenses
185,435

 
24,050

 
209,485

Revenues (less than) in excess of expenses
$
(19,842
)
 
$
217,533

 
$
197,691

(i)
Represents the combination of both (1) the annual rent of $220.6 million Crown Castle expects to recognize from AT&T under AT&T's contracted lease of space on the Sites at an initial monthly rate of $1,900 per Site and (2) an increase in straight-line revenues from the AT&T lease and other third party leases of approximately $21.0 million.
(ii)
Represents (1) an adjustment of $26.3 million to straight-line expense for ground leases with contractual fixed escalations relating to the Sites, (2) the net impact of the amortization of above-market and below-market ground leases, (3) the inclusion of site insurance expenses, partially offset by reclassifications discussed below under (iv).
(iii)
Represents an adjustment of real and personal property taxes to reflect the fixed annual amount per tower of $1,769 that Crown Castle has agreed to pay to AT&T for real and personal property taxes.
(iv)
Represents an adjustment to reclassify certain network services and other expenses from lease expense to network services and other expenses consistent with the manner in which Crown Castle reports such expenses.
(v)
Includes tower operating expenses such as repairs and maintenance, utilities and site insurance expenses.
D2.
Reflects depreciation, amortization and accretion on the Sites based on the estimated tangible and customer-related intangible assets of the Sites. For purposes of computing pro forma depreciation expense, a useful life equal to the shorter of 20 years or the term of the underlying ground lease including optional renewal periods was utilized, resulting in an average useful life of approximately 15 years. The fair value adjustment to identifiable intangible assets for the customer-related intangible is being amortized over an estimated useful life of 20 years.
 
Amount
 
Annual Depreciation Expense
Property and equipment
$
1,911,875

 
$
171,797

Intangible assets
1,124,000

 
56,200

Total
 
 
$
227,997

D3.
Reflects the increased annual interest expense and amortization of deferred financing costs from the aggregate borrowings of $865 million discussed under the heading "Debt Financing" in Note B3.
D4.
Benefit (provision) for income taxes reflects the aggregate pro forma tax effect of the AT&T Transaction using the federal and state statutory rates. As discussed in Note B2, no adjustment was made to reflect the impact of Crown Castle operating as a REIT as of January 1, 2014.
D5.
Reflects dividends on the 4.50% Mandatory Convertible Preferred Stock discussed in Note B3.

8
Notes to Pro Forma Condensed Combined Financial Statements (Unaudited)
Crown Castle International Corp. and Subsidiaries
(tabular dollars in thousands)


D6.
The following is a summary of the pro forma adjustment to the weighted-average common shares outstanding and net income (loss) attributable to CCIC common stockholders.
 
Year Ended December 31, 2012
 
Historical Year Ended
 
Adjustments
 
Pro Forma Year End
Weighted-average common shares outstanding (in thousands):
 
 
 
 
 
Basic weighted-average common shares outstanding
289,285

 
41,400

 
330,685

Effect of assumed dilution from potential common shares relating to stock options and restricted stock awards
1,985

 
—

 
1,985

Diluted weighted-average common shares outstanding
291,270

 
41,400

 
332,670

Net income (loss) attributable to CCIC stockholders, per common share:
 
 
 
 
 
Basic
$
0.64

 
 
 
$
0.33

Diluted
$
0.64

 
 
 
$
0.33

The weighted average common shares outstanding are inclusive of the impact of the issuance of 41.4 million shares of Common Stock used to fund the AT&T Transaction. Approximately 13.2 million common shares reserved for issuance in connection with the conversion of the 4.50% Mandatory Convertible Preferred Stock are excluded from the weighted average diluted common shares outstanding because the impact of such conversion would be anti-dilutive. See Note B3.

E.
Reflects Crown Castle's unaudited condensed consolidated statement of operations for the nine months ended September 30, 2013, derived from Crown Castle's unaudited condensed consolidated financial statements included in Crown Castle's Form 10-Q filed on November 8, 2013.


F.
Reflects the Transactions as set forth below
F1.
Reflects revenues and certain expenses of Tower Sites (a component of AT&T Inc.) as adjusted for the items footnoted below for the nine months ended September 30, 2013. These amounts were derived from the unaudited statement of revenues and certain expenses of Tower Sites (a component of AT&T Inc.) for the nine months ended September 30, 2013 included elsewhere herein.
 
Nine Months Ended September 30, 2013
 
As Reported
 
Adjustments
 
As Adjusted
Revenues:
 
 
 
 
 
Lease revenue
$
126,372

 
$
180,294

(i)
$
306,666

Service revenue
5,285

 
—

 
5,285

 
131,657

 
180,294

 
311,951

Certain expenses:
 
 
 
 
 
Lease expense(v)
118,209

 
16,429

(ii)
134,638

Property taxes
13,305

 
(425
)
(iii)
12,880

Network services and other expenses
—

 
3,400

(iv)
3,400

 
131,514

 
19,404

 
150,918

Selling, general & administrative expenses
10,163

 
—

 
10,163

Total certain expenses
141,677

 
19,404

 
161,081

Revenues (less than) in excess of expenses
$
(10,020
)
 
$
160,890

 
$
150,870

(i)
Represents the combination of both (1) the nine month rent of $165.4 million Crown Castle expects to recognize from AT&T under AT&T's contracted lease of space on the Sites at an initial monthly rate of $1,900 per Site and (2) a increase to straight-line revenue from the AT&T lease and other third party leases totaling $14.9 million.
(ii)
Represents (1) an adjustment of $20.8 million to straight-line expense for ground leases with contractual fixed escalations relating to the Sites, (2) the net decrease of the amortization of above-market and below-market ground leases, (3) the inclusion of site insurance expenses, partially offset by reclassifications discussed below under (iv).
(iii)
Represents an adjustment of real and personal property taxes to reflect the fixed annual amount per tower of $1,769 that Crown Castle has agreed to pay to AT&T for real and personal property taxes.

9
Notes to Pro Forma Condensed Combined Financial Statements (Unaudited)
Crown Castle International Corp. and Subsidiaries
(tabular dollars in thousands)


(iv)
Represents an adjustment to reclassify certain network services and other expenses from site rental lease expense to network services and other expenses consistent with the manner in which Crown Castle reports such expenses.
(v)
Includes tower operating expenses such as repairs and maintenance, utilities and site insurance expenses.
F2.
Reflects depreciation, amortization and accretion on estimated tangible and customer-related intangible assets of the Sites. For purposes of computing pro forma depreciation expense, a useful life equal to the shorter of 20 years or the term of the underlying ground lease including optional renewal periods was utilized, resulting in an average useful life of approximately 15 years. The fair value adjustment to identifiable intangible assets for the customer-related intangible is being amortized over an estimated useful life of 20 years.
 
Amount
 
Nine Month Depreciation Expense
Property and equipment
$
1,911,875

 
$
128,848

Intangible assets
1,124,000

 
42,150

Total
 
 
$
170,998

F3.
Reflects the increased interest expense and amortization of deferred financing costs from the aggregate borrowings of $865 million discussed under the heading "Debt Financing" in Note B3.
F4.
Benefit (provision) for income taxes reflects the aggregate pro forma tax effect of the AT&T Transaction using the federal and state statutory rates. As discussed in Note B2, no adjustment was made to reflect the impact of Crown Castle operating as a REIT as of January 1, 2014.
F5.
Reflects dividends on the 4.50% Mandatory Convertible Preferred Stock discussed in Note B3.
F6.
The following is a summary of the pro forma adjustment to the weighted-average common shares outstanding and net income (loss) attributable to CCIC common stockholders.
 
Year Ended September 30, 2013
 
Historical Nine Months Ended
 
Adjustments
 
Pro forma Nine Months Ended
Weighted-average common shares outstanding (in thousands):
 
 
 
 
 
Basic weighted-average common shares outstanding
290,900

 
41,400

 
332,300

Effect of assumed dilution from potential common shares relating to restricted stock awards
1,143

 
—

 
1,143

Diluted weighted-average common shares outstanding
292,043

 
41,400

 
333,443

Net income (loss) attributable to CCIC stockholders, per common share:
 
 
 
 
 
Basic
$
0.39

 
 
 
$
0.17

Diluted
$
0.39

 
 
 
$
0.17

The weighted-average common shares outstanding are inclusive of the impact of the issuance of 41.4 million shares of Common Stock used to fund the AT&T Transaction. Approximately 13.2 million common shares reserved for issuance in connection with the conversion of the 4.50% Mandatory Convertible Preferred Stock are excluded from the weighted average diluted common shares outstanding because the impact of such conversion would be anti-dilutive. See Note B3.


10