10-QPeriod: Q1 FY2002

CROWN CASTLE INC. Quarterly Report for Q1 Ended Mar 31, 2002

Filed May 14, 2002For Securities:CCI

Summary

Crown Castle International Corp. reported a net loss of $103.4 million for the first quarter of 2002, an increase from the $68.1 million loss in the same period of 2001. This widened loss was primarily driven by significant asset write-down charges of $31.9 million and restructuring charges of $5.9 million, alongside increased interest expenses. Despite a 3.6% increase in total net revenues to $220.6 million, largely from site rental and broadcast transmission, the company experienced a decline in its network services segment. A critical development impacting the company's liquidity and debt covenants is the impending liquidation of ITVdigital, a major customer of its UK subsidiary, CCUK. This event has led to the reclassification of CCUK's credit facility and CCUK bonds as current liabilities, totaling approximately $343 million, due to a potential event of default. Management is in discussions with lenders to amend the credit facility, but the outcome remains uncertain. Investors should closely monitor the resolution of this situation and its potential financial repercussions.

Key Highlights

  • 1Net loss increased significantly to $103.4 million in Q1 2002 from $68.1 million in Q1 2001, driven by restructuring and asset write-down charges.
  • 2Total net revenues grew 3.6% to $220.6 million, with site rental and broadcast transmission revenue increasing by 19.6%.
  • 3Network services and other revenues decreased by $18.6 million, primarily in the CCUSA segment.
  • 4Significant asset write-down charges of $31.9 million and restructuring charges of $5.9 million were recorded in Q1 2002.
  • 5Interest expense increased by $9.7 million, or 14.5%, to $76.3 million, impacting overall profitability.
  • 6The pending liquidation of ITVdigital, a key customer for CCUK, has resulted in the reclassification of approximately $343 million in CCUK debt as current liabilities due to a potential event of default.
  • 7The company adopted SFAS 142 effective January 1, 2002, which is expected to decrease annual depreciation and amortization expense by approximately $62 million but requires transitional impairment testing.

Frequently Asked Questions

The primary drivers for the increased net loss were significant asset write-down charges of $31.9 million and restructuring charges of $5.9 million, coupled with higher interest expenses.

The liquidation of ITVdigital, a major customer for Crown Castle's UK subsidiary (CCUK), is significant because it constitutes a 'Termination Event' under CCUK's credit facility and CCUK bonds. This has led the company to reclassify approximately $343 million of this debt as current liabilities, as it poses a risk of default if an amendment to the credit facility cannot be secured. This event could have material financial implications if not resolved favorably.

Total net revenues increased by 3.6% to $220.6 million. This growth was driven by a strong 19.6% increase in site rental and broadcast transmission revenues across various segments, particularly CCUSA. However, network services and other revenues decreased by $18.6 million, mainly due to a decline in the CCUSA segment.

The adoption of SFAS 142, effective January 1, 2002, changes the accounting for goodwill and intangible assets. It eliminates the amortization of goodwill and indefinite-lived intangibles, replacing it with annual impairment testing. The company expects this to reduce its annual depreciation and amortization expense by approximately $62 million. Transitional impairment tests are being conducted, and no impairment loss is currently anticipated.