UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 26, 2005
Crown Castle International Corp.
(Exact Name of Registrant as Specified in its Charter)
| Delaware | 001-16441 | 76-0470458 | ||
| (State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification Number) |
510 Bering Drive
Suite 500
Houston, TX 77057
(Address of Principal Executive Office)
Registrant’s telephone number, including area code: (713) 570-3000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
ITEM 2.02—RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On October 26, 2005, the Company issued a press release disclosing its financial results for the third quarter of 2005. The October 26 press release is furnished herewith as Exhibit 99.1 to this Form 8-K.
ITEM 9.01—FINANCIAL STATEMENTS AND EXHIBITS
| (c) | Exhibits |
As described in Item 2.02 of this Report, the following exhibit is furnished as part of this Current Report on Form 8-K:
| Exhibit No. |
Description | |
| 99.1 | Press Release dated October 26, 2005 | |
The information in this Form 8-K and Exhibit 99.1 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
1
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CROWN CASTLE INTERNATIONAL CORP. |
| By: /s/ E. Blake Hawk |
| Name: E. Blake Hawk Title: Executive Vice President and General Counsel |
Date: October 26, 2005
2
EXHIBIT INDEX
| Exhibit No. |
Description | |
| 99.1 | Press Release dated October 26, 2005 | |
3
Exhibit 99.1
| Contacts: |
W. Benjamin Moreland, CFO | |
| Jay Brown, Treasurer | ||
| Crown Castle International Corp. | ||
| 713-570-3000 |
FOR IMMEDIATE RELEASE
CROWN CASTLE INTERNATIONAL
REPORTS THIRD QUARTER 2005 RESULTS
October 26, 2005 – HOUSTON, TEXAS – Crown Castle International Corp. (NYSE:CCI) today reported results for the third quarter ended September 30, 2005.
Site rental revenue for the third quarter of 2005 increased 12.6% percent to $152.3 million, up $17.0 million from $135.2 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 14.3% to $102.2 million, up $12.8 million in the third quarter of 2005 from the same period in 2004. Adjusted EBITDA for the third quarter of 2005 increased $13.8 million, or 19.2%, to $85.8 million, up from $72.0 million for the same period in 2004.
Recurring cash flow, defined as Adjusted EBITDA less interest expense less sustaining capital expenditures, increased $35.5 million to $53.7 million for the third quarter of 2005, compared to $18.2 million for the third quarter of 2004. Weighted average common shares outstanding decreased to 215.7 million for the third quarter of 2005 from 222.8 million for the same period in the prior year. Recurring cash flow per share, defined as recurring cash flow divided by weighted average common shares outstanding, improved to $0.25 in the third quarter of 2005 compared to $0.08 in the third quarter of 2004.
Net loss was $28.1 million for the third quarter of 2005, inclusive of a $2.7 million loss from the retirement of debt, compared to a net income of $450.7 million for last year’s third quarter, inclusive of $509.1 million of income from discontinued operations and a $13.9 million loss from the retirement of debt. Net loss after deduction of dividends on preferred stock was $37.5 million in the third quarter of 2005, inclusive of a $2.7 million loss from the retirement of debt, compared to net income after deduction of dividends on preferred stock of $440.8 million for the same period last year,
| News Release continued: | Page 2 of 14 |
inclusive of $509.1 million of income from discontinued operations and a $13.9 million loss from the retirement of debt. Third quarter 2005 net loss per share was $(0.17), compared to net income per share of $1.98 in last year’s third quarter, inclusive of $2.29 per share in income from discontinued operations.
“During the last four quarters, we have more than tripled recurring cash flow per share through the achievement of 13% site rental revenue growth, a 45% decrease in interest expense and purchases of our common shares,” stated John P. Kelly, President and Chief Executive Officer of Crown Castle. “We remain focused on maximizing recurring cash flow per share as we believe it is the best measure of shareholder value. On the operational side, we are very pleased with the amount of new recurring revenue in the third quarter, as we added more tenants to our towers than we had forecasted.”
OPERATING RESULTS
US site rental revenue for the third quarter of 2005 increased $14.3 million, or 11.4%, to $139.8 million, compared to third quarter 2004 US site rental revenue of $125.5 million. US site rental gross margin increased 13.2% to $94.1 million, up $11.0 million in the third quarter of 2005 from the same period in 2004.
Australia site rental revenue for the third quarter of 2005 increased $2.7 million, or 28.0%, to $12.4 million, up from $9.7 million for the same period in 2004. Australia site rental gross margin increased 30.1% to $8.1 million, up $1.9 million in the third quarter of 2005 from the same period in 2004.
INVESTMENTS
During the third quarter of 2005, Crown Castle invested $129.4 million in capital expenditures and purchases of its common stock. During the quarter, Crown Castle purchased approximately 4.7 million shares of its common stock using approximately $112.5 million in cash, an average of $23.98 per share. Common shares outstanding – basic and diluted – were 213.4 million on September 30, 2005. During the third quarter of 2005, Crown Castle spent $16.9 million on capital expenditures, comprised of $3.5 million of sustaining capital expenditures and $13.4 million of revenue generating capital expenditures, of which $5.5 million was spent on existing sites, $2.9 million on land purchases and $5.0 million on the construction of new sites.
Also, as previously announced, during the third quarter, Crown Castle acquired 467 towers from TrinTel Communications, Inc. (“TrinTel”) for approximately $145 million in cash. The acquired
| News Release continued: | Page 3 of 14 |
TrinTel portfolio currently produces approximately $14 million in annualized site rental revenue and approximately $9 million in annualized site rental gross margin. Further, Crown Castle made an additional investment of $55 million in FiberTower Corporation (“FiberTower”), as part of a total of $150 million that FiberTower raised through an equity offering. Crown Castle retains approximately 32%, on a fully diluted basis, of FiberTower and remains FiberTower’s largest shareholder.
“We continue to invest our cash in investments that we believe will maximize long-term recurring cash flow per share,” stated Ben Moreland, Chief Financial Officer of Crown Castle. “Over the last 12 months, we have invested nearly $600 million in the purchase of our common shares and 4% Convertible Notes representing shares that were in the money. These investments will have a compounding long-term impact on recurring cash flow per share as the revenues and resulting cash flow that we expect to produce will now be spread among fewer common shares outstanding. Based on our current run-rates and outlook for 2006, we expect we will invest over $100 million per quarter in a combination of capital expenditures on our existing towers, the acquisition and construction of new towers, and the purchase of our common shares. We remain focused on our long-term goal of 20% to 25% annual growth in recurring cash flow per share through the expected growth in our core tower business and related investments.”
On August 1, 2005, Crown Castle completed a $275 million revolving credit facility. Borrowings under the credit facility may be used for general corporate purposes, including capital expenditures, acquisitions, common stock purchases and dividends. Under the terms of the facility, Crown Castle may use up to $100 million of borrowings for stock purchases and dividends. Borrowings under the facility will bear interest at a rate per annum of 200 to 275 basis points (based on interest expense coverage) plus LIBOR. Crown Castle currently has $145 million drawn under the credit facility, which was used to fund the Trintel acquisition.
OUTLOOK
The following statements and outlook tables are based on current expectations and assumptions and assume a US dollar to Australian dollar exchange rate of 0.76 US dollars to 1.00 Australian dollars. 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.
| News Release continued: | Page 4 of 14 |
The following table sets forth Crown Castle’s current outlook for the fourth quarter of 2005 and full year 2005:
| (dollars in millions) | Fourth 2005 |
Full Year 2005 | ||
| Site Rental Revenue |
$155 to 157 | $595 to 597 | ||
| Site Rental Cost of Operations |
$50 to 52 | $195 to 197 | ||
| Site Rental Gross Margin |
$104 to 106 | $399 to 401 | ||
| Adjusted EBITDA |
$87 to 89 | $332 to 334 | ||
| Interest Expense |
$28 to 30 | $131 to 133 | ||
| Sustaining Capital Expenditures |
$3 to 5 | $12 to 14 | ||
| Recurring Cash Flow |
$54 to 56 | $186 to 188 | ||
| Revenue Generating Capital Expenditures: |
||||
| Revenue Enhancing on Existing Sites |
$5 to 7 | $19 to 21 | ||
| Land Purchases |
$5 to 7 | $9 to 11 | ||
| New Site Construction |
$4 to 6 | $15 to 17 | ||
| Total Revenue Generating Capital Expenditures |
$14 to 20 | $43 to 49 | ||
The following table sets forth Crown Castle’s current outlook for full year 2006:
| (dollars in millions) | Full Year 2006 | |
| Site Rental Revenue |
$655 to 665 | |
| Site Rental Cost of Operations |
$208 to 212 | |
| Site Rental Gross Margin |
$445 to 455 | |
| Adjusted EBITDA |
$370 to 380 | |
| Interest Expense |
$115 to 120 | |
| Sustaining Capital Expenditures |
$11 to 15 | |
| Recurring Cash Flow |
$235 to 245 |
Crown Castle has not provided outlook for 2006 capital expenditures, except for sustaining capital expenditures. Crown Castle expects to invest approximately $450 million to $500 million during 2006, which it expects to fund from recurring cash flow and borrowings of five to seven times its expected growth in Adjusted EBITDA. These investments are likely to consist of capital expenditures on existing towers, the purchase of land beneath existing towers, the construction of
| News Release continued: | Page 5 of 14 |
new towers, the acquisition of towers, the purchase of common stock, and the redemption of the 8 1/4% Convertible Preferred Stock that would eliminate potential share dilution. Crown Castle’s 2006 Outlook for interest expense does not include the impact of potential borrowings.
CONFERENCE CALL DETAILS
Crown Castle has scheduled a conference call for Thursday, October 27, 2005, at 10:30 a.m. eastern time to discuss third quarter results and Crown Castle’s outlook. Please dial 303-205-0044 and ask for the Crown Castle call at least 10 minutes prior to the start time. A telephonic replay of the conference call will be available from 12:30 p.m. eastern time on Thursday, October 27, 2005, through 11:59 p.m. eastern time on Thursday, November 3, 2005, and may be accessed by dialing 303-590-3000 using pass code 11041238#. An audio archive will also be available on the company’s website at http://www.crowncastle.com shortly after the call and will be accessible for approximately 90 days.
Crown Castle International Corp. engineers, deploys, owns and operates technologically advanced shared wireless infrastructure, including extensive networks of towers and rooftops. Crown Castle offers significant wireless communications coverage to 68 of the top 100 United States markets and to substantially all of the Australian population. Crown Castle owns, operates and manages over 11,000 and 1,300 wireless communication sites in the U.S. and Australia, respectively. For more information on Crown Castle visit: http://www.crowncastle.com.
Non-Cash Compensation
Crown Castle incurs non-cash compensation charges related to the issuance of restricted stock and stock options to certain employees and executives. Beginning in the first quarter of 2005 and in accordance with the provisions of SEC Staff Accounting Bulletin No. 107, Crown Castle is classifying all non-cash compensation as components of cost of operations and general and administrative costs. In prior periods, Crown Castle had shown non-cash compensation as a separate line-item on its income statement. Prior period amounts of non-cash compensation have been reclassified for comparison purposes.
Summary of Non-Cash Amounts In Tower Gross Margin
In accordance with applicable accounting standards, Crown Castle recognizes site rental revenues and ground lease expenses monthly on a straight-line basis, regardless of whether the receipts and payments are in equal monthly amounts. An agreement, related to an acquisition in Australia, provides the seller with a rent-free period at the beginning of the lease term, and other agreements call for rent to be prepaid for a specified period. If, and to the extent the payment terms call for fixed escalations (as in fixed dollar or fixed percentage increases), the effect of such increases is recognized on a straight-line basis over the appropriate lease term. As a result of this accounting method, a portion of the revenue and expense recognized in a given period represents cash collected or paid in other periods.
| News Release continued: | Page 6 of 14 |
A summary of the non-cash portions of our site rental revenues, ground lease expense and resulting impact on site rental gross margins is as follows:
| (dollars in thousands) | For the Three Months Ended September 30, 2005 |
|||
| Non-Cash portion of site rental revenues: |
||||
| Amounts attributable to rent-free periods |
$ | 1,575 | ||
| Amounts attributable to straight-line recognition of fixed escalations |
$ | 2,515 | ||
| $ | 4,090 | |||
| Non-Cash portion of ground lease expense: |
||||
| Amounts attributable to straight-line recognition of fixed escalations |
$ | 3,793 | ||
| Non-Cash compensation charges |
504 | |||
| Non-Cash impact on site rental gross margins: |
$ | (207 | ) | |
Non-GAAP Financial Measures
This press release includes presentations of Adjusted EBITDA and recurring cash flow, which are non-GAAP financial measures.
Crown Castle defines Adjusted EBITDA as net income (loss) plus cumulative effect of change in accounting principle, income (loss) from discontinued operations, minority interests, credit (provision) for income taxes, interest expense, amortization of deferred financing costs, interest and other income (expense), depreciation, amortization and accretion, operating non-cash compensation charges, asset write-down charges and restructuring charges (credits). Adjusted EBITDA is not intended as an alternative measure of operating results (as determined in accordance with Generally Accepted Accounting Principles (GAAP)). Adjusted EBITDA is presented as additional information because management believes it to be a useful indicator of the current financial performance of our core businesses. In addition, Adjusted EBITDA is the measure of current financial performance generally used in our debt covenant calculations.
Crown Castle defines recurring cash flow to be Adjusted EBITDA, less interest expense and less sustaining capital expenditures. Each of the amounts included in the calculation of recurring cash flow are computed in accordance with GAAP, with the exception of sustaining capital expenditures, which is not defined under GAAP. Sustaining capital expenditures are defined as capital expenditures (determined in accordance with GAAP) which do not increase the capacity or term of an asset. Recurring cash flow is not intended as an alternative measure of cash flow from operations (as determined in accordance with GAAP). Recurring cash flow is provided as additional information because management believes it to be useful in providing investors with a reasonable estimate of our cash flow available for discretionary investments (including expansion projects, improvements to existing sites, debt repayment, securities purchases and dividends) without reliance on additional borrowing or the use of our cash and cash equivalents.
Our measures of Adjusted EBITDA and recurring cash flow may not be comparable to similarly titled measures of other companies. The tables set forth below reconcile these non-GAAP financial measures to comparable GAAP financial measures.
| News Release continued: | Page 7 of 14 |
| Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Financial Measures:
Adjusted EBITDA is computed as follows: |
| For the Three Months Ended |
||||||||
| (dollars in thousands) | September 30, 2005 |
September 30, 2004 |
||||||
| Net income (loss) |
$ | (28,066 | ) | $ | 450,656 | |||
| Income (loss) from discontinued operations, net of tax |
1,497 | (509,140 | ) | |||||
| Minority interests |
(904 | ) | 544 | |||||
| Credit (provision) for income taxes |
117 | (6,856 | ) | |||||
| Interest expense and amortization of deferred financing costs |
28,600 | 52,281 | ||||||
| Interest and other income (expense) |
(617 | ) | 13,552 | |||||
| Depreciation, amortization and accretion |
72,192 | 69,925 | ||||||
| Operating non-cash compensation charges |
11,816 | 1,442 | ||||||
| Asset write-down charges |
1,161 | — | ||||||
| Restructuring charges (credits) |
— | (445 | ) | |||||
| Adjusted EBITDA |
$ | 85,796 | $ | 71,959 | ||||
| Recurring Cash Flow is computed as follows: |
| For the Three Months Ended |
||||||||
| (dollars in thousands) | September 30, 2005 |
September 30, 2004 |
||||||
| Net cash provided by operating activities |
$ | 47,167 | $ | 20,705 | ||||
| Add: Other adjustments(1) |
10,032 | (1,027 | ) | |||||
| Less: Sustaining capital expenditures |
(3,468 | ) | (1,433 | ) | ||||
| Recurring Cash Flow |
$ | 53,731 | $ | 18,245 | ||||
| (1) | Other adjustments include adjustments for changes in assets and liabilities, excluding the effects of acquisitions, restructuring charges and provision for income taxes. |
| Recurring Cash Flow per share is computed as follows: |
| For the Three Months Ended | ||||||
| (dollars and shares in thousands) | September 30, 2005 |
September 30, 2004 | ||||
| Recurring Cash Flow |
$ | 53,731 | $ | 18,245 | ||
| Weighted average common shares outstanding |
215,664 | 222,841 | ||||
| Recurring Cash Flow per share |
$ | 0.25 | $ | 0.08 | ||
| Sustaining Capital Expenditures is computed as follows: |
| For the Three Months Ended |
||||||||
| (dollars in thousands) | September 30, 2005 |
September 30, 2004 |
||||||
| Capital expenditures |
$ | 16,867 | $ | 9,563 | ||||
| Less: Revenue enhancing on existing sites |
(5,495 | ) | (4,937 | ) | ||||
| Less: Land purchases |
(2,868 | ) | (1,917 | ) | ||||
| Less: New site construction |
(5,036 | ) | (1,276 | ) | ||||
| Sustaining Capital Expenditures |
$ | 3,468 | $ | 1,433 | ||||
| News Release continued: | Page 8 of 14 |
Adjusted EBITDA for the quarter ending December 31, 2005 and the years ending December 31, 2005 and December 31, 2006 is forecasted as follows:
| (dollars in millions) | Q4 2005 Outlook |
Full Year 2005 Outlook |
Full Year 2006 Outlook | |||
| Net income (loss) |
$(24) to (11) | $(408) to (394) | $(78) to (33) | |||
| Minority interests |
(1) to (2) | (4) to (5) | 0 to (5) | |||
| Credit (provision) for income taxes |
0.1 to 0.2 | 0.5 to 0.6 | 0 to 1 | |||
| Interest expense and amortization of deferred financing costs |
28 to 30 | 131 to 133 | 115 to 120 | |||
| Interest and other income (expense) |
0 to 2 | 285 to 287 | 0 to 5 | |||
| Depreciation, amortization and accretion |
72 to 77 | 289 to 294 | 290 to 315 | |||
| Operating non-cash compensation charges |
1 to 2 | 16 to 17 | 4 to 6 | |||
| Asset write-down charges |
0 to 2 | 2 to 4 | 4 to 6 | |||
| Restructuring charges (credits) |
— | 8 to 9 | — | |||
| Adjusted EBITDA |
$87 to 89 | $332 to 334 | $370 to 380 | |||
Recurring Cash Flow for the quarter ending December 31, 2005 and the years ending December 31, 2005 and December 31, 2006 is forecasted as follows:
| (dollars in millions) | Q4 2005 Outlook |
Full Year 2005 Outlook |
Full Year 2006 Outlook | |||
| Net cash provided by operating activities |
$54 to 59 | $163 to 168 | $226 to 260 | |||
| Add: Other adjustments(1) |
0 to 5 | 30 to 39 | 0 to 20 | |||
| Less: Sustaining capital expenditures |
(3) to (5) | (12) to (14) | (11) to (15) | |||
| Recurring Cash Flow |
$54 to 56 | $186 to 188 | $235 to 245 | |||
(1) Other adjustments include adjustments for changes in assets and liabilities, excluding the effects of acquisitions, restructuring charges and provision for income taxes.
Other Calculations:
Sustaining Capital Expenditures for the quarter ending December 31, 2005 and the year ending December 31, 2005 is forecasted as follows:
| (dollars in millions) | Q4 2005 Outlook |
Full Year 2005 Outlook | ||
| Capital expenditures |
$17 to 25 | $55 to 63 | ||
| Less: Revenue enhancing on existing sites |
(5) to (7) | (19) to (21) | ||
| Less: Land purchases |
(5) to (7) | (9) to (11) | ||
| Less: New site construction |
(4) to (6) | (15) to (17) | ||
| Sustaining Capital Expenditures |
$3 to 5 | $12 to 14 | ||
Site Rental Gross Margin for the quarter ending December 31, 2005 and for the years ending December 31, 2005 and December 31, 2006 is forecasted as follows:
| (dollars in millions) | Q4 2005 Outlook |
Full Year 2005 Outlook |
Full Year 2006 Outlook | |||
| Site rental revenue |
$155 to 157 | $595 to 597 | $655 to 665 | |||
| Less: Site rental cost of operations |
(50) to (52) | (195) to (197) | (208) to (212) | |||
| Site Rental Gross Margin |
$104 to 106 | $399 to 401 | $445 to 455 | |||
| News Release continued: | Page 9 of 14 |
Recurring Cash Flow for the quarter ending December 31, 2005 and for the years ending December 31, 2005 and December 31, 2006 is forecasted as follows:
| (dollars in millions) | Q4 2005 Outlook |
Full Year 2005 Outlook |
Full Year 2006 Outlook | |||
| Adjusted EBITDA |
$87 to 89 | $332 to 334 | $370 to 380 | |||
| Less: Interest expense |
(28) to (30) | (131) to (133) | (115) to (120) | |||
| Less: Sustaining capital expenditures |
(3) to (5) | (12 ) to (14) | (11) to (15) | |||
| Recurring Cash Flow |
$54 to 56 | $186 to 188 | $235 to 245 | |||
Cautionary Language Regarding Forward-Looking Statements
This press release contains forward-looking statements and information that are based on our management’s current expectations. Such statements include, but are not limited to, plans, projections and estimates regarding (i) growth in our business, demand for our towers and leasing rates and activity, (ii) investments, including the availability of appropriate investments and the impact of and return on our investments, (iii) currency exchange rates, (iv) site rental revenue, (v) customer payments, (vi) site rental cost of operations, (vii) site rental gross margin, (viii) Adjusted EBITDA, (ix) interest expense, (x) sustaining capital expenditures, (xi) recurring cash flow (including recurring cash flow per share), (xii) revenue enhancing capital expenditures on existing sites, (xiii) land purchases, (xiv) new site construction, and (xv) revenue generating capital expenditures. Such forward-looking statements are subject to certain risks, uncertainties and assumptions, including but not limited to prevailing market conditions and the following:
| • | Our business depends on the demand for wireless communications and towers, and we may be adversely affected by any slowdown in such demand. |
| • | The loss or consolidation of, network sharing among, or financial instability of any of our limited number of customers may materially decrease revenues. |
| • | An economic or wireless telecommunications industry slowdown may materially and adversely affect our business and the business of our customers. |
| • | Our substantial level of indebtedness may adversely affect our ability to react to changes in our business and limit our ability to use debt to fund future capital needs. |
| • | We operate in a competitive industry and some of our competitors have significantly more resources or less debt than we do. |
| • | Technology changes may significantly reduce the demand for site leases and negatively impact the growth in our revenues. |
| • | 2.5G/3G and other technologies may not deploy or be adopted by customers as rapidly or in the manner projected. |
| • | We generally lease or sublease the land under our sites and towers and may not be able to extend these leases. |
| • | We may need additional financing, which may not be available, for strategic growth opportunities. |
| • | Restrictive covenants on our debt instruments may limit our ability to take actions that may be in our best interests |
| • | Laws and regulations, which may change at any time and with which we may fail to comply, regulate our business. |
| • | We are heavily dependent on our senior management. |
| • | Our network services business has historically experienced significant volatility in demand, which reduces the predictability of our results. |
| • | We may suffer from future claims if radio frequency emissions from wireless handsets or equipment on our towers are demonstrated to cause negative health effects. |
| • | Certain provisions of our certificate of incorporation, bylaws and operative agreements and domestic and international competition laws may make it more difficult for a third party to acquire control of us or for us to acquire control of a third party, even if such a change in control would be beneficial to our stockholders. |
| • | Sales or issuances of a substantial number of shares of our common stock may adversely affect the market price of our common stock. |
| • | Disputes with customers and suppliers may adversely affect results. |
| News Release continued: | Page 10 of 14 |
Should one or more of these or other risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those expected. More information about potential risk factors which could affect our results is included in our filings with the Securities and Exchange Commission.
| News Release continued: | Page 11 of 14 |
|
|
CROWN CASTLE INTERNATIONAL CORP. CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND OTHER FINANCIAL DATA (in thousands, except per share data) |
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
| 2005 |
2004 |
2005 |
2004 |
|||||||||||||
| Net revenues: |
||||||||||||||||
| Site rental |
$ | 152,260 | $ | 135,229 | $ | 440,053 | $ | 397,916 | ||||||||
| Network services and other |
19,457 | 14,956 | 56,454 | 47,907 | ||||||||||||
| Total net revenues |
171,717 | 150,185 | 496,507 | 445,823 | ||||||||||||
| Costs of operations (exclusive of depreciation, amortization and accretion): |
||||||||||||||||
| Site rental (including non-cash compensation charges) |
50,029 | 45,804 | 145,468 | 136,024 | ||||||||||||
| Network services and other (including non-cash compensation charges) |
13,333 | 10,717 | 39,204 | 33,858 | ||||||||||||
| Total costs of operations |
63,362 | 56,521 | 184,672 | 169,882 | ||||||||||||
| General and administrative (including non-cash compensation charges) |
33,484 | 22,936 | 79,921 | 72,569 | ||||||||||||
| Corporate development |
891 | 211 | 2,110 | 1,021 | ||||||||||||
| Restructuring charges (credits) (including non-cash compensation charges) |
— | (445 | ) | 8,477 | (478 | ) | ||||||||||
| Asset write-down charges |
1,161 | — | 2,152 | 3,816 | ||||||||||||
| Depreciation, amortization and accretion |
72,192 | 69,925 | 217,076 | 211,141 | ||||||||||||
| Operating income (loss) |
627 | 1,037 | 2,099 | (12,128 | ) | |||||||||||
| Interest and other income (expense) |
617 | (13,552 | ) | (285,035 | ) | (40,279 | ) | |||||||||
| Interest expense and amortization of deferred financing costs |
(28,600 | ) | (52,281 | ) | (103,262 | ) | (166,171 | ) | ||||||||
| Loss from continuing operations before income taxes and minority interests |
(27,356 | ) | (64,796 | ) | (386,198 | ) | (218,578 | ) | ||||||||
| Benefit (provision) for income taxes |
(117 | ) | 6,856 | (408 | ) | 5,519 | ||||||||||
| Minority interests |
904 | (544 | ) | 2,977 | (952 | ) | ||||||||||
| Loss from continuing operations |
(26,569 | ) | (58,484 | ) | (383,629 | ) | (214,011 | ) | ||||||||
| Income (loss) from discontinued operations, net of tax |
(1,497 | ) | 509,140 | (649 | ) | 537,250 | ||||||||||
| Net income (loss) |
(28,066 | ) | 450,656 | (384,278 | ) | 323,239 | ||||||||||
| Dividends on preferred stock . |
(9,429 | ) | (9,836 | ) | (28,650 | ) | (28,864 | ) | ||||||||
| Net loss after deduction of dividends on preferred stock |
$ | (37,495 | ) | $ | 440,820 | $ | (412,928 | ) | $ | 294,375 | ||||||
| Per common share – basic and diluted: |
||||||||||||||||
| Loss from continuing operations |
$ | (0.17 | ) | $ | (0.31 | ) | $ | (1.88 | ) | $ | (1.10 | ) | ||||
| Income from discontinued operations |
— | 2.29 | — | 2.43 | ||||||||||||
| Net income (loss) |
$ | (0.17 | ) | $ | 1.98 | $ | (1.88 | ) | $ | 1.33 | ||||||
| Common shares outstanding – basic and diluted |
215,664 | 222,841 | 219,167 | 221,329 | ||||||||||||
| Adjusted EBITDA (before restructuring and asset write-down charges): |
||||||||||||||||
| Site rental |
$ | 95,012 | $ | 82,756 | $ | 272,384 | $ | 241,570 | ||||||||
| Network services and other |
(9,216 | ) | (10,797 | ) | (27,463 | ) | (29,359 | ) | ||||||||
| Total Adjusted EBITDA |
$ | 85,796 | $ | 71,959 | $ | 244,921 | $ | 212,211 | ||||||||
| Non-cash compensation charges: |
||||||||||||||||
| Site rental non-cash compensation charges |
$ | 504 | $ | 50 | $ | 622 | $ | 342 | ||||||||
| Network services non-cash compensation charges |
246 | 25 | 305 | 173 | ||||||||||||
| General and administrative non-cash compensation charges |
11,066 | 1,367 | 14,190 | 9,345 | ||||||||||||
| Total operating non-cash compensation charge |
11,816 | 1,442 | 15,117 | 9,860 | ||||||||||||
| Restructuring non-cash compensation charges |
— | — | 6,424 | — | ||||||||||||
| Total non-cash compensation charges from continuing operations |
$ | 11,816 | $ | 1,442 | $ | 21,541 | $ | 9,860 | ||||||||
| News Release continued: | Page 12 of 14 |
|
|
CROWN CASTLE INTERNATIONAL CORP. CONDENSED CONSOLIDATED BALANCE SHEET (in thousands) |
| September 30, 2005 |
December 31, 2004 | |||||
| ASSETS | ||||||
| Current assets: |
||||||
| Cash and cash equivalents |
$ | 71,350 | $ | 566,707 | ||
| Receivables, net of allowance for doubtful accounts |
15,243 | 28,366 | ||||
| Inventories |
3,732 | 4,781 | ||||
| Deferred site rental receivable |
5,354 | 6,395 | ||||
| Prepaid expenses and other current assets |
34,300 | 28,771 | ||||
| Restricted cash (including amounts returned on October 15, 2005 of $24,905) |
77,542 | — | ||||
| Assets of discontinued operations |
— | 3,693 | ||||
| Total current assets |
207,521 | 638,713 | ||||
| Restricted cash |
3,154 | — | ||||
| Property and equipment, net of accumulated depreciation |
3,326,801 | 3,368,166 | ||||
| Goodwill |
341,936 | 333,718 | ||||
| Deferred site rental receivable |
90,875 | 84,928 | ||||
| Deferred financing costs and other assets, net of accumulated amortization |
192,684 | 145,997 | ||||
| $ | 4,162,971 | $ | 4,571,522 | |||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
| Current liabilities: |
||||||
| Accounts payable |
$ | 11,064 | $ | 12,168 | ||
| Accrued interest |
6,323 | 43,308 | ||||
| Accrued compensation and related benefits |
12,554 | 15,445 | ||||
| Deferred rental revenues and other accrued liabilities |
109,966 | 116,326 | ||||
| Liabilities of discontinued operations |
— | 568 | ||||
| Long-term debt, current maturities |
145,000 | 97,250 | ||||
| Total current liabilities |
284,907 | 285,065 | ||||
| Long-term debt, less current maturities |
1,975,686 | 1,753,148 | ||||
| Deferred ground lease payable |
127,607 | 116,874 | ||||
| Other liabilities |
38,954 | 44,302 | ||||
| Total liabilities |
2,427,154 | 2,199,389 | ||||
| Minority interests |
27,516 | 30,468 | ||||
| Redeemable preferred stock |
509,043 | 508,040 | ||||
| Stockholders’ equity |
1,199,258 | 1,833,625 | ||||
| $ | 4,162,971 | $ | 4,571,522 | |||
| Note: | In accordance with the Indenture Agreement governing the Notes, all rental cash receipts for the month are restricted and held by the trustee. Amounts in excess of reserve balances as calculated by the trustee are returned to the Company on the 15th of the subsequent month. |
| News Release continued: | Page 13 of 14 |
 |
CROWN CASTLE INTERNATIONAL CORP. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands) |
| Nine Months Ended September 30, |
||||||||
| 2005 |
2004 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income (loss) |
$ | (384,278 | ) | $ | 323,239 | |||
| Adjustments to reconcile net loss to net cash provided by operating activities: |
||||||||
| Depreciation, amortization and accretion |
217,076 | 211,141 | ||||||
| Losses on purchases of long-term debt |
283,797 | 38,253 | ||||||
| Amortization of deferred financing costs and discounts on long-term debt |
4,174 | 7,978 | ||||||
| Non-cash compensation charges |
21,541 | 9,860 | ||||||
| Asset write-down charges |
2,152 | 3,816 | ||||||
| Minority interests |
(2,977 | ) | 952 | |||||
| Equity in losses and write-downs of unconsolidated affiliates |
3,365 | 3,991 | ||||||
| Loss (income) from discontinued operations |
649 | (537,250 | ) | |||||
| Interest rate swap termination payment |
655 | — | ||||||
| Amortization of interest rate swap payment |
286 | — | ||||||
| Changes in assets and liabilities: |
||||||||
| Increase (decrease) in accrued interest |
(36,985 | ) | (16,504 | ) | ||||
| Increase (decrease) in accounts payable |
(1,080 | ) | (1,040 | ) | ||||
| Increase (decrease) in deferred rental revenues, deferred ground lease payables and other liabilities |
(2,336 | ) | 1,257 | |||||
| Decrease (increase) in receivables |
12,984 | 6,291 | ||||||
| Decrease (increase) in inventories, prepaid expenses, deferred site rental receivable and other assets |
(10,285 | ) | (5,808 | ) | ||||
| Net cash provided by (used for) operating activities |
108,738 | 46,176 | ||||||
| Cash flows from investing activities: |
||||||||
| Proceeds from investments and disposition of property and equipment |
1,968 | 2,726 | ||||||
| Capital expenditures |
(38,799 | ) | (28,807 | ) | ||||
| Investments in affiliates and other |
(55,034 | ) | (11,119 | ) | ||||
| Maturities of investments |
— | 250,100 | ||||||
| Purchases of investments |
— | (375,000 | ) | |||||
| Acquisitions of assets |
(144,580 | ) | — | |||||
| Net cash provided by (used for) investing activities |
(236,445 | ) | (162,100 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Proceeds from issuance of long-term debt |
1,900,000 | — | ||||||
| Proceeds from issuance of capital stock |
37,044 | 30,074 | ||||||
| Purchases and redemption of long-term debt |
(1,848,222 | ) | (267,359 | ) | ||||
| Borrowings under revolving credit agreements |
145,000 | — | ||||||
| Payments under revolving credit agreements |
(180,000 | ) | (15,000 | ) | ||||
| Purchases of capital stock |
(292,718 | ) | (52,990 | ) | ||||
| Principal payments on long-term debt |
— | (1,289,750 | ) | |||||
| Incurrence of financing costs |
(31,973 | ) | (444 | ) | ||||
| Initial funding of restricted cash |
(48,873 | ) | — | |||||
| Net (increase) decrease in restricted cash |
(31,823 | ) | — | |||||
| News Release continued: | Page 14 of 14 |
| Interest rate swap payments |
(6,381 | ) | — | |||||
| Dividends on preferred stock |
(13,220 | ) | — | |||||
| Net cash provided by (used for) financing activities |
(371,166 | ) | (1,595,469 | ) | ||||
| Effect of exchange rate changes on cash |
(457 | ) | (105 | ) | ||||
| Discontinued operations |
3,973 | 2,058,919 | ||||||
| Net decrease in cash and cash equivalents |
(495,357 | ) | 347,421 | |||||
| Cash and cash equivalents at beginning of period |
566,707 | 409,584 | ||||||
| Cash and cash equivalents at end of period |
$ | 71,350 | $ | 757,005 | ||||
| Supplemental disclosure of cash flow information: |
||||||||
| Interest paid |
$ | 132,748 | $ | 172,376 | ||||
| Income taxes paid |
7,408 | 481 |
CROWN CASTLE INTERNATIONAL CORP.
Summary Fact Sheet
(in $ thousands)
| Quarter Ended 12/31/04 |
Quarter Ended 3/31/05 |
Quarter Ended 6/30/05 |
Quarter Ended 9/30/05 |
|||||||||||||||||||||||||||||||||||||||||||||
| CCUSA |
CCAL |
EmB |
CCIC |
CCUSA |
CCAL |
EmB |
CCIC |
CCUSA |
CCAL |
EmB |
CCIC |
CCUSA |
CCAL |
EmB |
CCIC |
|||||||||||||||||||||||||||||||||
| Revenues |
||||||||||||||||||||||||||||||||||||||||||||||||
| Site Rental |
128,838 | 10,711 | — | 139,549 | 130,692 | 10,173 | 61 | 140,926 | 133,540 | 13,260 | 67 | 146,867 | 139,797 | 12,399 | 64 | 152,260 | ||||||||||||||||||||||||||||||||
| Services |
16,907 | 1,003 | 76 | 17,986 | 14,138 | 2,041 | — | 16,179 | 19,082 | 1,736 | — | 20,818 | 17,519 | 1,938 | — | 19,457 | ||||||||||||||||||||||||||||||||
| Total Revenues |
145,745 | 11,714 | 76 | 157,535 | 144,830 | 12,214 | 61 | 157,105 | 152,622 | 14,996 | 67 | 167,685 | 157,316 | 14,337 | 64 | 171,717 | ||||||||||||||||||||||||||||||||
| Operating Expenses |
||||||||||||||||||||||||||||||||||||||||||||||||
| Site Rental |
43,474 | 4,655 | — | 48,129 | 43,011 | 4,590 | 79 | 47,680 | 43,250 | 4,387 | 122 | 47,759 | 45,653 | 4,261 | 115 | 50,029 | ||||||||||||||||||||||||||||||||
| Services |
11,494 | 825 | 575 | 12,894 | 10,277 | 915 | 276 | 11,468 | 13,092 | 924 | 387 | 14,403 | 12,048 | 754 | 531 | 13,333 | ||||||||||||||||||||||||||||||||
| Total Operating Expenses |
54,968 | 5,480 | 575 | 61,023 | 53,288 | 5,505 | 355 | 59,148 | 56,342 | 5,311 | 509 | 62,162 | 57,701 | 5,015 | 646 | 63,362 | ||||||||||||||||||||||||||||||||
| General & Administrative |
||||||||||||||||||||||||||||||||||||||||||||||||
| Site Rental |
4,629 | 3,039 | — | 7,668 | 4,472 | 2,836 | — | 7,308 | 4,657 | 3,256 | — | 7,913 | 4,997 | 2,835 | — | 7,832 | ||||||||||||||||||||||||||||||||
| Services |
16,303 | — | 1,125 | 17,428 | 14,587 | — | 652 | 15,239 | 15,199 | — | 778 | 15,977 | 24,268 | — | 1,384 | 25,652 | ||||||||||||||||||||||||||||||||
| Total General & Administrative |
20,932 | 3,039 | 1,125 | 25,096 | 19,059 | 2,836 | 652 | 22,547 | 19,856 | 3,256 | 778 | 23,890 | 29,265 | 2,835 | 1,384 | 33,484 | ||||||||||||||||||||||||||||||||
| Operating Cash Flow |
69,845 | 3,195 | (1,624 | ) | 71,416 | 72,483 | 3,873 | (946 | ) | 75,410 | 76,424 | 6,429 | (1,220 | ) | 81,633 | 70,350 | 6,487 | (1,966 | ) | 74,871 | ||||||||||||||||||||||||||||
| Corporate Development |
434 | — | — | 434 | — | — | 432 | 432 | — | — | 787 | 787 | — | — | 891 | 891 | ||||||||||||||||||||||||||||||||
| Add: Non-Cash Compensation |
3,212 | 16 | — | 3,228 | 1,506 | 14 | 28 | 1,548 | 1,513 | 107 | 133 | 1,753 | 11,048 | 109 | 659 | 11,816 | ||||||||||||||||||||||||||||||||
| Adjusted EBITDA |
72,623 | 3,211 | (1,624 | ) | 74,210 | 73,989 | 3,887 | (1,350 | ) | 76,526 | 77,937 | 6,536 | (1,874 | ) | 82,599 | 81,398 | 6,596 | (2,198 | ) | 85,796 | ||||||||||||||||||||||||||||
| Quarter Ended 12/31/04 |
Quarter Ended 3/31/05 |
Quarter Ended 6/30/05 |
Quarter Ended 9/30/05 |
|||||||||||||||||||||||||||||||||||||||||||||
| CCUSA |
CCAL |
EmB |
CCIC |
CCUSA |
CCAL |
EmB |
CCIC |
CCUSA |
CCAL |
EmB |
CCIC |
CCUSA |
CCAL |
EmB |
CCIC |
|||||||||||||||||||||||||||||||||
| Gross Margins: |
||||||||||||||||||||||||||||||||||||||||||||||||
| Site Rental |
66 | % | 57 | % | N/M | 66 | % | 67 | % | 55 | % | N/M | 66 | % | 68 | % | 67 | % | N/M | 67 | % | 67 | % | 66 | % | N/M | 67 | % | ||||||||||||||||||||
| Services |
32 | % | 18 | % | N/M | 28 | % | 27 | % | 55 | % | N/M | 29 | % | 31 | % | 47 | % | N/M | 31 | % | 31 | % | 61 | % | N/M | 31 | % | ||||||||||||||||||||
| Operating Cash Flow Margins |
48 | % | 27 | % | N/M | 45 | % | 50 | % | 32 | % | N/M | 48 | % | 50 | % | 43 | % | N/M | 49 | % | 45 | % | 45 | % | N/M | 44 | % | ||||||||||||||||||||
| Adjusted EBITDA Margin |
50 | % | 27 | % | N/M | 47 | % | 51 | % | 32 | % | N/M | 49 | % | 51 | % | 44 | % | N/M | 49 | % | 52 | % | 46 | % | N/M | 50 | % | ||||||||||||||||||||
Reconciliation of Non-GAAP Financial Measure (Adjusted EBITDA) to GAAP Financial Measure:
(in $ thousands)
| Quarter Ended |
||||||||||||||||
| 12/31/2004 | 3/31/2005 | 6/30/2005 | 9/30/2005 | |||||||||||||
| Net income (loss) |
$ | (88,129 | ) | $ | (128,761 | ) | $ | (227,451 | ) | $ | (28,066 | ) | ||||
| Income (loss) from discontinued operations, net of tax |
1,065 | 1,499 | (2,347 | ) | 1,497 | |||||||||||
| Minority interests |
(1,154 | ) | (1,275 | ) | (798 | ) | (904 | ) | ||||||||
| Credit (provision) for income taxes |
149 | 144 | 147 | 117 | ||||||||||||
| Interest expense, amortization of deferred financing costs |
40,599 | 39,269 | 35,393 | 28,600 | ||||||||||||
| Interest and other income (expense) |
37,985 | 83,017 | 202,635 | (617 | ) | |||||||||||
| Depreciation, amortization and accretion |
72,424 | 72,172 | 72,712 | 72,192 | ||||||||||||
| Operating non-cash compensation charges |
3,228 | 1,548 | 1,753 | 11,816 | ||||||||||||
| Asset write-down charges |
3,836 | 436 | 555 | 1,161 | ||||||||||||
| Restructuring charges (credits) |
4,207 | 8,477 | — | — | ||||||||||||
| Adjusted EBITDA |
$ | 74,210 | $ | 76,526 | $ | 82,599 | $ | 85,796 | ||||||||
CCI FACT SHEET Q3 2005
$ in thousands
| Q3 '04 |
Q3 '05 |
% Change | |||||||
| CCUSA |
|||||||||
| Site Rental Revenue |
$ | 125,546 | $ | 139,797 | 11% | ||||
| Ending Sites |
10,609 | 11,070 | 4% | ||||||
| CCAL |
|||||||||
| Site Rental Revenue |
$ | 9,683 | $ | 12,399 | 28% | ||||
| Ending Sites |
1,388 | 1,386 | 0% | ||||||
| CC EmB |
|||||||||
| Site Rental Revenue |
$ | — | 64 | N/A | |||||
| Ending Sites |
— | — | N/A | ||||||
| TOTAL CCIC |
|||||||||
| Site Rental Revenue |
$ | 135,229 | $ | 152,260 | 13% | ||||
| Ending Sites |
11,997 | 12,456 | 4% | ||||||
| Ending Cash and Investments |
$ | 757,005 | $ | 71,350 | * | ||||
| Debt |
|||||||||
| Bank Debt |
$ | 180,000 | $ | 145,000 | |||||
| Tower Revenue Notes & Bonds |
$ | 1,718,847 | $ | 1,975,686 | |||||
| 6 1/4% & 8 1/4% Convertible Preferred Stock |
$ | 507,706 | $ | 509,043 | |||||
| Total Debt |
$ | 2,406,553 | $ | 2,629,729 | |||||
| Leverage Ratios |
|||||||||
| Net Bank Debt / EBITDA |
N/A | N/A | |||||||
| Net Bank Debt + Bonds / EBITDA |
4.0X | 6.0X | |||||||
| Total Net Debt / EBITDA |
5.7X | 7.5X | |||||||
| Last Quarter Annualized Adjusted EBITDA |
287,836 | $ | 343,184 | ||||||
| *Excludes | Restricted Cash of $80.7 million |