10-QPeriod: Q2 FY2009

CROWN CASTLE INC. Quarterly Report for Q2 Ended Jun 30, 2009

Filed August 5, 2009For Securities:CCI

Summary

Crown Castle Inc. (CCI) reported its second quarter 2009 results, facing a challenging economic environment. While total revenues saw an 8% increase year-over-year to $409.9 million, driven by site rental growth, the company experienced a significant net loss of $111.8 million compared to a net income of $60.3 million in the prior year's quarter. This loss was largely attributable to substantial charges related to debt refinancing activities, including losses on debt purchases and redemptions, and net losses on interest rate swaps. Despite these significant one-time charges, the core site rental business demonstrated resilience, with site rental revenues growing 9% and site rental gross margins increasing 13%, reflecting the company's strategy of adding new tenants to its towers. The company's liquidity position appears stable, with a notable increase in cash and cash equivalents to $335.0 million. Management has been actively managing its debt profile, issuing new senior notes and secured notes in 2009 to extend maturities and repay existing debt. The company reiterates its long-term strategy focused on organic revenue growth through co-location and efficient capital allocation, expecting continued demand for its towers driven by wireless industry expansion. Investors should note the impact of debt refinancing costs on near-term profitability, while the underlying operational performance of the tower business remains positive.

Financial Highlights

47 data points
Beta

Revenue

$409.87M

Net Income

-$111.42M

-27.2% Net Margin

EPS (Diluted)

$-0.41

Total Assets

$10.55B

Cash & Equivalents

$334.99M

Free Cash Flow

$151.40M

Financial Statements
Beta
Revenue$409.87M
SG&A Expenses$38.10M
Operating Expenses$311.38M
Operating Income$98.49M
Interest Expense$94.05M
Net Income-$111.42M
EPS (Basic)$-0.41
EPS (Diluted)$-0.41
Shares Outstanding (Basic)286.45M
Shares Outstanding (Diluted)286.45M

Key Highlights

  • 1Total revenues increased by 8% year-over-year to $409.9 million, primarily driven by site rental revenue growth.
  • 2The company reported a significant net loss of $111.8 million for the quarter, a sharp decline from a net income of $60.3 million in Q2 2008, largely due to debt refinancing charges.
  • 3Site rental revenues increased by 9% year-over-year, with site rental gross margins growing by 13%, indicating continued strength in the core business.
  • 4Cash and cash equivalents significantly increased to $335.0 million from $155.2 million at the end of 2008.
  • 5The company actively managed its debt, issuing new senior and secured notes in 2009 to extend maturities and repay existing obligations, although this resulted in substantial refinancing costs.
  • 6Operating income increased by 44% to $98.5 million, demonstrating operational leverage in the core business despite the net loss.
  • 7Management expects site rental revenues for 2009 to be between $1.520 billion and $1.530 billion, representing 8-9% growth from 2008.

Frequently Asked Questions

The substantial net loss of $111.8 million was primarily driven by significant one-time charges related to debt refinancing activities. These included losses on the purchase and early retirement of debt, such as the 2006 mortgage loan, and net losses on interest rate swaps that were de-designated as hedges. These events overshadowed the positive operational performance of the core site rental business.

The core site rental business remains strong. Site rental revenues increased by 9% year-over-year to $376.4 million for the quarter. Site rental gross margins also saw a healthy increase of 13%, indicating efficient operations and the high incremental margins associated with adding new tenants to existing towers. The company expects continued demand for its towers due to wireless industry growth.

The company's liquidity position appears stable, with cash and cash equivalents significantly increasing to $335.0 million. Management has been proactive in managing its debt profile by issuing new debt instruments with extended maturities and repaying existing obligations. In 2009, they issued 9% senior notes and 7.75% secured notes. Despite the costs associated with these refinancing activities, the company has extended its debt maturities and is focused on prudently managing its financial resources in the challenging credit markets.

Yes, the company has significant customer concentrations. For the six months ended June 30, 2009, Sprint Nextel Corp. accounted for 22% of consolidated revenues, AT&T for 20%, Verizon Wireless for 17%, and T-Mobile for 14%. Together, these four customers represented 73% of consolidated revenues. While these are large industry players, such concentration can pose a risk if any of these major customers experience financial difficulties or reduce their tower leasing needs.