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Crown Castle Reports Second Quarter 2018 Results and Raises Outlook for Full Year 2018

HOUSTON, July 18, 2018 (GLOBE NEWSWIRE) — Crown Castle International Corp. (NYSE:CCI) (“Crown Castle”) today reported results for the quarter ended June 30, 2018.

2018 Outlook for Organic Contribution to Site Rental Revenues, Growth in Site Rental Revenues ($ in millions)
2018 Outlook for Organic Contribution to Site Rental Revenues, Growth in Site Rental Revenues ($ in millions)
2018 Outlook for AFFO growth ($ in millions)
2018 Outlook for AFFO growth ($ in millions)

“We delivered another terrific quarter of results, and remain on track to generate attractive growth in cash flows and dividends per share for the full year 2018,” stated Jay Brown, Crown Castle’s Chief Executive Officer. “Over the past two decades, we have built and acquired an unmatched portfolio of more than 40,000 towers and 60,000 route miles of dense, high capacity fiber in the top U.S. markets, where we see the greatest long-term demand from multiple customers.  We believe our ability to offer towers, small cells and fiber solutions, which are all integral components of communications networks, is the best strategy to pursue this significant growth opportunity while generating high returns for our shareholders by sharing our assets among multiple tenants.  Based on our experience, we believe that the U.S. represents the best market in the world for communications infrastructure ownership and we have a differentiated strategy to pursue that compelling opportunity.  With the positive momentum we continue to see in our towers and fiber segments, we remain dedicated to investing in our business to generate future growth while delivering near-term dividend per share growth of 7% to 8% per year.”

RESULTS FOR THE QUARTER
The table below sets forth select financial results for the three month period ended June 30, 2018 and 2017.  For further information, refer to the financial statements and non-GAAP, segment and other calculation reconciliations included in this press release.

(in millions) Actual Midpoint
Q2 2018
Outlook(b)
Actual
Compared to
Outlook
Q2 2018 Q2 2017 Change % Change
Site rental revenues $1,169 $869 +$300 +35 $1,158 +$11
Net income (loss) $180 $112 +$68 +61 % $152 +$28
Adjusted EBITDA(a) $769 $589 +$180 +31 % $762 +$7
AFFO(a)(c) $546 $440 +$106 +24 % $544 +$2
Weighted-average common shares outstanding – diluted 416 366 +50 +14 % 416

Note: Figures may not tie due to rounding.

  1. See reconciliation of this non-GAAP financial measure to net income (loss) and definition included herein.
  2. As issued on April 18, 2018.
  3. Attributable to CCIC common stockholders.

HIGHLIGHTS FROM THE QUARTER

  • Site rental revenues.  Site rental revenues grew approximately 35%, or $300 million, from second quarter 2017 to second quarter 2018, inclusive of approximately $49 million in Organic Contribution to Site Rental Revenues plus $231 million in contributions from acquisitions and other items, plus a $20 million increase in straight-lined revenues.  The $49 million in Organic Contribution to Site Rental Revenues represents approximately 5.6% growth, comprised of approximately 8% growth from new leasing activity and contracted tenant escalations, net of approximately 2.5% from tenant non-renewals.  When compared to the prior second quarter 2018 Outlook, site rental revenues benefited by approximately $9 million of additional straight-lined revenues primarily resulting from term extensions associated with leasing activity.
  • Net income.  Net income for second quarter 2018 was $180 million, compared to $112 million during the same period a year ago.
  • Adjusted EBITDA.  When compared to the second quarter 2018 Outlook, Adjusted EBITDA benefited by approximately $9 million of additional straight-lined revenues, partially offset by the timing of certain network services contribution that is now expected to contribute to Adjusted EBITDA during the remainder of 2018.
  • Capital expenditures.  Capital expenditures during the quarter were $393 million, comprised of $10 million of land purchases, $26 million of sustaining capital expenditures, $356 million of revenue generating capital expenditures and $1 million of integration capital expenditures.
  • Common stock dividend.  During the quarter, Crown Castle paid common stock dividends of $1.05 per common share, an increase of approximately 11% compared to the same period a year ago.
  • Financing activities.  During the quarter, Crown Castle increased the commitments under its Senior Unsecured Revolving Credit Facility by $750 million and extended the maturity date on its Senior Unsecured Credit Facility to June 2023.  In July, Crown Castle issued $1.0 billion of Senior Secured Tower Revenue Notes with net proceeds from the offering and cash on hand used to retire $1.0 billion of existing Senior Secured Tower Revenue Notes.  With these financings, the weighted average maturity of outstanding debt was extended to 6.5 years while the weighted average interest rate was reduced to 3.9%.

“The momentum we see across the business has translated into solid financial results and an 11% year-over-year growth in dividends per share during the first half of 2018, demonstrating how well positioned Crown Castle is to capitalize on the positive tailwinds creating demand for our communications infrastructure,” stated Dan Schlanger, Crown Castle’s Chief Financial Officer.  “With our recent refinancings, we have increased our financial flexibility, positioning us to continue to invest in our business and create significant value for our shareholders by leveraging our leading portfolio of towers and high-capacity fiber assets.”

OUTLOOK
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”).

The following table sets forth Crown Castle’s current Outlook for third quarter 2018 and full year 2018:

(in millions) Third Quarter 2018 Full Year 2018
Site rental revenues $1,172 to $1,182 $4,673 to $4,703
Site rental cost of operations(a) $345 to $355 $1,382 to $1,412
Net income (loss) $126 to $151 $603 to $663
Adjusted EBITDA(b) $785 to $795 $3,132 to $3,162
Interest expense and amortization of deferred financing costs(c) $156 to $166 $627 to $657
FFO(b)(d) $490 to $500 $2,014 to $2,044
AFFO(b)(d) $568 to $578 $2,263 to $2,293
Weighted-average common shares outstanding – diluted(e) 416 415
  1. Exclusive of depreciation, amortization and accretion.
  2. See reconciliation of this non-GAAP financial measure to net income (loss) and definition included herein.
  3. See reconciliation of “components of interest expense and amortization of deferred financing costs” herein for a discussion of non-cash interest expense.
  4. Attributable to CCIC common stockholders.
  5. The assumption for third quarter 2018 and full year 2018 diluted weighted-average common shares outstanding is based on the diluted common shares outstanding as of June 30, 2018.  For all periods presented, the diluted weighted-average common shares outstanding does not include any assumed conversion of preferred stock in the share count. 
  • Compared to second quarter 2018, the midpoints of third quarter 2018 Outlook for Adjusted EBITDA and AFFO are expected to benefit from a higher network services contribution and lower cash tax payments.

Full Year 2018 Outlook
The table below compares the results for full year 2017, midpoint of the current full year 2018 Outlook and the midpoint of the previously provided full year 2018 Outlook for select metrics.

  Midpoint of FY 2018 Outlook to FY 2017 Actual Comparison    
(in millions) Current
Full Year
2018
Outlook
Full Year
2017 Actual
Change % Change Previous
Full Year
2018
Outlook(d)
Current
Compared to
Previous
Outlook
Site rental revenues $4,688 $3,669 +$1,019 +28 $4,662 +$26
Net income (loss) $633 $445 +$188 +42 % $629 +$4
Adjusted EBITDA(a) $3,147 $2,482 +$665 +27 % $3,120 +$27
AFFO(a)(b) $2,278 $1,860 +$418 +22 % $2,278
Weighted-average common shares outstanding – diluted(c) 415 383 +32 +8 % 415
  1. See reconciliation of this non-GAAP financial measure to net income (loss) and definition included herein.
  2. Attributable to CCIC common stockholders.
  3. The assumption for full year 2018 diluted weighted-average common shares outstanding is based on diluted common shares outstanding as of June 30, 2018.  For all periods presented, the diluted weighted-average common shares outstanding does not include any assumed conversion of preferred stock in the share count.
  4. As issued on April 18, 2018.
     
  • The chart below reconciles the components of expected growth in site rental revenues from 2017 to 2018 of $1,005 million to $1,035 million, inclusive of expected Organic Contribution to Site Rental Revenues during 2018 of $190 million to $220 million.
  • The increases in full year 2018 Outlook reflect a higher expected contribution from straight-lined revenues.  The increase to expected straight-lined revenues primarily reflects the impact of term extensions associated with leasing activity.

A photo accompanying this announcement is available at http://www.globenewswire.com/NewsRoom/AttachmentNg/c1f978e3-c552-43c5-a17a-d30c509e141b

  • For the above chart, the entire expected contribution to full year 2018 Outlook for growth in site rental revenues from Lightower is included within acquisitions.
     
  • The chart below reconciles the components of expected growth in AFFO from 2017 to 2018 of $400 million to $430 million. 

A photo accompanying this announcement is available at http://www.globenewswire.com/NewsRoom/AttachmentNg/378f1a8b-4f75-4c51-801e-90ae4a87e990

  • Additional information is available in Crown Castle’s quarterly Supplemental Information Package posted in the Investors section of its website.

CONFERENCE CALL DETAILS
Crown Castle has scheduled a conference call for Thursday, July 19, 2018, at 10:30 a.m. Eastern time to discuss its second quarter 2018 results.  The conference call may be accessed by dialing 877-260-1479 and asking for the Crown Castle call (access code 9212580) 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.  Supplemental materials for the call have been posted on the Crown Castle website at http://investor.crowncastle.com.

A telephonic replay of the conference call will be available from 1:30 p.m. Eastern time on Thursday, July 19, 2018, through 1:30 p.m. Eastern time on Wednesday, October 17, 2018, and may be accessed by dialing 888-203-1112 and using access code 9212580.  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.

ABOUT CROWN CASTLE
Crown Castle owns, operates and leases more than 40,000 cell towers and approximately 60,000 route miles of fiber supporting small cells and fiber solutions across every major U.S. market.  This nationwide portfolio of communications infrastructure connects cities and communities to essential data, technology and wireless service – bringing information, ideas and innovations to the people and businesses that need them.  For more information on Crown Castle, please visit www.crowncastle.com.

Non-GAAP Financial Measures, Segment Measures and Other Calculations

This press release includes presentations of Adjusted EBITDA, Adjusted Funds from Operations (“AFFO”), Funds from Operations (“FFO”) and Organic Contribution to Site Rental Revenues, 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”)).

Our measures of Adjusted EBITDA, AFFO, FFO and Organic Contribution to Site Rental Revenues may not be comparable to similarly titled measures of other companies, including other companies in the communications infrastructure sector or other real estate investment trusts (“REITs”).  Our definition of FFO is consistent with guidelines from the National Association of Real Estate Investment Trusts with the exception of the impact of income taxes in periods prior to our REIT conversion in 2014.

In addition to the non-GAAP financial measures used herein, we also provide Segment Site Rental Gross Margin, Segment Network Services and Other Gross Margin and Segment Operating Profit, which are key measures used by management to evaluate our operating segments for purposes of making decisions about allocating capital and assessing performance.  These segment measures are provided pursuant to GAAP requirements related to segment reporting.  In addition, we provide the components of certain GAAP measures, such as capital expenditures.

Adjusted EBITDA, AFFO, FFO and Organic Contribution to Site Rental Revenues are presented as additional information because management believes these measures are useful indicators of the financial performance of our business.  Among other things, management believes that:

  • Adjusted EBITDA is useful to investors or other interested parties in evaluating our financial performance.  Adjusted EBITDA is the primary measure used by management (1) to evaluate the economic productivity of our operations and (2) for purposes of making decisions about allocating resources to, and assessing the performance of, our operations.  Management believes that Adjusted EBITDA helps investors or other interested parties meaningfully evaluate and compare the results of our operations (1) from period to period and (2) to our competitors, by removing the impact of our capital structure (primarily interest charges from our outstanding debt) and asset base (primarily depreciation, amortization and accretion) from our financial results.  Management also believes Adjusted EBITDA is frequently used by investors or other interested parties in the evaluation of the communications infrastructure sector and other REITs to measure financial performance without regard to items such as depreciation, amortization and accretion which can vary depending upon accounting methods and the book value of assets.  In addition, Adjusted EBITDA is similar to the measure of current financial performance generally used in our debt covenant calculations.  Adjusted EBITDA should be considered only as a supplement to net income computed in accordance with GAAP as a measure of our performance.
  • AFFO is useful to investors or other interested parties in evaluating our financial performance.  Management believes that AFFO helps investors or other interested parties meaningfully evaluate our financial performance as it includes (1) the impact of our capital structure (primarily interest expense on our outstanding debt and dividends on our preferred stock) and (2) sustaining capital expenditures, and excludes the impact of our (a) asset base (primarily depreciation, amortization and accretion) and (b) certain non-cash items, including straight-lined revenues and expenses related to fixed escalations and rent free periods.  GAAP requires rental revenues and expenses related to leases that contain specified rental increases over the life of the lease to be recognized evenly over the life of the lease.  In accordance with GAAP, if payment terms call for fixed escalations, or rent free periods, the revenue or expense is recognized on a straight-lined basis over the fixed, non-cancelable term of the contract.  Management notes that Crown Castle uses AFFO only as a performance measure.  AFFO should be considered only as a supplement to net income computed in accordance with GAAP as a measure of our performance and should not be considered as an alternative to cash flows from operations or as residual cash flow available for discretionary investment.
  • FFO is useful to investors or other interested parties in evaluating our financial performance.  Management believes that FFO may be used by investors or other interested parties as a basis to compare our financial performance with that of other REITs.  FFO helps investors or other interested parties meaningfully evaluate financial performance by excluding the impact of our asset base (primarily depreciation, amortization and accretion). FFO is not a key performance indicator used by Crown Castle.  FFO should be considered only as a supplement to net income computed in accordance with GAAP as a measure of our performance and should not be considered as an alternative to cash flow from operations.
  • Organic Contribution to Site Rental Revenues is useful to investors or other interested parties in understanding the components of the year-over-year changes in our site rental revenues computed in accordance with GAAP.  Management uses the Organic Contribution to Site Rental Revenues to assess year-over-year growth rates for our rental activities, to evaluate current performance, to capture trends in rental rates, new leasing activities and customer non-renewals in our core business, as well to forecast future results. Organic Contribution to Site Rental Revenues is not meant as an alternative measure of revenue and should be considered only as a supplement in understanding and assessing the performance of our site rental revenues computed in accordance with GAAP.

We define our non-GAAP financial measures, segment measures and other calculations as follows:

Non-GAAP Financial Measures

Adjusted EBITDA. We define 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, (gains) losses on foreign currency swaps, impairment of available-for-sale securities, interest income, other (income) expense, (benefit) provision for income taxes, cumulative effect of a change in accounting principle, (income) loss from discontinued operations and stock-based compensation expense.

Adjusted Funds from Operations.  We define Adjusted Funds from Operations as FFO before straight-lined revenue, straight-lined expense, stock-based compensation expense, non-cash portion of tax provision, non-real estate related depreciation, amortization and accretion, amortization of non-cash interest expense, other (income) expense, (gains) losses on retirement of long-term obligations, net (gain) loss on interest rate swaps, (gains) losses on foreign currency swaps, acquisition and integration costs, and adjustments for noncontrolling interests, and less sustaining capital expenditures (comprised of capital improvement capital expenditures and corporate capital expenditures).

Funds from Operations. We define Funds from Operations as net income plus real estate related depreciation, amortization and accretion and asset write-down charges, less noncontrolling interest and cash paid for preferred stock dividends, and is a measure of funds from operations attributable to CCIC common stockholders.

Organic Contribution to Site Rental Revenues. We define the Organic Contribution to Site Rental Revenues as the sum of the change in GAAP site rental revenues related to (1) new leasing activity, including revenues from the construction of small cells and the impact of prepaid rent, (2) escalators and less (3) non-renewals of customer contracts.

Segment Measures

Segment Site Rental Gross Margin.  We define Segment Site Rental Gross Margin as segment site rental revenues less segment site rental cost of operations, excluding stock-based compensation expense and prepaid lease purchase price adjustments recorded in consolidated site rental cost of operations.

Segment Network Services and Other Gross Margin.  We define Segment Network Services and Other Gross Margin as segment network services and other revenues less segment network services and other cost of operations, excluding stock-based compensation expense recorded in consolidated network services and other cost of operations.

Segment Operating Profit.  We define Segment Operating Profit as segment site rental gross margin plus segment network services and other gross margin, less general and administrative expenses attributable to the respective segment.

Other Calculations

Discretionary capital expenditures.  We define discretionary capital expenditures as those capital expenditures made with respect to activities which we believe exhibit sufficient potential to enhance long-term stockholder value. They consist of expansion or development of existing communications infrastructure, construction of new communications infrastructure, and, to a lesser extent, purchases of land interests (which primarily relate to land assets under towers as we seek to manage our interests in the land beneath our towers) and other capital projects.

Sustaining capital expenditures.  We define sustaining capital expenditures as those capital expenditures made with respect to either (1) corporate capital expenditures or (2) capital improvement capital expenditures on our communications infrastructure assets that enable our customers’ ongoing quiet enjoyment of the communications infrastructure.

Integration capital expenditures.  We define integration capital expenditures as those capital expenditures made specifically with respect to recent acquisitions that are essential to integrating acquired companies into our business.

The tables set forth below reconcile the non-GAAP financial measures used herein to comparable GAAP financial measures.  The components in these tables may not sum to the total due to rounding.  The Company has changed its presentation to millions and, as a result, any necessary rounding adjustments have been made to prior year disclosed amounts.

Reconciliations of Non-GAAP Financial Measures, Segment Measures and Other Calculations to Comparable GAAP Financial Measures:

Reconciliation of Historical Adjusted EBITDA:

  For the Three
Months Ended
  For the Twelve
Months Ended
  June 30, 2018   June 30, 2017   December 31, 2017
(in millions)          
Net income (loss) $ 180     $ 112     $ 445  
Adjustments to increase (decrease) net income (loss):          
Asset write-down charges 6     4     17  
Acquisition and integration costs 8     8     61  
Depreciation, amortization and accretion 379     296     1,242  
Amortization of prepaid lease purchase price adjustments 5     5     20  
Interest expense and amortization of deferred financing costs(a) 158     142     591  
(Gains) losses on retirement of long-term obligations 3         4  
Interest income (1 )   (1 )   (19 )
Other (income) expense     1     (1 )
(Benefit) provision for income taxes 5     5     26  
Stock-based compensation expense 26     17     96  
Adjusted EBITDA(b)(c) $ 769     $ 589     $ 2,482  
  1. See the reconciliation of “components of interest expense and amortization of deferred financing costs” herein for a discussion of non-cash interest expense.
  2. See “Non-GAAP Financial Measures, Segment Measures and Other Calculations” herein for a discussion of our definition of Adjusted EBITDA.
  3. The above reconciliation excludes line items included in our definition which are not applicable for the periods shown.

Reconciliation of Current Outlook for Adjusted EBITDA:

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  Q3 2018   Full Year 2018
(in millions) Outlook   Outlook
Net income (loss) $ 126   to $ 151   $ 603   to $ 663
Adjustments to increase (decrease) net income (loss):              
Asset write-down charges $ 9   to $ 11   $ 25   to $ 35
Acquisition and integration costs $ 16   to $ 20   $ 45   to $ 55
Depreciation, amortization and accretion $ 378   to $ 398   $ 1,513   to $ 1,548
Amortization of prepaid lease purchase price adjustments $ 4   to $ 6   $ 19   to $ 21
Interest expense and amortization of deferred financing costs(a) $ 156   to $ 166   $ 627   to $ 657
(Gains) losses on retirement of long-term obligations $ 33   to $ 33   $ 107   to $ 107
Interest income $ (1 ) to $ 1   $ (4 ) to $ 0
Other (income) expense $ (1 ) to $ 3   $ 2   to $ 4
(Benefit) provision for income taxes $ 7   to $