01—Abstract
Summary
Summary of the 10-K filed February 16, 2010. Cited figures are marked; the original filing is the authoritative source.
Crown Castle International Corp. (CCI) closed 2009 with a tower portfolio of roughly 24,000 structures, with about 22,200 in the U.S., 1,600 in Australia, and the remainder in Canada.
Site rental drove the business, accounting for 92% of 2009 consolidated revenue, which rose 10% to $1.685 billiona. Site rental revenue grew 10% to $1.543 billion, and Adjusted EBITDA grew 18% at CCUSA. Tenant concentration remains high: Sprint Nextel, AT&T, Verizon Wireless and T-Mobile together made up 73% of consolidated revenue.
Net loss attributable to CCIC stockholders was $114.3 millionb for 2009, versus a $48.9 million loss in 2008, largely because of $91.1 million in debt repurchase losses and $93.0 million in interest rate swap losses. The central investor issue is the balance sheet and refinancing. Total debt was about $6.6 billion at year-end 2009, and the company issued $4.8 billion of new debt during 2009 and early 2010 to extend and ladder maturities.
Interest rate swaps carry a net liability of about $300 millionc at year-end, with $411.7 million in cash settlements due between mid-2010 and late 2011. The 2006 tower revenue notes ($1.55 billion) have an anticipated repayment date in November 2011, and failure to refinance triggers a roughly 5% rate step-up and cash sweeps. Management says operating cash flow of $571 million in 2009 and guidance of $575-625 million for the next 12 months give it capacity to service obligations, but the refinancing and swap settlements are the key risks to monitor.
Management guides 2010 site rental revenue to $1.6d-1.7 billion, implying 7-8% growth, and expects to step up discretionary capital spending to at least $225 million after limiting it in 2009. Investors should weigh that growth outlook against a highly leveraged capital structure, customer concentration, and sensitivity to refinancing costs and interest rates.
02—Key points
Key Highlights
- Site rental revenue grew 10% to $1.54 billion in 2009, and site rental represented 92% of consolidated revenue, with tenant additions carrying high incremental margins.
- Net loss attributable to CCIC stockholders was $114.3 million in 2009 (about -$0.47 per share after preferred dividends), driven by $91.1 million in debt repurchase losses and $93.0 million in interest rate swap losses.
- Total debt and other obligations were about $6.6 billion at December 31, 2009, with roughly 70% issued during 2009 and early 2010 to extend and ladder maturities.
- The 2006 tower revenue notes (~$1.55 billion) have an anticipated repayment date in November 2011; failure to repay or refinance triggers a roughly 5% interest increase and excess cash flow sweeps.
- Interest rate swaps carry a net liability of about $300 million, with $411.7 million in cash settlements due between June 2010 and November 2011.
- Four customers (Sprint Nextel, AT&T, Verizon Wireless, T-Mobile) account for 73% of consolidated revenue, creating meaningful concentration risk.
- 2010 guidance calls for site rental revenue of $1.6-1.7 billion (7-8% growth) and at least $225 million in discretionary capital expenditures, up from 2009 levels.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 16, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $1.69B$1.53B | +10.4% |
| SG&A Expenses | $153.07M$149.59M | +2.3% |
| Operating Expenses | $1.25B$1.23B | +1.4% |
| Operating Income | $433.99M$292.51M | +48.4% |
| Interest Expense | $384.52M$354.11M | +8.6% |
| Net Income | -$114.33M-$48.86M | −134.0% |
| EPS (Basic) | $-0.47— | — |
| EPS (Diluted) | $-0.47— | — |
| Shares Outstanding (Basic) | 286.62M— | — |
| Shares Outstanding (Diluted) | 286.62M— | — |
05—Questions
Frequently Asked Questions
Why did Crown Castle report a net loss in 2009 despite growing revenue and cash flow?
The loss was driven mainly by non-operating items rather than core operations. Interest expense rose to $445.9 million, the company booked $91.1 million of losses on debt purchases and redemptions, and $93.0 million of losses came from interest rate swaps that no longer qualify as hedges. Operating income actually rose 48% to $434 million.
How much debt does Crown Castle have, and when does it come due?
Total debt and other obligations were about $6.6 billion at December 31, 2009 (about $6.4 billion as of January 31, 2010). Most of it was extended through refinancings in 2009 and early 2010, with no material maturities in the next twelve months apart from nominal amortization. The main near-term pressure point is the $1.55 billion 2006 tower revenue notes, with an anticipated repayment date in November 2011.
What are the interest rate swap obligations and how could they affect investors?
The company holds forward-starting swaps with a notional value of $5.0 billion and a net liability of roughly $300 million on a fair value basis. Cash settlements of $411.7 million are due between June 2010 and November 2011. Because LIBOR fell, the company locked in higher fixed rates on anticipated refinancing, so these settlements represent an opportunity cost. Each 100 basis point decline in LIBOR would increase the liability by about $270 million.
How concentrated is Crown Castle's customer base?
Highly concentrated. Sprint Nextel (22%), AT&T (20%), Verizon Wireless (18%) and T-Mobile (13%) together provided 73% of consolidated 2009 revenue. Long-term leases with initial terms of five to 15 years and high renewal rates mitigate this, and about 53% of CCUSA site rental revenue came from investment-grade customers. Still, the loss or consolidation of a major tenant would materially affect revenue.
What is management's outlook for 2010, and is the company generating enough cash to meet its obligations?
Management expects 2010 site rental revenue of $1.6-1.7 billion, implying 7-8% growth, and plans to increase discretionary investments, including at least $225 million of capital expenditures and higher land purchases. It expects $575-625 million of operating cash flow over the next 12 months, and it had $483 million of pro forma cash and $400 million of undrawn revolver capacity. These are management projections and depend on continued tenant demand and access to capital markets.
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