10-QPeriod: Q1 FY2008

CROWN CASTLE INC. Quarterly Report for Q1 Ended Mar 31, 2008

Filed May 2, 2008For Securities:CCI

Summary

Crown Castle Inc. (CCI) reported its first quarter 2008 financial results, showing a notable increase in site rental revenues, up 15% year-over-year to $345 million. This growth was primarily driven by the addition of new tenants to its tower portfolio and the full-year impact of the Global Signal merger compared to the prior year's partial inclusion. While total revenues grew 17% to $371 million, the company continued to incur net losses, with the first quarter loss narrowing to $13.2 million from $42.9 million in the prior year. Despite the ongoing net loss, the company demonstrated improved operational performance as measured by Adjusted EBITDA, which increased 26% to $211 million. This improvement highlights the high incremental margins associated with adding new tenants to existing towers, a core component of CCI's growth strategy. The company also continued its strategy of capital allocation, including opportunistic share repurchases funded by debt, and maintained a strong focus on managing interest rate risk through hedging instruments. Significant capital expenditures were made in property and equipment, including tower construction and land acquisition.

Key Highlights

  • 1Site rental revenues increased by 15% to $345 million in Q1 2008 compared to Q1 2007.
  • 2Total revenues grew by 17% to $371 million in Q1 2008.
  • 3Net loss narrowed significantly to $13.2 million in Q1 2008, from $42.9 million in Q1 2007.
  • 4Adjusted EBITDA (a non-GAAP measure) increased by 26% to $211 million in Q1 2008, indicating improved operational profitability.
  • 5Capital expenditures increased by 31% to $61.7 million in Q1 2008, reflecting investments in tower construction, improvements, and land acquisition.
  • 6The company continues to manage interest rate risk using interest rate swaps, with a significant portion of debt effectively fixed.
  • 7CCI repurchased approximately $42 million of its common stock in Q1 2008, funded by borrowings.

Frequently Asked Questions

The primary driver for the revenue increase was site rental revenue, which grew 15% year-over-year. This growth was largely attributed to the addition of new tenants to Crown Castle's existing tower portfolio and the full-year impact of the Global Signal merger compared to the partial inclusion in the prior year's first quarter.

No, Crown Castle Inc. reported a net loss for the first quarter of 2008. However, the net loss decreased to $13.2 million from $42.9 million in the same period of the prior year, indicating an improvement in financial performance. The company's operational performance, as measured by Adjusted EBITDA, which excludes certain non-cash and financing items, showed significant growth.

Crown Castle utilizes a mix of fixed and variable rate debt. To manage interest rate risk, the company employs interest rate swaps to effectively fix the interest rate on a significant portion of its variable-rate debt and for anticipated future refinancings. As of March 31, 2008, a substantial portion of their debt was either fixed-rate or effectively hedged.

Crown Castle's capital allocation strategy focuses on increasing long-term stockholder value. Key elements include organically growing revenues and cash flows from existing towers by adding tenants, and opportunistically repurchasing its common stock, entering strategic tower acquisitions, constructing or acquiring towers, and managing its debt.