CCI's Loss Wider than Expected

• By Zacks Equity Research
• On 10:23 am EST, Wednesday November 4, 2009

Higher interest expenses and amortization of deferred financing cost together with net loss on interest rate swap significantly hurt the third quarter results of Crown Castle International Corp. (NYSE: CCI - News). Net loss for the quarter came in at $36.8 million or 13 cents per share, wider than the Zacks Consensus Estimate of a loss of 3 cents per share. However, third quarter net loss remains almost same compared to a net loss of $37.4 million or 13 cents per share in the prior-year quarter. Quarterly interest expenses and amortization of deferred financing cost was $111.2 million, compared to $88.1 million in the year-ago quarter. Net loss on interest rate swap was $58.3 million, compared to a gain of $2.4 million in the year-ago quarter.

 

Net revenues of $429.1 million marked an improvement of 12% year over year and also came above the Zacks Consensus Estimate of $416 million. This was primarily due to fabulous performance by the company’s core Site Rental segment. Quarterly adjusted EBITDA was $260.5 million, up 19.7% year over year and also up 5.5% sequentially. Recurring cash flow (adjusted EBITDA less interest expense less sustaining capital expenditures) in the same quarter was $143.8 million, up 16.4% year over year and also up 9.4% sequentially.

 

Quarterly gross margin was 68.2%, compared to 64.8% in the year-ago quarter. Operating expenses, in the same quarter, were $173.8 million, compared to $172.1 million in the prior-year quarter. This increase in operating expenses was primarily due to higher asset write-down charges.

 

At the end of the third quarter, Crown Castle had nearly $268.8 million of cash & marketable securities on its balance sheet, compared to $109.5 million at the end of the prior-year quarter. Total debt was approximately $6.14 billion at the end of the same quarter, compared to $6.1 billion at the end of the year-ago quarter. The company generated $124.2 million cash from operation during the reported quarter compared to $129.6 million during the prior-year quarter. Free cash flow (cash flow from operation less capital expenditure) was $91.8 million, compared to a negative ($11) million in the year-ago quarter.

 

Site Rental Segment

 

Revenues were $396.5 million, up 12% year over year and also up 5.3% sequentially. Gross margin of this segment was 71%, compared to 67.3% in the prior-year quarter.

 

Network Services Segment

 

Revenues were $32.6 million, up 7.4% year over year but down 2.4% sequentially. Gross margin of this segment was 33.7%, compared to 32.4% in the prior-year quarter.

 

Outlook for the Fourth Quarter of 2009

 

Management has predicted that site rental revenues during the fourth quarter will approximate a range of $397 million-$402 million. Site rental cost of operation is expected to be approximately $115 million-$120 million. Adjusted EBITDA is forecasted in the $259 million-$264 million range. Interest expense is guided in the range of $117 million-$121 million with sustaining capital expenditure between $10 million - $12 million and recurring cash flow in the range of $129 million-$134 million. Net income/loss, on a GAAP basis, after deduction of dividend on preferred stocks, is expected to be ($15) million- $7 million or (5 cents) – 2 cents per share.

 

Outlook for Full Fiscal 2010

 

For the full year 2010, site rental revenues are expected to range between $1,645 million and $1,665 million. Site rental cost of operation is expected to be approximately $460 million-$480 million. Adjusted EBITDA is projected between $1,095 million and $1,115 million. Interest expense is estimated at approximately $448 million-$458 million with sustaining capital expenditure in the range of $27 million-$32 million and recurring cash flow of $612 million-$632 million. Net income/loss, on a GAAP basis, after deduction of dividend on preferred stocks, is expected to be ($16) million-$68 million or (6 cents) – 24 cents per share.

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