10-QPeriod: Q3 FY2013

CROWN CASTLE INC. Quarterly Report for Q3 Ended Sep 30, 2013

Filed November 8, 2013For Securities:CCI

Summary

Crown Castle Inc. (CCI) reported its third-quarter 2013 financial results, showcasing robust growth in net revenues, primarily driven by its site rental segment. The company saw a significant increase in both quarterly and year-to-date revenues compared to the prior year, signaling continued demand for its wireless infrastructure. A major development highlighted is the company's announced plan to reorganize and qualify as a Real Estate Investment Trust (REIT) starting in 2014, a strategic move expected to impact its tax structure and dividend policy. Additionally, the company is actively pursuing a significant acquisition of approximately 9,700 AT&T towers for $4.85 billion, a transaction expected to close in the fourth quarter of 2013 and to be funded through a combination of existing cash, debt, and substantial equity financings completed in October 2013.

Financial Highlights

49 data points
Beta

Revenue

$748.98M

Net Income

$45.84M

6.1% Net Margin

EPS (Diluted)

$0.16

Total Assets

$15.57B

Cash & Equivalents

$218.65M

Free Cash Flow

$278.84M

Financial Statements
Beta
Revenue$748.98M
SG&A Expenses$58.50M
Operating Expenses$526.14M
Operating Income$222.84M
Interest Expense$121.25M
Net Income$45.84M
EPS (Basic)$0.16
EPS (Diluted)$0.16
Shares Outstanding (Basic)290.37M
Shares Outstanding (Diluted)291.38M

Key Highlights

  • 1Net revenues increased by 21% year-over-year for the third quarter, reaching $749.0 million, primarily driven by a 15% increase in site rental revenues.
  • 2Site rental revenues for the first nine months of 2013 grew by 19% to $1.85 billion, reflecting continued demand for wireless infrastructure.
  • 3Crown Castle announced its intention to elect REIT status starting January 1, 2014, which is expected to have significant implications for its tax structure and dividend policy.
  • 4The company entered into a definitive agreement to acquire approximately 9,700 AT&T towers for $4.85 billion, a transaction expected to close in Q4 2013.
  • 5Substantial equity financings were completed in October 2013, raising approximately $3.0 billion from common stock and $949.6 million from mandatory convertible preferred stock, primarily to fund the AT&T acquisition.
  • 6An intention to initiate a quarterly common stock dividend of $0.35 per share, beginning in Q1 2014, was announced, subject to the successful completion of the AT&T transaction.
  • 7Adjusted EBITDA for the first nine months of 2013 increased by 17% to $1.33 billion, demonstrating operational efficiency and growth.

Frequently Asked Questions

Crown Castle's primary revenue driver is its site rental business, which generated the vast majority of its revenue. This segment benefits from long-term contracts with wireless carriers for space and capacity on its towers and small cell networks. The company also generates revenue from network services and other offerings.

The planned conversion to a Real Estate Investment Trust (REIT) starting in 2014 is a significant strategic move. REITs are generally not subject to U.S. federal corporate income tax to the extent they distribute net taxable income to stockholders. This is expected to change the company's tax obligations and enable it to potentially pay regular dividends to shareholders, as indicated by the announced intention to initiate a $0.35 per share quarterly dividend.

Crown Castle is financing the $4.85 billion acquisition of AT&T towers through a combination of sources. These include existing cash on hand, proceeds from substantial equity financings completed in October 2013 (including common stock and mandatory convertible preferred stock offerings), and other debt financing, such as borrowings under its revolving credit facility.

Crown Castle aims to maintain a target leverage ratio of approximately four to six times Adjusted EBITDA. As of September 30, 2013, its consolidated leverage ratio was 6.1 times Adjusted EBITDA, which was within its restrictive covenant of 7.0 times. The company also has a significant portion of its debt at fixed rates and is managing its interest rate risk through its debt portfolio mix.