10-QPeriod: Q2 FY2008

CROWN CASTLE INC. Quarterly Report for Q2 Ended Jun 30, 2008

Filed August 6, 2008For Securities:CCI

Summary

Crown Castle International Corp. (CCI) reported a significant rebound in its financial performance for the second quarter and first half of 2008 compared to the same periods in 2007. The company saw substantial growth in net revenues, driven primarily by its core site rental business, which benefited from an increase in tenant additions across its tower portfolio. This organic growth, coupled with the ongoing integration of the Global Signal acquisition, led to a strong improvement in operating income and net income. A notable factor in the improved net income was a significant tax benefit of $74.9 million recognized in the second quarter of 2008, stemming from the completion of an IRS examination for the 2004 tax year. Despite the positive operational and financial trends, the company acknowledges ongoing concerns regarding the broader credit market and potential increases in future debt financing costs, especially as a significant portion of its debt matures in the coming years.

Financial Highlights

26 data points
Beta

Revenue

$379.51M

Net Income

$60.34M

15.9% Net Margin

EPS (Diluted)

$0.19

Cash & Equivalents

$98.75M

Free Cash Flow

$216.11M

Financial Statements
Beta
Revenue$379.51M
SG&A Expenses$38.49M
Operating Expenses$310.95M
Operating Income$68.57M
Interest Expense$88.76M
Net Income$60.34M
EPS (Basic)$0.20
EPS (Diluted)$0.19
Shares Outstanding (Basic)279.43M
Shares Outstanding (Diluted)288.43M

Key Highlights

  • 1Net revenues increased by 11% to $379.5 million for the three months ended June 30, 2008, and by 14% to $750.1 million for the six months ended June 30, 2008, primarily driven by site rental revenue growth.
  • 2Operating income saw a substantial increase of 81% to $68.6 million for the quarter and 168% to $137.6 million for the six months, reflecting improved operational efficiencies and revenue growth.
  • 3The company reported a net income of $60.3 million for the second quarter of 2008, a significant improvement from a net loss of $32.7 million in the prior year, largely due to tax benefits and operational performance.
  • 4For the first six months of 2008, net income was $47.2 million, a substantial turnaround from a net loss of $75.6 million in the comparable period of 2007.
  • 5A key driver for improved profitability was a $74.9 million tax benefit recognized in Q2 2008 related to the resolution of an IRS examination for the 2004 tax year.
  • 6Capital expenditures increased by 62% to $202.4 million for the first six months of 2008, with significant investments in land purchases, tower construction, and revenue-generating opportunities.
  • 7The company's investment in FiberTower (FTWR) equity securities had an unrealized loss of $23.2 million as of June 30, 2008, with its fair value significantly below the cost basis.

Frequently Asked Questions

The primary driver of Crown Castle's revenue growth in the second quarter of 2008 was the increase in site rental revenues, which grew by 8% year-over-year. This growth was largely attributed to new tenant additions across the company's tower portfolio, fueled by the ongoing expansion within the wireless communications industry.

Crown Castle experienced a significant improvement in profitability. Net income for the second quarter of 2008 was $60.3 million, a substantial recovery from a net loss of $32.7 million in the same period of 2007. This turnaround was primarily driven by operational improvements, including higher site rental revenues, and a significant tax benefit of $74.9 million resulting from the resolution of an IRS examination.

The company acknowledges the challenging credit market environment and its potential impact on future debt financing costs. Approximately $450 million of debt matures over the next 18 months. Crown Castle expects to fund these maturities with future debt financings and is also evaluating options to refinance its tower revenue notes and mortgage loans. However, they note that the availability and cost of future financing will depend on capital market conditions and their own financial performance.

As of June 30, 2008, Crown Castle held an investment in FiberTower (FTWR) common stock, representing approximately 17% of FiberTower's outstanding shares. This investment had an unrealized loss of $23.2 million, with its fair value significantly below the cost basis. The company stated that it does not consider the decline in fair value to be 'other than temporary' as of that date, but acknowledges the volatility and potential for future impairment charges.