HOUSTON, July 24, 2013 (GLOBE NEWSWIRE) — Crown Castle International Corp. (NYSE:CCI) today reported results for the quarter ended June 30, 2013.
“We had an excellent second quarter, producing AFFO per share of $1.04, up 41% over the same quarter last year,” stated Ben Moreland, Crown Castle’s President and Chief Executive Officer. “In addition, we saw a significant increase in leasing activity as all four major carriers in the US continued upgrading their networks for LTE and capacity enhancements. In fact, revenue from tenant additions approximately doubled in the second quarter of 2013, compared to the second quarter of 2012, reflecting the shift in activity towards network densification as carriers strive to improve network quality and to add capacity through cell-splitting to meet the increasing demand for mobile technology.”
CONSOLIDATED FINANCIAL RESULTS
Total revenue for the second quarter of 2013 increased 26% to $735 million from $586 million for the same period in 2012. Site rental revenue for the second quarter of 2013 increased $99 million, or 19%, to $617 million from $518 million for the same period in the prior year. Site rental gross margin, defined as site rental revenue less site rental cost of operations, increased $52 million, or 13%, to $438 million in the second quarter of 2013 from $386 million in the same period in 2012. Adjusted EBITDA for the second quarter of 2013 increased $66 million,or 17%,to $444 million from $379 million in the same period in 2012.
Funds from Operations (“FFO”) increased 41% to $276 million in the second quarter of 2013, compared to $195 million in the second quarter of 2012. FFO per share increased 40% to $0.94 in the second quarter of 2013, compared to $0.67 in the second quarter of 2012. Adjusted Funds from Operations (“AFFO”) increased 41% to $304 million in the second quarter of 2013, compared to $215 million in the second quarter of 2012. AFFO per share increased 41% to $1.04 in the second quarter of 2013, compared to $0.74 in the second quarter of 2012.
Income before income taxes for the second quarter of 2013 was $90 million, compared to $49 million for the same period in 2012. Net income attributable to CCIC stockholders for the second quarter of 2013 was $52 million, inclusive of the negative impact of the provision for income taxes of $37 million, compared to $116 million of net income, inclusive of a non-cash benefit for income taxes of $68 million, for the same period in 2012. Net income attributable to CCIC stockholders per common share was $0.18 for the second quarter of 2013, compared to $0.40 per common share in the second quarter of 2012.
Adjusted EBITDA in the second quarter of 2013 exceeded the high-end of second quarter Outlook (previously issued on April 24, 2013) by $13 million, primarily due to significantly higher than expected service gross margin contribution and $2 million of non-recurring site rental revenues which were not previously contemplated in the Outlook. In addition, AFFO exceeded the high-end of Outlook by $25 million, due to the aforementioned items in Adjusted EBITDA and higher than expected contributions related to reimbursements for wireless infrastructure expenditures necessary to accommodate carrier equipment which is directly related to the increase in leasing activity.
FINANCING AND INVESTING ACTIVITIES
“We had a terrific quarter exceeding our expectations for site rental gross margin, Adjusted EBITDA and AFFO,” stated Jay Brown, Crown Castle’s Chief Financial Officer. “As a result of our strong results in the second quarter and the significant increase in new leasing activity, we have increased our full year 2013 Outlook, which now suggests annual site rental revenue and AFFO per share growth of 17% and 35%, respectively. In addition, we continued to invest in activities we believe will maximize long-term AFFO per share, including purchases of our common shares and the construction of small cell networks.”
During the second quarter of 2013, Crown Castle invested approximately $138 million in capital expenditures, comprised of $27 million of land purchases, $10 million of sustaining capital expenditures and $101 million of revenue generating capital expenditures (inclusive of $66 million on existing sites and$35 million on the construction of new sites, primarily small cell networks).
Further, during the second quarter of 2013, Crown Castle purchased 1.1 million of its common shares using $75 million in cash at an average price of $70 per share. Diluted common shares outstanding at June 30, 2013 were 291.8 million. Since January 2003, Crown Castle has spent $2.8 billion to purchase 101.8 million of its common shares and potential shares, at an average price of $27.45 per share.
Additionally, during the second quarter, Crown Castle refinanced its existing $1.58 billion Term Loan B and effectively lowered the rate on the loan by 75 basis points, saving approximately $12 million in annual interest expense. The maturity and terms of the loan remained unchanged.
Also during the second quarter, Crown Castle started preparing in earnest for an anticipated future REIT conversion. Crown Castle engaged accounting and legal advisers to assist in this effort. Crown Castle expects to convert to a REIT no later than the utilization of its remaining net operating losses (currently approximately $2.7 billion).
This Outlook section contains forward-looking statements, and actual results may differ materially. Information regarding potential risks which could cause actual results to differ from the forward-looking statements herein is set forth below and in Crown Castle’s filings with the Securities and Exchange Commission (“SEC”).
As reflected in the table below, Crown Castle has increased the midpoint of its full year 2013 Outlook (previously issued on April 24, 2013) for site rental gross margin by $6 million, Adjusted EBITDA by $28 million, and AFFO by $61 million.
The following Outlook is based on current expectations and assumptions and assumes a US dollar to Australian dollar exchange rate of 0.91 US dollars and 0.96 US dollars to 1.0 Australian dollar for third quarter and full year 2013 Outlook, respectively. As a result, Crown Castle has decreased its expected contribution from its Australian operations for full year 2013 Outlook by approximately $8 million for site rental revenue and $6 million for Adjusted EBITDA and AFFO.
The following table sets forth Crown Castle’s current Outlook for third quarter 2013 and full year 2013:
|(in millions, except per share amounts)||Third Quarter 2013||Full Year 2013|
|Site rental revenues||$617 to $622||$2,471 to $2,481|
|Site rental cost of operations||$179 to $184||$711 to $721|
|Site rental gross margin||$437 to $442||$1,755 to $1,765|
|Adjusted EBITDA||$436 to $441||$1,750 to $1,760|
|Interest expense and amortization of deferred financing costs(a)||$138 to $143||$581 to $591|
|FFO||$270 to $275||$1,022 to $1,032|
|AFFO||$299 to $304||$1,187 to $1,197|
|AFFO per share(b)||$1.02 to $1.04||$4.07 to $4.10|
|Net income (loss)||$28 to $68||$116 to $212|
|Net income (loss) per share – diluted(b)||$0.10 to $0.23||$0.40 to $0.73|
|(a) See the reconciliation of “Components of interest expense and amortization of deferred financing costs” herein for a discussion of non-cash interest expense.|
|(b) Based on 291.8 million diluted shares outstanding as of June 30, 2013.|
CONFERENCE CALL DETAILS
Crown Castle has scheduled a conference call for Thursday, July 25, 2013, at 10:30 a.m. Eastern Time. The conference call may be accessed by dialing 480-629-9722 and asking for the Crown Castle call at least 30 minutes prior to the start time. The conference call may also be accessed live over the Internet at http://investor.crowncastle.com. Any supplemental materials for the call will be posted on the Crown Castle website at http://investor.crowncastle.com.
A telephonic replay of the conference call will be available from 12:30 p.m. Eastern Time on Thursday, July 25, 2013, through 11:59 p.m. Eastern Time on August 1, 2013, and may be accessed by dialing 303-590-3030 using access code 4627804. An audio archive will also be available on the company’s website at http://investor.crowncastle.com shortly after the call and will be accessible for approximately 90 days.
Crown Castle owns, operates and leases towers and other infrastructure for wireless communications. Crown Castle offers significant wireless communications coverage to 98 of the top 100 US markets and to substantially all of the Australian population. Crown Castle owns, operates and manages over 30,000 and approximately 1,700 wireless communication sites in the US and Australia, respectively. For more information on Crown Castle, please visit www.crowncastle.com.
Non-GAAP Financial Measures and Other Calculations
This press release includes presentations of Adjusted EBITDA, Funds from Operations and Adjusted Funds from Operations, which are non-GAAP financial measures. These non-GAAP financial measures are not intended as alternative measures of operating results or cash flow from operations (as determined in accordance with Generally Accepted Accounting Principles (“GAAP”)). Each of the amounts included in the calculation of Adjusted EBITDA, FFO, and AFFO are computed in accordance with GAAP, with the exception of: (1) sustaining capital expenditures, which is not defined under GAAP and (2) our adjustment to the income tax provision in calculations of FFO and AFFO.
Our measures of Adjusted EBITDA, FFO and AFFO may not be comparable to similarly titled measures of other companies, including other companies in the tower sector or those reported by REITs. FFO and AFFO presented are not necessarily indicative of the operating results that would have been achieved had we converted to a REIT, nor are they necessarily indicative of future financial position or operating results. Our FFO and AFFO may not be comparable to those reported in accordance with National Association of Real Estate Investment Trusts, including as a result of our adjustment to the income tax provision to reflect our estimate of the cash taxes had we been a REIT.
Adjusted EBITDA, FFO and AFFO are presented as additional information because management believes these measures are useful indicators of the financial performance of our core businesses. In addition, Adjusted EBITDA is a measure of current financial performance used in our debt covenant calculations.
Adjusted EBITDA. Crown Castle defines Adjusted EBITDA as net income (loss) plus restructuring charges (credits), asset write-down charges, acquisition and integration costs, depreciation, amortization and accretion, amortization of prepaid lease purchase price adjustments, interest expense and amortization of deferred financing costs, gains (losses) on retirement of long-term obligations, net gain (loss) on interest rate swaps, impairment of available-for-sale securities, interest income, other income (expense), benefit (provision) for income taxes, cumulative effect of change in accounting principle, income (loss) from discontinued operations and stock-based compensation expense.
Funds from Operations. Crown Castle defines Funds from Operations as net income plus adjusted tax provision plus real estate depreciation, amortization and accretion.
Adjusted Funds from Operations. Crown Castle defines Adjusted Funds from Operations as Funds from Operations before straight-line revenue, straight-line expense, stock-based compensation expense, non-real estate related depreciation, amortization and accretion, amortization of deferred financing costs, debt discounts, and interest rate swaps, other (income) and expense, gain (loss) on retirement of long-term obligations, net gain (loss) on interest rate swaps, acquisition and integration costs, asset write-down charges and less capital improvement capital expenditures and corporate capital expenditures.
Sustaining capital expenditures. Crown Castle defines sustaining capital expenditures as either (1) corporate related capital improvements, such as information technology equipment and office equipment or (2) capital improvements to tower sites that enable our customers’ ongoing quiet enjoyment of the tower.
The next wave of tower leasing, network densification, has taken root, Ben Moreland, CEO, president and director of Crown Castle International, told the company’s first quarter earnings call.
With all four major U.S. wireless carriers engaged in major network upgrades, Crown experienced a significant amount of activity in the first quarter, logging more than 75 percent of the 2013 leasing activity into its application pipeline.
Application volume by revenue in the first quarter grew at twice the pace of last year, and 60 percent of that number was from new tenants collocating on towers they were not previously on.
“This is a trend we have been anticipating for some time, as some of the carriers are nearing completion of their LTE nationwide build out,” Moreland said. “We have been expecting to see in-fill sites, or densification, as a second wave of LTE network deployment, providing us with a longer runway of expected future growth as the carriers strive to maintain network quality and reliability through cell splitting in the face of exponential growth in mobile technology demand.”
Given the location of 74 percent of Crown’s sites in the top 100 markets, the company expects to benefit from the majority of network densification through new leases. Overall, LTE deployment should be the gift that keeps on giving to the tower industry into the future, Ted Abrams, Abrams Wireless, told AGL Bulletin.
“Working with clients deploying LTE, and those responding to major carrier requests, I see strong indications that LTE deployments are only just beginning. Evidence indicates demand growth for wireless network infrastructure — assets that support and connect small cells and macros – continuing for many years to come,” Abrams said.
Crown Castle International’s purchase of T-Mobile USA ’s 7,200 towers for $2.4 billion in cash late in September not only helps fund the carrier’s LTE build out, but it also reinforces its position as the largest U.S. tower company with 30,000 towers and small cell operations in over 50 markets. Both of which are good news for the tower industry.
“T-Mobile is working aggressively to make our 4G network stronger, faster and more dependable for consumers, and this transaction will support our ongoing $4 billion network modernization initiative that is the cornerstone of this effort,” said John Legere, T-Mobile’s recently hired CEO, in a prepared release.
The urban locations of T-Mobile’s towers – 83 percent of them are in the top 100 markets and 72 percent are located in the top 50 markets – were a good fit for Crown Castle.
“Consistent with our focus on the top 100 U.S. markets, the T-Mobile assets are expected to provide significant growth driven by the continued demand for wireless data services, particularly in the most densely populated areas in the United States,” Ben Moreland, Crown Castle’s president and CEO, said in a prepared release.
According to RBC Capital Markets Analyst Jonathan Atkin, T-Mobile’s financial stability was the key result from the tower sale. “In our view, the tower deal will have little operational impact on Deutsche Telekom or Crown Castle, and serves mainly to provide Deutsche Telekom with financial flexibility for pursuing its U.S. LTE build,” Atkin writes.
Crown Castle estimates that the T-Mobile towers will produce $125 million to $130 million in adjusted funds from operations before financing costs in 2013, and have sufficient capacity to accommodate at least one additional tenant per tower without significant incremental capital. T-Mobile has committed to maintain its communications facilities on the towers for a minimum of 10 years with annual rent escalation provisions tied to the consumer price index. Further, T-Mobile’s rent includes the rights, subject to certain limitations, to complete its current network modernization on these sites.
Crown Castle announced on Wednesday that it is offering $1.65 billion in senior debt to finance the T-Mobile tower transaction. It will also use cash on hand and funds from its revolving credit facility.
HOUSTON and BELLEVUE, Wash., Sept. 28, 2012 (GLOBE NEWSWIRE) — Crown Castle International Corp.(NYSE:CCI) and T-Mobile USA, Inc. (“T-Mobile”), a subsidiary of Deutsche Telekom, AG (“DT”), announced today that they have entered into definitive agreements pursuant to which Crown Castle will acquire rights to approximately 7,200 T-Mobile towers for $2.4 billion in cash at closing (subject to certain adjustments). Under the definitive agreements, Crown Castle will have the exclusive right to lease and operate the T-Mobile towers for a weighted average term of approximately 28 years. In addition, Crown Castle will have the option to purchase such towers at the end of the respective lease terms for aggregate option payments of approximately $2.4 billion, which payments, if exercised would be primarily between 2025 and 2048. The transaction is expected to close in fourth quarter 2012.
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The mood was positive during second quarter conference calls of SBA Communications, Crown Castle International and American Tower, but not just because the last quarter was successful. Tower company executives are particularly hopeful that the good times will continue to roll well into the future.
SBA continued to experience strong leasing demand in the second quarter. The majority of amendments, which came from AT&T, Verizon Wireless and Sprint, accounted for almost 80 percent of the domestic leasing revenue added in the quarter. With a strong leasing backlog, the tower company expects the third quarter to be good, as well.
“We had an excellent second quarter, one of the best that I can remember. All of the factors that materially contribute to our financial results came together positively in the second quarter and ahead of our expectations,” Jeffrey Stoops, president and CEO, said, according to a Seeking Alpha transcript. “Probably more exciting is our belief that these factors will continue to combine positively for the rest of 2012 and into 2013.”
SBA’s organic growth was spurred by strong wireless capital expenditures and network upgrades. Although there was little activity by T-Mobile or Clearwire, AT&T and Verizon continued their LTE rollouts driving amendment activity, and Sprint picked up its network provision activity. Stoops expects the trend to continue.
“We have a lot of runway left around amendments. Between AT&T, Verizon Wireless and Sprint we have commenced cash revenue recognition from 4G or network provision amendments on less than 25 percent of their existing sites through the end of the second quarter. There is a long way to go,” Stoops said. “Our backlogs of leases and amendments are very strong and we have clear visibility to continue strong organic growth through the rest of this year and well into 2013.”
American Tower said in its second quarter earnings call that it will experience “consistent incremental demand” for tower leasing in the United States well into the future.
“Each of the four largest U.S. wireless carriers have publicly committed to nationwide LTE network coverage between the 2013 to 2015 timeframe. Once full coverage is achieved carriers will use cell splitting and site augmentation in two phases, which will further enhance coverage. Those phases will continue many years into the future,” said James Taiclet, American Tower CEO, in a Morningstar transcript.
Even with the predictions of a rosy future, Taiclet said the tower company takes measures to guard against dips inn revenue growth.
“For example, we have established a comprehensive master lease agreement structure with two of our largest customers in the United States, which seek to eliminate our exposure to any significant potential future downside risk with those two customers. These new MLAs typically include 10-year contract extensions and they eliminate all churn or decommissioning risk,” Taiclet said.
Crown Castle International exceeded the high-end of its Outlook for site rental revenue in the second quarter, seeing an increase of 15 percent in leasing activity as carriers filed amendments to upgrade their networks. Crown also expects the good times to keep on rolling, increasing its full-year 2012 outlook for site rental revenue by $43 million, site rental gross margin by $36 million and adjusted EBITDA by $63 million.
“We are enjoying unprecedented visibility into future revenue growth as evidenced in our increased guidance,” Ben Moreland, Crown president and CEO, said on the second quarter earnings call. “As the largest single provider of sites to the four largest wireless carriers in the United States, we expect to receive an outsized benefit from the significant 4G upgrade activity from all of the carriers, which we believe is reflected in our current results and updated outlook.”