10-QPeriod: Q1 FY2011

CROWN CASTLE INC. Quarterly Report for Q1 Ended Mar 31, 2011

Filed May 6, 2011For Securities:CCI

Summary

Crown Castle International Corp. (CCI) reported its first quarter 2011 financial results, showing a significant turnaround from the prior year's loss to a net income of $40.1 million. This improvement was driven by a 12% increase in net revenues, reaching $499.0 million, primarily fueled by strong growth in site rental revenue. The company's core U.S. tower operations (CCUSA) continue to be the primary revenue driver, contributing 94% of net revenues. Despite a reported increase in interest expense, the company's operational performance and cost management were robust, leading to a substantial increase in operating income. The company highlights its stable, recurring revenue model derived from long-term contracts with major wireless carriers, providing a solid foundation for future growth. Management also provided positive outlook regarding industry trends, anticipating continued demand for tower space due to network expansion, new technologies, and increasing smartphone penetration. However, investors should note the potential risk associated with customer concentration, particularly the proposed AT&T acquisition of T-Mobile, which could impact future revenues.

Financial Highlights

47 data points
Beta

Revenue

$499.04M

Net Income

$40.02M

8.0% Net Margin

EPS (Diluted)

$0.12

Total Assets

$10.40B

Cash & Equivalents

$82.32M

Free Cash Flow

$127.51M

Financial Statements
Beta
Revenue$499.04M
SG&A Expenses$44.74M
Operating Expenses$332.61M
Operating Income$166.43M
Interest Expense$100.89M
Net Income$40.02M
EPS (Basic)$0.12
EPS (Diluted)$0.12
Shares Outstanding (Basic)287.00M
Shares Outstanding (Diluted)289.00M

Key Highlights

  • 1Net income of $40.1 million for the quarter, a significant improvement from a net loss of $119.4 million in the prior year's comparable period.
  • 2Net revenues increased by 12% year-over-year to $499.0 million, primarily driven by a 12% rise in site rental revenues.
  • 3Operating income grew by 28% to $166.4 million, demonstrating strong operational performance.
  • 4The company generated $127.5 million in cash flow from operating activities, up 51% from the previous year.
  • 5Approximately 72% of consolidated net revenues were derived from four major customers: AT&T, Verizon Wireless, Sprint, and T-Mobile.
  • 6The company is closely monitoring the proposed acquisition of T-Mobile by AT&T, which could present a risk to future revenues due to potential network consolidation and reduced demand.
  • 7Discretionary investments during the quarter included $42.2 million in share repurchases and $52.7 million in capital expenditures.

Frequently Asked Questions

The primary driver of Crown Castle's revenue growth in the first quarter of 2011 was a 12% increase in site rental revenues, contributing to a 12% overall increase in net revenues to $499.0 million. This growth was attributed to new tenant additions, contract renewals and escalations, and favorable industry trends in wireless network expansion.

A significant risk highlighted is customer concentration, with 72% of revenue from four major carriers. The proposed acquisition of T-Mobile by AT&T is a notable concern, as it could lead to network integration, potential duplication, and a subsequent decrease in demand for Crown Castle's towers and services. Other risks include potential uncollectible receivables and impairment of assets if large customers face financial instability or consolidate.

Crown Castle reported $82.3 million in cash and cash equivalents and $293 million in undrawn revolver availability as of March 31, 2011. The company has a debt portfolio with long-dated maturities and a significant portion (89%) at fixed rates. They generated $127.5 million in operating cash flow, which they believe is sufficient to cover expected debt service obligations and capital expenditures for the next 12 months. During the quarter, they repaid $50.0 million under their revolver and repurchased $42.2 million of common stock.

Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, Amortization, and Accretion) is a non-GAAP financial measure that Crown Castle's management uses to evaluate operating performance. It is important because it's the primary metric used for internal decision-making, resource allocation, performance assessment of operating segments, and is also used in debt covenant calculations. It allows for a comparison of operational performance across periods by excluding the impact of capital structure and asset base.