UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2005
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period to
Commission File Number 001-16441
CROWN CASTLE INTERNATIONAL CORP.
(Exact name of registrant as specified in its charter)
| Delaware | 76-0470458 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| 510 Bering Drive Suite 500 Houston, Texas |
77057-1457 | |
| (Address of principal executive offices) | (Zip Code) | |
(713) 570-3000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
Number of shares of common stock outstanding at April 30, 2005: 219,075,155
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
| Page | ||
| PART I—FINANCIAL INFORMATION |
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| Item 1. Financial Statements |
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| Consolidated Balance Sheet at December 31, 2004 and March 31, 2005 |
3 | |
| 4 | ||
| Consolidated Statement of Cash Flows for the three months ended March 31, 2004 and 2005 |
5 | |
| 6 | ||
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
20 | |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk |
38 | |
| 38 | ||
| PART II—OTHER INFORMATION |
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| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
40 | |
| 41 | ||
| 42 | ||
2
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands of dollars, except share amounts)
| December 31, 2004 |
March 31, 2005 |
|||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 566,707 | $ | 383,077 | ||||
| Receivables: |
||||||||
| Trade, net of allowance for doubtful accounts of $6,577 and $5,410 at December 31, 2004 and March 31, 2005, respectively |
16,369 | 8,293 | ||||||
| Other |
11,997 | 4,590 | ||||||
| Inventories |
4,781 | 4,933 | ||||||
| Deferred site rental receivable |
6,395 | 4,988 | ||||||
| Prepaid expenses and other current assets |
28,771 | 27,455 | ||||||
| Assets of discontinued operations (note 1) |
3,693 | 3,048 | ||||||
| Total current assets |
638,713 | 436,384 | ||||||
| Property and equipment, net of accumulated depreciation of $1,361,355 and $1,429,894 at December 31, 2004 and March 31, 2005, respectively |
3,368,166 | 3,304,591 | ||||||
| Goodwill |
333,718 | 333,718 | ||||||
| Deferred site rental receivable |
84,928 | 87,657 | ||||||
| Deferred financing costs and other assets, net of accumulated amortization of $35,961 and $36,864 at December 31, 2004 and March 31, 2005, respectively |
145,997 | 141,019 | ||||||
| $ | 4,571,522 | $ | 4,303,369 | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 12,168 | $ | 6,765 | ||||
| Accrued interest |
43,308 | 31,372 | ||||||
| Accrued compensation and related benefits |
15,445 | 5,844 | ||||||
| Deferred rental revenues and other accrued liabilities |
116,326 | 113,621 | ||||||
| Liabilities of discontinued operations (note 1) |
568 | 640 | ||||||
| Long-term debt, current maturities |
97,250 | 182,564 | ||||||
| Total current liabilities |
285,065 | 340,806 | ||||||
| Long-term debt, less current maturities |
1,753,148 | 1,552,346 | ||||||
| Deferred ground lease payable |
116,874 | 120,282 | ||||||
| Other liabilities |
44,302 | 42,082 | ||||||
| Total liabilities |
2,199,389 | 2,055,516 | ||||||
| Commitments and contingencies (note 8) |
||||||||
| Minority interests |
30,468 | 29,403 | ||||||
| Redeemable preferred stock |
508,040 | 508,374 | ||||||
| Stockholders’ equity: |
||||||||
| Common stock, $.01 par value; 690,000,000 shares authorized; shares issued: December 31, 2004—224,064,124 and March 31, 2005—225,517,085 |
2,241 | 2,255 | ||||||
| Additional paid-in capital |
3,386,749 | 3,412,320 | ||||||
| Accumulated other comprehensive income |
54,476 | 53,305 | ||||||
| Unearned stock compensation |
(9,892 | ) | (19,441 | ) | ||||
| Accumulated deficit |
(1,599,949 | ) | (1,738,363 | ) | ||||
| Total stockholders’ equity |
1,833,625 | 1,710,076 | ||||||
| $ | 4,571,522 | $ | 4,303,369 | |||||
See condensed notes to consolidated financial statements.
3
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)
(In thousands of dollars, except per share amounts)
| Three Months Ended March 31, |
||||||||
| 2004 |
2005 |
|||||||
| Net revenues: |
||||||||
| Site rental |
$ | 130,180 | $ | 140,926 | ||||
| Network services and other |
14,703 | 16,179 | ||||||
| 144,883 | 157,105 | |||||||
| Operating expenses: |
||||||||
| Costs of operations (exclusive of depreciation, amortization and accretion): |
||||||||
| Site rental (including non-cash compensation charges of $77 and $47 for the three months ended March 31, 2004 and 2005, respectively) |
44,602 | 47,680 | ||||||
| Network services and other (including non-cash compensation charges of $39 and $24 for the three months ended March 31, 2004 and 2005, respectively) |
11,035 | 11,468 | ||||||
| General and administrative (including non-cash compensation charges of $2,099 and $1,477 for the three months ended March 31, 2004 and 2005, respectively) |
22,266 | 22,547 | ||||||
| Corporate development |
439 | 432 | ||||||
| Restructuring (credits) charges (including non-cash compensation charges of $0 and $6,424 for the three months ended March 31, 2004 and 2005, respectively) |
(33 | ) | 8,477 | |||||
| Asset write-down charges |
1,948 | 436 | ||||||
| Depreciation, amortization and accretion |
70,743 | 72,172 | ||||||
| 151,000 | 163,212 | |||||||
| Operating loss |
(6,117 | ) | (6,107 | ) | ||||
| Other income (expense): |
||||||||
| Interest and other income (expense) |
(25,416 | ) | (83,017 | ) | ||||
| Interest expense and amortization of deferred financing costs |
(57,322 | ) | (39,269 | ) | ||||
| Loss from continuing operations before income taxes and minority interests |
(88,855 | ) | (128,393 | ) | ||||
| Provision for income taxes |
(653 | ) | (144 | ) | ||||
| Minority interests |
(131 | ) | 1,275 | |||||
| Loss from continuing operations |
(89,639 | ) | (127,262 | ) | ||||
| Income (loss) from discontinued operations, net of tax (note 1) |
13,002 | (1,499 | ) | |||||
| Net loss |
(76,637 | ) | (128,761 | ) | ||||
| Dividends on preferred stock |
(9,696 | ) | (9,653 | ) | ||||
| Net loss after deduction of dividends on preferred stock |
$ | (86,333 | ) | $ | (138,414 | ) | ||
| Net loss |
$ | (76,637 | ) | $ | (128,761 | ) | ||
| Other comprehensive income (loss): |
||||||||
| Foreign currency translation adjustments |
49,295 | (1,673 | ) | |||||
| Derivative instruments: |
||||||||
| Net change in fair value of cash flow hedging instruments |
(434 | ) | 87 | |||||
| Amounts reclassified into results of operations |
980 | 415 | ||||||
| Comprehensive loss |
$ | (26,796 | ) | $ | (129,932 | ) | ||
| Per common share—basic and diluted: |
||||||||
| Loss from continuing operations |
$ | (0.45 | ) | $ | (0.61 | ) | ||
| Income (loss) from discontinued operations |
0.06 | (0.01 | ) | |||||
| Net loss |
$ | (0.39 | ) | $ | (0.62 | ) | ||
| Common shares outstanding—basic and diluted (in thousands) |
219,294 | 223,601 | ||||||
See condensed notes to consolidated financial statements.
4
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(In thousands of dollars)
| Three Months Ended March 31, |
||||||||
| 2004 |
2005 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (76,637 | ) | $ | (128,761 | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used for) operating activities: |
||||||||
| Depreciation, amortization and accretion |
70,743 | 72,172 | ||||||
| Losses on purchases of long-term debt |
24,367 | 82,587 | ||||||
| Amortization of deferred financing costs and discounts on long-term debt |
2,960 | 1,494 | ||||||
| Non-cash compensation charges |
2,215 | 7,972 | ||||||
| Asset write-down charges |
1,948 | 436 | ||||||
| Minority interests |
131 | (1,275 | ) | |||||
| Equity in losses and write-downs of unconsolidated affiliates |
1,173 | 2,791 | ||||||
| (Income) loss from discontinued operations |
(13,002 | ) | 1,499 | |||||
| Changes in assets and liabilities: |
||||||||
| Decrease in accrued interest |
(17,833 | ) | (11,936 | ) | ||||
| Decrease in accounts payable |
(1,746 | ) | (5,398 | ) | ||||
| Decrease in deferred rental revenues, deferred ground lease payable and other liabilities |
(6,675 | ) | (8,271 | ) | ||||
| Decrease in receivables |
3,307 | 15,427 | ||||||
| Increase in inventories, prepaid expenses, deferred site rental receivable and other assets |
(2,276 | ) | (1,696 | ) | ||||
| Net cash provided by (used for) operating activities |
(11,325 | ) | 27,041 | |||||
| Cash flows from investing activities: |
||||||||
| Proceeds from disposition of property and equipment |
415 | 4 | ||||||
| Capital expenditures |
(6,601 | ) | (9,599 | ) | ||||
| Investments in affiliates and other |
(14,028 | ) | (45 | ) | ||||
| Maturities of investments |
62,650 | — | ||||||
| Purchases of investments |
(36,050 | ) | — | |||||
| Net cash provided by (used for) investing activities |
6,386 | (9,640 | ) | |||||
| Cash flows from financing activities: |
||||||||
| Proceeds from issuance of capital stock |
3,562 | 3,319 | ||||||
| Purchases of long-term debt |
(267,359 | ) | (173,695 | ) | ||||
| Payments under revolving credit agreements |
(15,000 | ) | (21,987 | ) | ||||
| Purchases of capital stock |
(4,108 | ) | (4,074 | ) | ||||
| Principal payments on long-term debt |
(2,750 | ) | — | |||||
| Incurrence of financing costs |
(412 | ) | (3,550 | ) | ||||
| Net cash used for financing activities |
(286,067 | ) | (199,987 | ) | ||||
| Effect of exchange rate changes on cash |
264 | (262 | ) | |||||
| Discontinued operations (note 1) |
31,509 | (782 | ) | |||||
| Net decrease in cash and cash equivalents |
(259,233 | ) | (183,630 | ) | ||||
| Cash and cash equivalents at beginning of period |
409,344 | 566,707 | ||||||