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EX-31.2 - CERTIFICATION OF CFO (302) - CC Holdings GS V LLCgsvexhibit312093017.htm
EX-32.1 - CERTIFICATION OF CEO AND CFO (906) - CC Holdings GS V LLCgsvexhibit321093017.htm
EX-31.1 - CERTIFICATION OF CEO (302) - CC Holdings GS V LLCgsvexhibit311093017.htm


 

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

For the quarterly period ended September 30, 2017
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period              to             
Commission File Number 333-187970
____________________________________
CC HOLDINGS GS V LLC
(Exact name of registrant as specified in its charter)
 
Delaware
20-4300339
(State or other jurisdiction
of incorporation or organization)
(I.R.S. Employer
Identification No.)
 
 
1220 Augusta Drive, Suite 600, Houston, Texas 77057-2261
(Address of principal executives office) (Zip Code)
(713) 570-3000
(Registrant's telephone number, including area code)
____________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x No  o
Explanatory Note: The registrant is a voluntary filer and not subject to the filing requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934; however, the registrant has filed all reports that would have been required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months had the registrant been subject to such filing requirements.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
o
 
Accelerated filer
o
 
 
Non-accelerated filer
x
(Do not check if a smaller reporting company)
Smaller reporting company
o
 
 
 
 
 
Emerging growth company
o
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  x
As of September 30, 2017, the only member of the registrant is a wholly-owned indirect subsidiary of Crown Castle International Corp.
The registrant is a wholly-owned indirect subsidiary of Crown Castle International Corp. and meets the conditions set forth in General Instruction (H)(1)(a) and (b) of Form 10-Q, and is therefore filing this form with the reduced disclosure format.




CC HOLDINGS GS V LLC

INDEX



Cautionary Language Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q ("Form 10-Q") contains forward-looking statements that are based on our management's expectations as of the filing date of this report with the Securities and Exchange Commission ("SEC"). Statements that are not historical facts are hereby identified as forward-looking statements. In addition, words such as "estimate," "anticipate," "project," "plan," "intend," "believe," "expect," "likely," "predict," any variation of these words, and similar expressions are intended to identify forward-looking statements. Such statements include plans, projections and estimates contained in "Part I—Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" ("MD&A") herein. Such forward-looking statements include (1) expectations regarding anticipated growth in the wireless industry, carriers' investments in their networks, tenant additions, customer consolidation or ownership changes, or demand for our sites, (2) expectations regarding non-renewals of tenant leases (including the impact of our customers' decommissioning of the former Leap Wireless, MetroPCS and Clearwire networks (collectively, the "Acquired Networks")), (3) availability and adequacy of cash flows and liquidity for, or plans regarding, future discretionary investments including: capital expenditure limitations created as a result of being a wholly-owned indirect subsidiary of Crown Castle International Corp. ("CCIC" or "Crown Castle") and reliance on strategic decisions made by CCIC management that enable such discretionary investments, (4) potential benefits of our discretionary investments, (5) anticipated changes in our financial results, including future revenues, margins, and operating cash flows, (6) expectations regarding our capital structure and the credit markets, our availability and cost of capital, or our ability to service our debt and comply with debt covenants, (7) expectations for sustaining capital expenditures, and (8) expectations related to CCIC's ability to remain qualified as a real estate investment trust ("REIT") and the advantages, benefits or impact of, or opportunities created by the inclusion of our assets and operations in CCIC's REIT.
Such forward-looking statements should, therefore, be considered in light of various risks, uncertainties and assumptions, including prevailing market conditions, risk factors described in "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 ("2016 Form 10-K") and other factors. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those expected. As used herein, the term "including," and any variation thereof, means "including without limitation." The use of the word "or" herein is not exclusive.

1



PART I—FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS

CC HOLDINGS GS V LLC
CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
(In thousands of dollars)
 
September 30, 2017
 
December 31, 2016
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
24,519

 
$
19,550

Receivables, net
2,379

 
3,527

Prepaid expenses
25,913

 
24,051

Deferred site rental receivables and other current assets
29,174

 
20,313

Total current assets
81,985

 
67,441

Deferred site rental receivables
330,631

 
346,507

Property and equipment, net of accumulated depreciation of $896,689 and $828,670, respectively
1,061,711

 
1,088,883

Goodwill
1,338,730

 
1,338,730

Other intangible assets, net
951,352

 
1,038,007

Long-term prepaid rent and other assets, net
37,906

 
35,490

Total assets
$
3,802,315

 
$
3,915,058

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accrued expenses and payables
$
13,372

 
$
13,243

Accrued interest
17,748

 
8,126

Deferred revenues
11,360

 
11,930

Total current liabilities
42,480

 
33,299

Debt
992,317

 
991,279

Deferred ground lease payable
106,677

 
102,519

Above-market leases and other liabilities
49,184

 
48,716

Total liabilities
1,190,658

 
1,175,813

Commitments and contingencies (note 7)


 


Member's equity:
 
 
 
Member's equity
2,611,657

 
2,739,245

Accumulated earnings (deficit)

 

Total member's equity
2,611,657

 
2,739,245

Total liabilities and equity
$
3,802,315

 
$
3,915,058

 
See notes to condensed consolidated financial statements.

2



CC HOLDINGS GS V LLC
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
(In thousands of dollars)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
Site rental revenues
$
153,732

 
$
152,523

 
$
460,028

 
$
458,781

 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
Site rental cost of operations—third parties(a)
37,504

 
38,670

 
113,185

 
112,575

Site rental cost of operations—related parties(a)
9,234

 
8,569

 
27,275

 
25,238

Site rental cost of operations—total(a)
46,738

 
47,239

 
140,460

 
137,813

Management fee—related party
11,779

 
11,425

 
35,069

 
33,936

Asset write-down charges

 
950

 

 
3,724

Depreciation, amortization and accretion
52,714

 
52,624

 
157,886

 
157,098

Total operating expenses
111,231

 
112,238

 
333,415

 
332,571

Operating income (loss)
42,501

 
40,285

 
126,613

 
126,210

Interest expense and amortization of deferred financing costs
(9,969
)
 
(12,934
)
 
(29,906
)
 
(39,546
)
Gains (losses) on retirement of long-term obligations

 
(10,273
)
 

 
(10,273
)
Other income (expense)
(720
)
 
(74
)
 
129

 
(85
)
Income (loss) before income taxes
31,812

 
17,004

 
96,836

 
76,306

Benefit (provision) for income taxes
(88
)
 
(84
)
 
(264
)
 
(253
)
Net income (loss)
$
31,724

 
$
16,920

 
$
96,572

 
$
76,053

    
(a)
Exclusive of depreciation, amortization and accretion shown separately and certain indirect costs included in the management fee.

See notes to condensed consolidated financial statements.


3



CC HOLDINGS GS V LLC
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(In thousands of dollars)
 
Nine Months Ended September 30,
 
2017
 
2016
Cash flows from operating activities:
 
 
 
Net income (loss)
$
96,572

 
$
76,053

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
Depreciation, amortization and accretion
157,886

 
157,098

Amortization of deferred financing costs
1,038

 
2,081

Asset write-down charges

 
3,724

Gains (losses) on retirement of long-term obligations

 
10,273

Increase (decrease) in accrued interest
9,622

 
9,093

Increase (decrease) in accounts payable
(893
)
 
(399
)
Increase (decrease) in deferred revenues, deferred ground lease payable and other liabilities
3,788

 
2,515

Decrease (increase) in receivables
1,148

 
1,688

Decrease (increase) in other current assets, deferred site rental receivable, long-term prepaid rent, and other assets
5,969

 
(8,951
)
Net cash provided by (used for) operating activities
275,130

 
253,175

Cash flows from investing activities:
 
 
 
Capital expenditures
(46,001
)
 
(39,317
)
Net cash provided by (used for) investing activities
(46,001
)
 
(39,317
)
Cash flows from financing activities:
 
 
 
Purchases and redemptions of debt

 
(508,472
)
Equity contribution related to debt repayment

 
508,472

Distributions to member
(224,160
)
 
(194,678
)
Net cash provided by (used for) financing activities
(224,160
)
 
(194,678
)
Net increase (decrease) in cash and cash equivalents
4,969

 
19,180

Cash and cash equivalents at beginning of period
19,550

 
20,401

Cash and cash equivalents at end of period
$
24,519


$
39,581


See notes to condensed consolidated financial statements.

4



CC HOLDINGS GS V LLC
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN MEMBER'S EQUITY (Unaudited)
(In thousands of dollars)

 
 
Member's Equity
 
Accumulated
Earnings (Deficit)
 
Total
Balance, July 1, 2017
 
$
2,660,691

 
$

 
$
2,660,691

Distributions to member (note 4)
 
(49,034
)
 
(31,724
)
 
(80,758
)
Net income (loss)
 

 
31,724

 
31,724

Balance, September 30, 2017
 
$
2,611,657

 
$

 
$
2,611,657

 
 
 
 
 
 
 
 
 
Member's Equity
 
Accumulated
Earnings (Deficit)
 
Total
Balance, July 1, 2016
 
$
2,327,938

 
$
6,033

 
$
2,333,971

Equity contribution related to debt repayment (note 4)

 
508,472

 

 
508,472

Distributions to member (note 4)
 
(42,215
)
 
(22,953
)
 
(65,168
)
Net income (loss)
 

 
16,920

 
16,920

Balance, September 30, 2016
 
$
2,794,195

 
$

 
$
2,794,195



 
 
Member's Equity
 
Accumulated
Earnings (Deficit)
 
Total
Balance at January 1, 2017
 
$
2,739,245

 
$

 
$
2,739,245

Distributions to member (note 4)
 
(127,588
)
 
(96,572
)
 
(224,160
)
Net income (loss)
 

 
96,572

 
96,572

Balance at September 30, 2017
 
$
2,611,657

 
$

 
$
2,611,657

 
 
 
 
 
 

 
 
Member's Equity
 
Accumulated
Earnings (Deficit)
 
Total
Balance at January 1, 2016
 
$
2,327,938

 
$
76,410

 
$
2,404,348

Equity contribution related to debt repayment (note 4)

 
508,472

 

 
508,472

Distributions to member (note 4)
 
(42,215
)
 
(152,463
)
 
(194,678
)
Net income (loss)
 

 
76,053

 
76,053

Balance at September 30, 2016
 
$
2,794,195

 
$

 
$
2,794,195

See notes to condensed consolidated financial statements.



5


CC HOLDINGS GS V LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited
(Tabular dollars in thousands)



1.
General
The accompanying consolidated financial statements reflect the consolidated financial position, results of operations, and cash flows of CC Holdings GS V LLC ("CCL") and its consolidated wholly-owned subsidiaries (collectively, "Company"). The Company is a wholly-owned subsidiary of Global Signal Operating Partnership, L.P. ("GSOP"), which is an indirect subsidiary of Crown Castle International Corp., a Delaware corporation ("CCIC" or "Crown Castle"). CCL is a Delaware limited liability company that is a holding company and an issuer of the Company's debt. Intercompany accounts, transactions, and profits have been eliminated. As used herein, the term "including," and any variation thereof means "including without limitation." The use of the word "or" herein is not exclusive.
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, 2016, and related notes thereto, included in the 2016 Form 10-K filed by the Company with the SEC.
The Company is organized specifically to own, lease and manage sites that are geographically dispersed across the United States ("U.S."). The Company's core business is providing access, including space or capacity, to its sites via long-term contracts in various forms, including licenses, subleases and lease agreements. Management services related to the Company's sites are performed by Crown Castle USA Inc. ("CCUSA"), an affiliate of the Company, under the Management Agreement, as the Company has no employees.
Approximately 68% of the Company's sites are leased or subleased or operated and managed for an initial period of 32 years (through May 2037) under master lease or other agreements with Sprint ("Sprint Sites"). CCIC, through its subsidiaries (including the Company) has the option to purchase in 2037 all (but not less than all) of the Sprint Sites from Sprint for approximately $2.3 billion. CCIC has no obligation to exercise the purchase option.
CCIC operates as a real estate investment trust ("REIT") for U.S. federal income tax purposes. For U.S. federal income tax purposes, the Company's assets and operations are part of the CCIC REIT. See note 5.
Basis of Presentation
The condensed consolidated financial statements included herein are unaudited; however, they include all adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are necessary to fairly state the consolidated financial position of the Company as of September 30, 2017, and the consolidated results of operations and the consolidated cash flows for the nine months ended September 30, 2017 and 2016. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles in the U.S. ("GAAP"). The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the entire year.
The preparation of financial statements in conformity with GAAP requires management to make estimates and use assumptions that affect the reported amounts of assets and liabilities and the disclosure for contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

2.
Summary of Significant Accounting Policies
The significant accounting policies used in the preparation of the Company's condensed consolidated financial statements are disclosed in the 2016 Form 10-K.
Recently Adopted Accounting Pronouncements
No new accounting pronouncements adopted during the nine months ended September 30, 2017 had a material impact on the Company's condensed consolidated financial statements.

6


CC HOLDINGS GS V LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited
(Tabular dollars in thousands)


Recent Accounting Pronouncements Not Yet Adopted
In February 2016, the FASB issued new guidance on the recognition, measurement, presentation and disclosure of leases. The new guidance requires lessees to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments for all leases with a term greater than 12 months. The accounting for lessors remains largely unchanged from existing guidance. This guidance is effective for the Company as of January 1, 2019 and is required to be applied using a modified retrospective approach for all leases existing at, or entered into after, the beginning of the earliest comparative period presented. Early adoption is permitted, however, the Company does not expect to early adopt the new guidance. CCIC (1) has established and is progressing through the various steps of a cross functional project plan to assess the impact of the standard; (2) expects this guidance to have a material impact on its condensed consolidated balance sheet due to the addition of right-of-use assets and lease liabilities for all lessee arrangements with a term greater than 12 months; and (3) continues to assess additional impacts to its condensed consolidated financial statements, including the condensed consolidated statement of operations and the condensed consolidated statement of cash flows.

3.
Debt
The outstanding balance of the 2012 Secured Notes as of both September 30, 2017 and December 31, 2016 was $992 million, comprised of 3.849% secured notes ("3.849% Secured Notes") due April 2023. The 2012 Secured Notes originally consisted of (1) the previously outstanding $500 million aggregate principal amount of 2.381% secured notes ("2.381% Secured Notes") due December 2017 and (2) $1.0 billion aggregate principal amount of 3.849% Secured Notes due April 2023. In September 2016, CCIC issued $700 million aggregate principal amount of 2.25% senior secured notes ("September 2016 Senior Notes"). CCIC used a portion of the net proceeds from the September 2016 Senior Notes offering to repay in full the previously outstanding 2.381% Secured Notes. The Company recorded an equity contribution related to the repayment of the 2.381% Secured Notes for the nine months ended September 30, 2016 (see note 4).
Interest Expense and Amortization of Deferred Financing Costs
The components of interest expense and amortization of deferred financing costs are as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Interest expense on debt obligations
$
9,623

 
$
12,267

 
$
28,868

 
$
37,465

Amortization of deferred financing costs
346

 
667

 
1,038

 
2,081

Total
$
9,969

 
$
12,934

 
$
29,906

 
$
39,546


4.
Related Party Transactions
Pursuant to the Management Agreement, CCUSA has agreed to employ, supervise, and pay at all times a sufficient number of capable employees as may be necessary to perform services in accordance with the operation standards defined in the Management Agreement. CCUSA currently acts as the Manager of the sites held by subsidiaries of CCIC. The management fee is equal to 7.5% of the Company’s Operating Revenues, as defined in the Management Agreement, which is based on the Company’s reported revenues adjusted to exclude certain items including revenues related to the accounting for leases with fixed escalators. The fee is compensation for those functions reasonably necessary to maintain, market, operate, manage and administer the sites, other than the operating expenses (which includes real estate and personal property taxes, ground lease and easement payments, and insurance premiums). Further, in connection with its role as Manager, CCUSA may make certain modifications to the Company's sites.
In addition, CCUSA may perform installation services on the Company's towers, for which the Company is not a party to any agreement and for which no operating results are reflected herein.
As part of the CCIC strategy to obtain long-term control of the land under its towers, affiliates of the Company have acquired rights to land interests under the Company's towers. These affiliates then lease the land to the Company. Under such circumstances, the Company's obligation typically continues with the same or similar economic terms as the lease agreement for the land that existed prior to an affiliate acquiring rights to such land. As of September 30, 2017, there was approximately 28% of the Company's sites where the land under the tower is controlled by an affiliate. Also, the Company receives rent revenue from affiliates for land controlled by the Company that affiliates have towers on.

7


CC HOLDINGS GS V LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited
(Tabular dollars in thousands)


For the nine months ended September 30, 2017, the Company recorded an equity distribution of $224.2 million reflecting distributions to its member and ultimately other subsidiaries of CCIC. For the nine months ended September 30, 2016, the Company recorded a net equity contribution of $313.8 million, which was inclusive of (1) an equity contribution from CCIC of $508.5 million related to the repayment of the previously outstanding 2.381% Secured Notes (see note 3) and (2) an equity distribution of $194.7 million, reflecting distributions to its member and ultimately other subsidiaries of CCIC. Cash on hand above the amount that is required by the Management Agreement has been, and is expected to continue to be, distributed to the Company's parent company. As of September 30, 2017 and 2016, the Company had no material related party assets or liabilities on its condensed consolidated balance sheet.

5.
Income Taxes
CCIC operates as a REIT for U.S. federal income tax purposes. As a REIT, CCIC is generally entitled to a deduction for dividends that it pays and therefore is not subject to U.S. federal corporate income tax on its net taxable income that is currently distributed to its stockholders. For U.S. federal income tax purposes, the Company's assets and operations are part of the CCIC REIT.
For the nine months ended September 30, 2017 and 2016, the Company's effective tax rate differed from the federal statutory rate predominately due to (1) CCIC's dividends paid deduction, and (2) state taxes.

6.
Fair Values
The fair value of cash and cash equivalents approximates the carrying value. The Company determines the fair value of its debt securities based on indicative quotes (that are non-binding quotes) from brokers that require judgment to interpret market information, including implied credit spreads for similar borrowings on recent trades or bid/ask prices or quotes from active markets if applicable. There were no changes since December 31, 2016 in the Company's valuation techniques used to measure fair values. The estimated fair values of the Company's financial instruments, along with the carrying amounts of the related assets and liabilities, are as follows:
 
Level in Fair Value Hierarchy
 
September 30, 2017
 
December 31, 2016
 
 
Carrying
 Amount
 
Fair
Value
 
Carrying
 Amount
 
Fair
Value
Assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
1
 
$
24,519

 
$
24,519

 
$
19,550

 
$
19,550

Liabilities:
 
 
 
 
 
 
 
 
 
Debt
2
 
992,317

 
1,050,230

 
991,279

 
1,013,300


7.
Commitments and Contingencies
The Company is involved in various claims, lawsuits or proceedings arising in the ordinary course of business. While there are uncertainties inherent in the ultimate outcome of such matters, and it is impossible to presently determine the ultimate costs or losses that may be incurred, if any, management believes the resolution of such uncertainties and the incurrence of such costs should not have a material adverse effect on the Company's consolidated financial position or results of operations. In addition, CCIC, through its subsidiaries (including the Company) has the option to purchase in 2037 all (but not less than all) of the Sprint Sites, which represent approximately 68% of the Company's sites. CCIC has no obligation to exercise the purchase option.

8.
Supplemental Cash Flow Information
 
Nine Months Ended September 30,
 
2017
 
2016
Supplemental disclosure of cash flow information:
 
 
 
Interest paid
$
19,246

 
$
28,372



8


CC HOLDINGS GS V LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Unaudited
(Tabular dollars in thousands)


9.
Guarantor Subsidiaries
CCL has no independent assets or operations. The 2012 Secured Notes are guaranteed by all subsidiaries of CCL, each of which is a wholly-owned subsidiary of CCL, other than Crown Castle GS III Corp., which is a co-issuer of the 2012 Secured Notes and a wholly-owned finance subsidiary. Such guarantees are full and unconditional and joint and several. Subject to the provisions of the Indenture, a guarantor may be released and relieved of its obligations under its guarantee under certain circumstances including: (1) in the event of any sale or other disposition of all or substantially all of the assets of any guarantor, by way of merger, consolidation or otherwise to a person that is not (either before or after giving effect to such transaction) CCL or a subsidiary of CCL, (2) in the event of any sale or other disposition of all of the capital stock of any guarantor, to a person that is not (either before or after giving effect to such transaction) CCL or a subsidiary of CCL, (3) upon CCL's exercise of legal defeasance in accordance with the relevant provisions of the Indenture, or (4) upon the discharge of the Indenture in accordance with its terms.

9


ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the response to Part I, Item 1 of this report and the consolidated financial statements of the Company including the related notes and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" ("MD&A") included in our 2016 Form 10-K. Capitalized terms used but not defined in this Form 10-Q have the same meaning given to them in our 2016 Form 10-K. Unless this Quarterly Report on Form 10-Q indicates otherwise or the context requires, the terms "we," "our," "our company," "the company," or "us" as used herein refer to CC Holdings GS V LLC and its subsidiaries.
General Overview
We own, lease or manage sites that are geographically dispersed throughout the United States. The vast majority of our site rental revenues is of a recurring nature and has been contracted for in a prior year.
Business Fundamentals and Results
The following are certain highlights of our business fundamentals and results as of and for the nine months ended September 30, 2017.
Potential growth resulting from wireless network expansion and new entrants caused by increasing demand for data and connectivity
We expect wireless carriers will continue their focus on improving network quality and expanding capacity by adding additional antennas or other equipment on our wireless infrastructure.
We expect existing and potential new customer demand for our towers will result from (1) new technologies, (2) increased usage of wireless applications (including mobile entertainment, mobile internet usage, and machine-to-machine applications), (3) adoption of other emerging and embedded wireless devices (including laptops, tablets, and other devices), (4) increasing smartphone penetration, (5) wireless carrier focus on expanding both network quality and capacity, or (6) the availability of additional spectrum.
Substantially all of our towers can accommodate additional tenancy, either as currently constructed or with appropriate modifications to the structure (which may include extensions or structural reinforcement).
U.S. wireless carriers continue to invest in their networks.
Organizational structure
CCIC operates as a REIT for U.S. federal income tax purposes. For U.S. federal income tax purposes, our assets and operations are part of the CCIC REIT.
Our subsidiaries (other than Crown Castle GS III Corp.) were organized specifically to own, lease, and manage certain shared wireless infrastructure, such as towers or other structures, and have no employees.
Management services, including those functions reasonably necessary to maintain, market, operate, manage or administer our sites, are performed by CCUSA. The management fee is equal to 7.5% of our Operating Revenues as defined in the Management Agreement.
Site rental revenues under long-term tenant leases with contractual escalations
Initial terms of five to 15 years with multiple renewal periods at the option of the tenant of five to ten years each.
The weighted-average remaining term (calculated by weighting the remaining term for each lease by the related site rental revenue) of approximately five years, exclusive of renewals at the tenants' option, currently representing approximately $3.6 billion of expected future cash inflows.
Revenues predominately from large wireless carriers
Approximately 88% of our site rental revenues were derived from Sprint, AT&T, T-Mobile and Verizon Wireless.
Majority of land interests under our wireless infrastructure are under long-term control
More than 80% and more than 50% of our sites are under our control for greater than 10 and 20 years, respectively. The aforementioned amounts include sites that reside on land interests that are owned, including fee interests and perpetual easements.
Approximately 19% of our site rental cost of operations represents ground lease payments to our affiliates. Such affiliates acquired the rights to such land interests as a result of negotiated transactions with third parties in connection with a program established by CCIC to extend the rights to the land under its portfolio of towers.
Relatively fixed tower operating costs
Our operating costs tend to escalate at approximately the rate of inflation and are not typically influenced by tenant additions or non-renewals.
Minimal sustaining capital expenditure requirements
Sustaining capital expenditures represented approximately 1% of site rental revenues.

10


Fixed rate debt with no short-term maturities
Our debt consists of $1.0 billion aggregate principal amount of 3.849% Secured Notes. See note 3 to our condensed consolidated financial statements.
Significant cash flows from operations
Net cash provided by operating activities was $275.1 million. See "Item 2. MD&A—Liquidity and Capital Resources."
Outlook Highlights
The following are certain highlights of our outlook that impact our business fundamentals described above.
We expect demand for tenant leasing to continue during 2017 and 2018.
During 2017 and 2018, we also expect that the impact from tenant leasing will be offset by non-renewals of tenant leases, primarily from our customers' decommissioning of the Acquired Networks, at least in part.

Consolidated Results of Operations
The following discussion of our results of operations should be read in conjunction with our condensed consolidated financial statements and our 2016 Form 10-K. The following discussion of our results of operations is based on our condensed consolidated financial statements prepared in accordance with GAAP which requires us to make estimates and judgments that affect the reported amounts. See "Item 2. MD&A—Accounting and Reporting Matters—Critical Accounting Policies and Estimates" herein and note 2 to our 2016 Form 10-K.
Comparison of Consolidated Results of Operations
The following information is derived from our historical consolidated statements of operations for the periods indicated. 
 
Three Months Ended September 30, 2017
 
Three Months Ended September 30, 2016
 
Percent
Change
 
(Dollars in thousands)
 
 
Site rental revenues
$
153,732

 
$
152,523

 
1
 %
 


 


 
 
Operating expenses:
 
 
 
 
 
Costs of operations(a)(b)
46,738

 
47,239

 
(1
)%
Management fee(b)
11,779

 
11,425

 
3
 %
Asset write-down charges

 
950

 
*

Depreciation, amortization and accretion
52,714

 
52,624

 
 %
Total operating expenses
111,231

 
112,238

 
(1
)%
Operating income (loss)
42,501

 
40,285

 
6
 %
Interest expense and amortization of deferred financing costs
(9,969
)
 
(12,934
)
 
(23
)%
Gains (losses) on retirement of long-term obligations

 
(10,273
)
 
 
Other income (expense)
(720
)
 
(74
)
 
 
Income (loss) before income taxes
31,812

 
17,004

 
 
Benefit (provision) for income taxes
(88
)
 
(84
)
 
 
Net income (loss)
$
31,724

 
$
16,920

 
 
____________________
*
Percentage not meaningful
(a)
Exclusive of depreciation, amortization and accretion shown separately and certain indirect costs included in the management fee.
(b)
Inclusive of related parties transactions.


11


 
Nine Months Ended September 30, 2017
 
Nine Months Ended September 30, 2016
 
Percent
Change
 
(Dollars in thousands)
 
 
Site rental revenues
$
460,028

 
$
458,781

 
 %
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
Costs of operations(a)(b)
140,460

 
137,813

 
2
 %
Management fee(b)
35,069

 
33,936

 
3
 %
Asset write-down charges

 
3,724

 
*

Depreciation, amortization and accretion
157,886

 
157,098

 
1
 %
Total operating expenses
333,415

 
332,571

 
 %
Operating income (loss)
126,613

 
126,210

 
 %
Interest expense and amortization of deferred financing costs
(29,906
)
 
(39,546
)
 
(24
)%
Gains (losses) on retirement of long-term obligations

 
(10,273
)
 
 
Other income (expense)
129

 
(85
)
 
 
Income (loss) before income taxes
96,836

 
76,306

 
 
Benefit (provision) for income taxes
(264
)
 
(253
)
 
 
Net income (loss)
$
96,572

 
$
76,053

 
 
____________________
*
Percentage not meaningful
(a)
Exclusive of depreciation, amortization and accretion shown separately and certain indirect costs included in the management fee.
(b)
Inclusive of related parties transactions.
Third Quarter 2017 and 2016
Site rental revenues for the three months ended September 30, 2017 increased by $1.2 million, or 1%, from the same period in the prior year. This increase in site rental revenues was impacted by the following items, inclusive of straight-line accounting, in no particular order: tenant additions across our entire portfolio, renewals or extensions of tenant leases, escalations and non-renewals of tenant leases. Tenant additions were influenced by our customers' ongoing efforts to improve network quality and capacity. See also "Item 2. MD&A—General Overview" and the 2016 Form 10-K for further discussion regarding our customers' decommissioning of the Acquired Networks.
Operating income for the three months ended September 30, 2017 increased by $2.2 million, or 6%, from the same period in the prior year. The increase in operating income was predominately due to the aforementioned increase in site rental revenues and a decrease in asset write-down charges and cost of operations, partially offset by an increase in the management fee and depreciation, amortization and accretion from the three months ended September 30, 2016.
During September 2016, CCIC issued $700 million aggregate principal amount of September 2016 Senior Notes and used a portion of the proceeds to repay all of the previously outstanding 2.381% Secured Notes, which resulted in a loss on retirement of long-term obligations of $10.3 million.
Interest expense and amortization of deferred financing costs for the three months ended September 30, 2017 decreased $3.0 million, or 23%, from the same period in the prior year. This decrease was related to the aforementioned repayment of the previously outstanding 2.381% Secured Notes in September 2016.
Net income for the three months ended September 30, 2017 was $31.7 million, compared to net income of $16.9 million for the three months ended September 30, 2016. The increase was due primarily to the aforementioned loss on retirement of long-term obligations recorded for the repayment of the previously outstanding 2.381% Secured Notes in September 2016 and a corresponding decrease in interest expense and amortization of deferred financing costs.

First Nine Months 2017 and 2016
Site rental revenues for the nine months ended September 30, 2017 remained consistent with the same period in the prior year. Site rental revenues were impacted by the following items, inclusive of straight-line accounting, in no particular order: new tenant additions across our entire portfolio, renewals or extensions of tenant leases, escalations and non-renewal of tenant leases. Tenant additions were influenced by our customers' ongoing efforts to improve network quality and capacity. See also "Item 2. MD&A—General Overview" herein.

12



Operating income for the nine months ended September 30, 2017 remained consistent with the same period in the prior year.
During September 2016, CCIC issued $700 million aggregate principal amount of September 2016 Senior Notes and used a portion of the proceeds to repay all of the previously outstanding 2.381% Secured Notes which resulted in a loss on retirement of long-term obligations of $10.3 million.
Interest expense and amortization of deferred financing costs for the nine months ended September 30, 2017 decreased $9.6 million, or 24%, from the same period in the prior year. This decrease was related to the aforementioned repayment of the previously outstanding 2.381% Secured Notes in September 2016.
Net income for the nine months ended September 30, 2017 was $96.6 million compared to net income of $76.1 million for the nine months ended September 30, 2016. The increase was due primarily to the aforementioned loss on retirement of long-term obligations recorded for the repayment of the previously outstanding 2.381% Secured Notes in September 2016 and a corresponding decrease in interest expense and amortization of deferred financing costs.

Liquidity and Capital Resources
Overview
General. Our core business generates revenues under long-term leases (See "Item 2. MD&A—General Overview"), predominantly from the largest U.S. wireless carriers. Historically, our net cash provided by operating activities has exceeded our capital expenditures. For the foreseeable future, we expect to generate net cash provided by operating activities (exclusive of movements in working capital) that exceed our capital expenditures. We seek to allocate the net cash generated from our business in a manner that we believe drives value for our member and ultimately CCIC.
From a cash management perspective, we currently distribute cash on hand above amounts required pursuant to the Management Agreement to our member and ultimately other subsidiaries of CCIC. If any future event would occur that would leave us with a deficiency in our operating cash flow, while not required, CCIC may contribute cash back to us.
CCIC operates as a REIT for U.S. federal income tax purposes. For U.S. federal income tax purposes, our assets and operations are part of the CCIC REIT. We expect to continue to pay minimal cash income taxes as a result of CCIC's REIT status and NOLs.
Liquidity Position. The following is a summary of our capitalization and liquidity position as of September 30, 2017:
 
September 30, 2017
 
(In thousands of dollars)
Cash and cash equivalents
$
24,519

Debt
992,317

Total member's equity
2,611,657

Over the next 12 months:
We expect that our net cash provided by operating activities should be sufficient to cover our expected capital expenditures.
We have no debt maturities.
See note 3 to our condensed consolidated financial statements for additional information regarding our debt.
Summary Cash Flow Information
 
Nine Months Ended September 30,
 
 
 
2017
 
2016
 
Change
 
(In thousands of dollars)
Net cash provided by (used for):
 
 
 
 
 
Operating activities
$
275,130

 
$
253,175

 
$
21,955

Investing activities
(46,001
)
 
(39,317
)
 
(6,684
)
Financing activities
(224,160
)
 
(194,678
)
 
(29,482
)
Net increase (decrease) in cash and cash equivalents
$
4,969

 
$
19,180

 
$
(14,211
)

13


Operating Activities
The increase in net cash provided by operating activities for the first nine months of 2017 of $22.0 million, or 9%, from the first nine months of 2016, was due primarily to a net benefit from changes in working capital and growth in cash revenues, including cash escalations that are subject to straight-line accounting.
Investing Activities
Capital Expenditures
Our capital expenditures include the following:
Site improvement capital expenditures consist of improvements to existing sites to accommodate new leasing and typically vary based on, among other factors: (1) the type of site, (2) the scope, volume, and mix of work performed on the site, (3) existing capacity prior to installation, or (4) changes in structural engineering regulations and standards. Our decisions regarding capital expenditures are influenced by (1) sufficient potential to enhance CCIC's long-term stockholder value, (2) CCIC's availability and cost of capital and (3) CCIC's expected returns on alternative uses of cash, such as payments of dividends and investments.
Sustaining capital expenditures consist of capital improvements on our sites that enable our customers' ongoing quiet enjoyment of the site.
Capital expenditures for the nine months ended September 30, 2017 and 2016 were as follows:
 
Nine Months Ended September 30,
 
 
 
2017
 
2016
 
Change
 
(In thousands of dollars)
Site improvements
$
40,338

 
$
32,980

 
$
7,358

Sustaining
5,663

 
6,337

 
(674
)
Total
$
46,001

 
$
39,317

 
$
6,684

Financing Activities
The net cash flows used for financing activities in the nine months ended September 30, 2017 and 2016 includes the impact from our continued practice of distributing excess cash to our member and ultimately other subsidiaries of CCIC. In September 2016, CCIC issued $700 million aggregate principal amount of September 2016 Senior Notes. CCIC used a portion of the net proceeds from the September 2016 Senior Notes offering to repay $508.5 million of our previously outstanding 2.381% Secured Notes. We recorded an equity contribution related to the debt repayment of our 2.381% Secured Notes for the nine months ended September 30, 2016. See notes 3 and 4 to our condensed consolidated financial statements.
2012 Secured Notes
See our 2016 Form 10-K for a discussion of the 2012 Secured Notes, debt restrictions, and disclosures about market risk. There are no financial maintenance covenants in the 2012 Secured Notes. We are currently not restricted in our ability to incur additional indebtedness or distribute cash to affiliates or issue dividends to our parent.

Accounting and Reporting Matters
Critical Accounting Policies and Estimates
Our critical accounting policies and estimates are those that we believe (1) are most important to the portrayal of our financial condition and results of operations or (2) require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. The critical accounting policies and estimates for 2017 are not intended to be a comprehensive list of our accounting policies and estimates. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP, with no need for management's judgment. In other cases, management is required to exercise judgment in the application of accounting principles with respect to particular transactions. Our critical accounting policies and estimates as of December 31, 2016 are described in "Item 7. MD&A—Accounting and Reporting Matters" and in note 2 in our 2016 Form 10-K. The critical accounting policies and estimates for the first nine months of 2017 have not changed from the critical accounting policies for the year ended December 31, 2016.

14



Accounting Pronouncements
Recently Adopted Accounting Pronouncements. See note 2 to our condensed consolidated financial statements.
Recent Accounting Pronouncements Not Yet Adopted. See note 2 to our condensed consolidated financial statements.


15


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


16


PART II—OTHER INFORMATION

ITEM 1.
LEGAL PROCEEDINGS
See the disclosure in note 7 to our condensed consolidated financial statements set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q, which disclosure is hereby incorporated herein by reference.

ITEM 1A.
RISK FACTORS
There are no material changes to the risk factors discussed in "Item 1A—Risk Factors" in our 2016 Form 10-K.

ITEM 6.
EXHIBITS

Exhibit Index
Exhibit No.
 
Description
 
 
 
 
(a)
3.1
 
 
 
 
 
(a)
3.2
 
 
 
 
 
*
31.1
 
 
 
 
 
*
31.2
 
 
 
 
 
32.1
 
 
 
 
 
*
101.INS
 
XBRL Instance Document
 
 
 
 
*
101.SCH
 
XBRL Taxonomy Extension Schema Document
 
 
 
 
*
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document
 
 
 
 
*
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
 
 
*
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document
 
 
 
 
*
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document
________________
*
Filed herewith.
Furnished herewith.
(a)
Incorporated by reference to the exhibit previously filed by the Registrant on Form S-4 (Registration No. 333-187970) on April 17, 2013.



17


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.
 
 
 
CC HOLDINGS GS V LLC
 
 
 
 
Date:
November 6, 2017
 
By:
/s/ Daniel K. Schlanger
 
 
 
 
Daniel K. Schlanger
 
 
 
 
Senior Vice President
 
 
 
 
and Chief Financial Officer
 
 
 
 
(Principal Financial Officer)
 
 
 
 
Date:
November 6, 2017
 
By:
/s/ Robert S. Collins
 
 
 
 
Robert S. Collins
 
 
 
 
Vice President and Controller
 
 
 
 
(Principal Accounting Officer)
 

18