10-Q/APeriod: Q3 FY2004

CROWN CASTLE INC. Quarterly Report (Amendment) for Q3 Ended Sep 30, 2004

Filed May 6, 2005For Securities:CCI

Summary

Crown Castle International Corp.'s (CCI) amended 10-Q for the quarter ended September 30, 2004, primarily focuses on the significant restatement of its financial statements. The restatement addresses prior non-cash accounting errors related to lease accounting practices, impacting site rental revenues, ground lease expenses, and depreciation. While these adjustments did not affect historical cash flows or debt compliance, they resulted in a decrease in net income for the period. The company also reported the completion of its UK subsidiary (CCUK) sale, which significantly impacted its financial results, generating a substantial gain. Despite the complexities introduced by the restatement and the CCUK divestiture, the core site leasing business demonstrated continued revenue growth, driven by new tenant additions and escalations on existing leases. The company continues to manage its debt obligations and capital resources, with a focus on optimizing its capital structure and funding operations through cash flow.

Key Highlights

  • 1The company has restated its financial statements for prior periods due to errors in lease accounting practices, impacting site rental revenues, ground lease expenses, and depreciation. This resulted in a decrease in net income for the three and nine months ended September 30, 2004.
  • 2Crown Castle International Corp. completed the sale of its UK subsidiary (CCUK) for $2.035 billion, recognizing a significant net gain of $495.0 million on disposal.
  • 3Total net revenues increased by 7.9% to $150.2 million for the three months ended September 30, 2004, compared to the prior year period, primarily driven by an 11.0% increase in site rental revenues.
  • 4Operating income for the three months ended September 30, 2004, was $(0.2) million, a significant improvement from a loss of $(19.2) million in the same period of the prior year, largely due to the gain from discontinued operations (CCUK sale).
  • 5Interest expense decreased by 16.2% to $52.3 million for the three months ended September 30, 2004, compared to the prior year period, primarily due to debt repurchases and redemptions.
  • 6As of September 30, 2004, the company had $757.0 million in cash and cash equivalents and $1.9 billion in long-term debt, less current maturities.
  • 7The company implemented new accounting pronouncements including SFAS 143, SFAS 146, EITF 00-21, SFAS 148, FIN 46, and SFAS 150, which primarily relate to asset retirement obligations, exit activities, revenue arrangements, stock-based compensation, variable interest entities, and financial instruments with liability and equity characteristics.

Frequently Asked Questions

The company restated its financial statements to correct errors in its lease accounting practices. These non-cash adjustments primarily involved increases in site rental revenues, ground lease expenses, and depreciation expense. The company states these corrections do not affect historical net cash flows, future cash flows, debt compliance, or the economic value of its assets.

The sale of CCUK was completed on August 31, 2004, generating proceeds of $2.028 billion. This transaction resulted in a significant net gain on disposal of $495.0 million for the three months ended September 30, 2004. The company has restated its financial statements to present CCUK's results as discontinued operations for all periods presented.

Total net revenues increased by 7.9% to $150.2 million, primarily driven by an 11.0% increase in site rental revenues due to new tenant additions and contractual escalations. Total costs of operations increased slightly to $56.5 million. Operating income improved significantly due to the gain from discontinued operations, moving from a loss of $(19.2) million to $(0.2) million. Interest expense decreased by 16.2% due to debt management activities.

As of September 30, 2004, Crown Castle International Corp. held $757.0 million in cash and cash equivalents. Its long-term debt, excluding current maturities, was approximately $1.9 billion. The company also had $507.7 million in redeemable preferred stock and $1.9 billion in total stockholders' equity.