Crown Castle Reports Second Quarter 2016 Results and Raises Outlook for Full Year 2016

HOUSTON, July 21, 2016 (GLOBE NEWSWIRE) -- Crown Castle International Corp. (NYSE:CCI) ("Crown Castle") today reported results for the quarter ended June 30, 2016.    

"With the backdrop of a healthy leasing environment, we were able to deliver strong operating and financial results in the second quarter and increase our Outlook for full year 2016," stated Jay Brown, Crown Castle’s Chief Executive Officer. "Our leading position in U.S. wireless infrastructure positions us to continue to benefit as wireless carriers upgrade and enhance their networks to meet increasing demand for wireless connectivity. This increasing demand, coupled with our ability to make investments with attractive returns, gives us confidence in our goal of growing dividends per share by 6% to 7% annually over the next several years."
           
RESULTS FOR THE QUARTER
In response to recent public comments and guidance by the Securities and Exchange Commission ("SEC") regarding the use of certain financial measures, Crown Castle has adjusted the presentation of its quarterly information as set forth in this press release and the supplemental materials referenced below.

The table below sets forth select financial results for the three month period ended June 30, 2016.  For further information, refer to the financial statements and non-GAAP and other calculation reconciliations included in this press release. 

HIGHLIGHTS FROM THE QUARTER

• Site rental revenues.  Site rental revenues grew approximately 9%, or $68 million, from second quarter 2015 to second quarter 2016, inclusive of approximately $49 million in Organic Contribution to Site Rental Revenues plus $34 million in contributions from acquisitions and other items, less a $15 million reduction in straight-line revenues.  The $49 million in Organic Contribution to Site Rental Revenues represents approximately 7% growth, comprised of approximately 9.5% growth from new leasing activity and contracted tenant escalations, net of approximately 2.5% from tenant non-renewals. 
• Net income (loss). Net income (loss) for second quarter 2015 includes approximately $1.0 billion in gains related to the sale of our Australian subsidiary ("CCAL").  Additionally, during second quarter 2016, Crown Castle incurred approximately $11 million in losses on retirement of long-term obligations related to refinancing activities during the quarter.
• Capital expenditures. Capital expenditures during the quarter were approximately $200 million, comprised of approximately $19 million of land purchases, approximately $19 million of sustaining capital expenditures and approximately $161 million of revenue generating capital expenditures.
• Common stock dividend.  During the quarter, Crown Castle paid common stock dividends of approximately $299 million in the aggregate, or $0.885 per common share, representing an increase of 8% from the quarterly common stock dividend paid per share in second quarter 2015.
• Financing activities.  During the quarter, Crown Castle issued $1.0 billion in aggregate principal amount of senior unsecured notes, the proceeds of which were used to refinance existing debt.
  
  

"In the second quarter, we continued our focus on maintaining a strong balance sheet, as evidenced by our achievement of investment grade credit ratings," stated Dan Schlanger, Crown Castle’s Chief Financial Officer. "Our solid credit profile, underscored by the stability and quality of our cash flows, allows us to both return capital to our shareholders through a significant and growing dividend and invest in growth projects that we believe will generate attractive long-term returns, enhance our long-term growth in dividends per share and reinforce our leadership position in U.S. wireless infrastructure."

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 SEC.

The following table sets forth Crown Castle's current Outlook for third quarter 2016 and full year 2016:  

Full Year 2016 Outlook 

The table below compares the results for full year 2015, the midpoint of the current full year 2016 Outlook and the midpoint of the previously provided full year 2016 Outlook for select metrics:

• The chart below reconciles the components of expected growth, at the midpoint, from 2015 to 2016 in site rental revenues of $205 million, including expected Organic Contribution to Site Rental Revenues of approximately $185 million.
  
  An infographic accompanying this announcement is available at http://www.globenewswire.com/NewsRoom/AttachmentNg/33125a81-4d9d-46ad-a136-4f0181ac7367 
  
  
• The expected decrease in net income from 2015 to 2016, at the midpoint, is primarily attributable to the previously referenced sale of CCAL, which generated gains of approximately $1.0 billion during 2015.
  
  
• The chart below reconciles the components of expected growth in AFFO from 2015 to 2016 of approximately $168 million at the midpoint.
  
  An infographic accompanying this announcement is available at http://www.globenewswire.com/NewsRoom/AttachmentNg/0cad4ca1-6cbe-4092-a35a-fa150d4dd787 
  
  
• Additional information regarding Crown Castle's expectations for site rental revenue growth, including tenant non-renewals, 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 Friday, July 22, 2016, at 10:30 a.m. Eastern time.  The conference call may be accessed by dialing 888-218-8170 and asking for the Crown Castle call (access code 5264915) 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 Friday, July 22, 2016, through 1:30 p.m. Eastern time on Thursday, October 20, 2016 and may be accessed by dialing 888-203-1112 and using access code 5264915.  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 provides wireless carriers with the infrastructure they need to keep people connected and businesses running. With approximately 40,000 towers and 17,000 miles of fiber supporting small cells, Crown Castle is the nation's largest provider of shared wireless infrastructure with a significant presence in the top 100 US markets.  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, 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, Organic Contribution to Site Rental Revenues, Segment Site Rental Gross Margin, Segment Network Services and Other Gross Margin and Segment Operating Profit, may not be comparable to similarly titled measures of other companies, including other companies in the tower sector or other REITs.  For periods prior to our REIT conversion, our FFO may not be comparable to FFO as defined by the National Association of Real Estate Investment Trusts as a result of the impact of income taxes.

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 excluding 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 REITs.  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 they include (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 exclude the impact of our (1) asset base (primarily depreciation, amortization and accretion) and (2) 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 the Company 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 the Company.  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.
  
  

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.

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

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-line 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, gain (loss) 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 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.

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 (1) improvements to existing wireless infrastructure and construction of new wireless infrastructure (collectively referred to as "revenue generating") and (2) purchases of land assets under towers as we seek to manage our interests in the land beneath our towers.

Sustaining capital expenditures.  We define sustaining capital expenditures as either (1) corporate related capital improvements, such as buildings, information technology equipment and office equipment or (2) capital improvements to tower sites that enable our customers' ongoing quiet enjoyment of the tower.

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 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 cost of operations.

Segment Operating Profit.  We define Segment Operating Profit as segment revenues less segment cost of operations and segment general and administrative expenses, excluding stock-based compensation expense and prepaid lease purchase price adjustments recorded in cost of operations.

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.

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

Reconciliation of Historical Adjusted EBITDA:

Reconciliation of Current Outlook for Adjusted EBITDA:

Reconciliation of Historical FFO and AFFO:

Reconciliation of Current Outlook for FFO and AFFO:

For Comparative Purposes - Reconciliation of Previous Outlook for Adjusted EBITDA:

For Comparative Purposes - Reconciliation of Previous Outlook for FFO and AFFO:

The components of changes in site rental revenues for the quarters ended June 30, 2016 and 2015 are as follows:

The components of the changes in site rental revenues for the year ending December 31, 2016 is forecasted as follows:

Components of Historical Interest Expense and Amortization of Deferred Financing Costs:

Components of Current Outlook for Interest Expense and Amortization of Deferred Financing Costs:

Debt balances and maturity dates as of June 30, 2016 are as follows:

Net Debt to Last Quarter Annualized Adjusted EBITDA is computed as follows:

Components of Capital Expenditures:

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 our Outlook and plans, projections, and estimates regarding (1) potential benefits, returns and shareholder value which may be derived from our business, assets, investments, dividends and acquisitions, including on a long-term basis, (2) our strategy and strategic position and strength of our business, (3) carrier network investments and upgrades, and the benefits which may be derived therefrom, (4) demand for wireless connectivity and the benefits which may be derived therefrom, (5) our dividends, including our dividend plans, the amount and growth of our dividends, (6) leasing activity,  (7) our investments, including in small cells, and the potential growth, returns and benefits therefrom, (8) demand for our wireless infrastructure and services, (9) our growth and long-term prospects, (10) tenant non-renewals, including the impact and timing thereof, (11) capital expenditures, including sustaining capital expenditures, (12) straight-line adjustments, (13) tower acquisitions and builds, (14) expenses, (15) site rental revenues, (16) site rental cost of operations, (17) site rental gross margin and network services gross margin, (18) cash flows, (19) net income (loss), (20) Adjusted EBITDA, (21) interest expense and amortization of deferred financing costs, (22) FFO, (23) AFFO, (24) Organic Contribution to Site Rental Revenues and Organic Contribution to Site Rental Revenue growth, (25) our common shares outstanding, including on a diluted basis, and (26) the utility of certain financial measures, including non-GAAP financial measures.  Such forward-looking statements are subject to certain risks, uncertainties and assumptions prevailing market conditions and the following:

• Our business depends on the demand for our wireless infrastructure, driven primarily by demand for wireless connectivity, and we may be adversely affected by any slowdown in such demand.  Additionally, a reduction in carrier network investment may materially and adversely affect our business (including reducing demand for new tenant additions and network services).
  
• A substantial portion of our revenues is derived from a small number of customers, and the loss, consolidation or financial instability of any of our limited number of customers may materially decrease revenues or reduce demand for our wireless infrastructure and network services.
  
• The business model for our small cell operations contains differences from our traditional site rental business, resulting in different operational risks.  If we do not successfully operate that business model or identify or manage those operational risks, such operations may produce results that are less than anticipated.
  
• Our substantial level of indebtedness could adversely affect our ability to react to changes in our business, and the terms of our debt instruments and 4.50% Mandatory Convertible Preferred Stock limit our ability to take a number of actions that our management might otherwise believe to be in our best interests.  In addition, if we fail to comply with our covenants, our debt could be accelerated. 
  
• We have a substantial amount of indebtedness.  In the event we do not repay or refinance such indebtedness, we could face substantial liquidity issues and might be required to issue equity securities or securities convertible into equity securities, or sell some of our assets to meet our debt payment obligations.
  
• Sales or issuances of a substantial number of shares of our common stock may adversely affect the market price of our common stock.
  
• As a result of competition in our industry, we may find it more difficult to achieve favorable rental rates on our new or renewing tenant leases.
  
• New technologies may reduce demand for our wireless infrastructure or negatively impact our revenues.
  
• The expansion and development of our business, including through acquisitions, increased product offerings or other strategic growth opportunities, may cause disruptions in our business, which may have an adverse effect on our business, operations or financial results.
  
• If we fail to retain rights to our wireless infrastructure, including the land interests under our towers, our business may be adversely affected.
  
• Our network services business has historically experienced significant volatility in demand, which reduces the predictability of our results.
  
• New wireless technologies may not deploy or be adopted by customers as rapidly or in the manner projected.
  
• If we fail to comply with laws and regulations which regulate our business and which may change at any time, we may be fined or even lose our right to conduct some of our business.
  
• If radio frequency emissions from wireless handsets or equipment on our wireless infrastructure are demonstrated to cause negative health effects, potential future claims could adversely affect our operations, costs or revenues.
  
• Certain provisions of our restated certificate of incorporation, amended and restated by-laws 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.
  
• We may be vulnerable to security breaches that could adversely affect our business, operations, and reputation.
  
• Future dividend payments to our stockholders will reduce the availability of our cash on hand available to fund future discretionary investments, and may result in a need to incur indebtedness or issue equity securities to fund growth opportunities.  In such event, the then current economic, credit market or equity market conditions will impact the availability or cost of such financing, which may hinder our ability to grow our per share results of operations.
  
• Remaining qualified to be taxed as a REIT involves highly technical and complex provisions of the US Internal Revenue Code.  Failure to remain qualified as a REIT would result in our inability to deduct dividends to stockholders when computing our taxable income, which would reduce our available cash.
  
• Complying with REIT requirements, including the 90% distribution requirement, may limit our flexibility or cause us to forgo otherwise attractive opportunities, including certain discretionary investments and potential financing alternatives.
  
• If we fail to pay scheduled dividends on the 4.50% Mandatory Convertible Preferred Stock, in cash, common stock or any combination of cash and common stock, we will be prohibited from paying dividends on our common stock, which may jeopardize our status as a REIT.
  
• We have limited experience operating as a REIT. Our failure to successfully operate as a REIT may adversely affect our financial condition, cash flow, the per share trading price of our common stock, or our ability to satisfy debt service obligations.
  
• REIT related ownership limitations and transfer restrictions may prevent or restrict certain transfers of our capital stock.
  
  

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 SEC.  As used in this release, the term "including," and any variation thereof, means "including without limitation."