10-QPeriod: Q1 FY2014

CROWN CASTLE INC. Quarterly Report for Q1 Ended Mar 31, 2014

Filed May 6, 2014For Securities:CCI

Summary

Crown Castle Inc. (CCI) reported its first quarter 2014 results, showcasing significant year-over-year growth driven by the acquisition of AT&T's tower assets completed in December 2013. Net revenues increased by 18% to $876 million, with site rental revenue, the primary revenue driver, growing by 21% to $747 million. This growth was largely attributed to the AT&T acquisition, contributing approximately 15% to the site rental revenue increase, alongside contributions from new tenant additions and contractual escalations. The company also highlighted its transition to operating as a Real Estate Investment Trust (REIT) effective January 1, 2014, a move expected to reduce its corporate tax burden by distributing at least 90% of its REIT taxable income to shareholders. Despite increased depreciation and amortization costs stemming from the AT&T acquisition, operating income saw a 7% increase to $251.6 million. The company maintained a strong liquidity position with substantial cash on hand and revolving credit facility availability, supporting its dividend payments and ongoing capital allocation strategy.

Financial Highlights

48 data points
Beta

Revenue

$841.76M

Net Income

$101.50M

12.1% Net Margin

EPS (Diluted)

$0.27

Total Assets

$20.57B

Cash & Equivalents

$200.54M

Free Cash Flow

$362.28M

Financial Statements
Beta
Revenue$841.76M
SG&A Expenses$64.85M
Operating Expenses$624.38M
Operating Income$239.21M
Interest Expense$125.52M
Net Income$101.50M
EPS (Basic)$0.27
EPS (Diluted)$0.27
Shares Outstanding (Basic)332.03M
Shares Outstanding (Diluted)333.05M

Key Highlights

  • 1Net revenues increased 18% to $876 million for the three months ended March 31, 2014, compared to $740 million in the prior year period.
  • 2Site rental revenue, representing 85% of total net revenue, grew 21% to $747 million, significantly boosted by the AT&T acquisition completed in December 2013.
  • 3Operating income rose 7% to $251.6 million, despite a 34% increase in depreciation, amortization, and accretion costs, largely due to the AT&T acquisition.
  • 4The company commenced operations as a REIT effective January 1, 2014, which is expected to reduce its corporate tax liability.
  • 5Net cash provided by operating activities increased by 26% to $362.3 million, demonstrating strong operational cash generation.
  • 6Capital expenditures increased to $142.9 million, primarily for discretionary investments in wireless infrastructure improvements and land acquisitions.
  • 7The company declared and paid a quarterly cash dividend of $0.35 per common share in March 2014, totaling approximately $117 million.

Frequently Asked Questions

The acquisition of AT&T's tower assets, completed in December 2013, was a primary driver of growth in the first quarter of 2014. It contributed significantly to the 21% increase in site rental revenue and also led to higher depreciation and amortization expenses.

Effective January 1, 2014, Crown Castle elected to operate as a REIT. This allows the company to generally avoid U.S. federal corporate income tax on its net taxable income by distributing at least 90% of that income to shareholders as dividends. However, it may still be subject to certain other taxes.

Crown Castle maintains a strong liquidity position with approximately $201 million in cash and cash equivalents and over $1.1 billion in undrawn revolving credit facility availability as of March 31, 2014. The company has a diversified debt portfolio, with approximately 67% being fixed-rate debt after recent refinancing activities, and a long-dated maturity profile.

Future revenue growth is expected to be driven by wireless carriers' continued investment in network expansion and capacity upgrades (e.g., 4G/LTE), the deployment of new technologies, increasing smartphone penetration, and the demand for additional spectrum. Contractual escalations in existing long-term leases also contribute to predictable revenue growth.