Crown Castle International Corp.

Transcription

1 Crown Castle International Corp. NYSE: CCI RBC Capital Markets August 9, 2006 Jay Brown, Treasurer

2 Forward-Looking Information This presentation contains forward-looking statements that are based on management s current expectations. Such statements include, but are not limited to plans, projections and estimates regarding (i) recurring cash flow (including on a per share basis), (ii) site rental revenue, (iii) site rental gross margin, (iv) capital to invest, (v) mobile penetration, (vi) wireless minutes of use, (vii) capital expenditures in wireless industry, (viii) site rental cost of operations, (ix) Adjusted EBITDA, (x) interest expense and amortization of deferred financing costs, and (xi) capital expenditures, including sustaining capital expenditures. Such forward-looking statements are subject to numerous risks, uncertainties and assumptions, including prevailing market conditions and other factors. Should one or more of these risks or uncertainties materialize, or should any 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. The Company assumes no obligation to update publicly any forwardlooking statements, whether as a result of new information, future events or otherwise. This presentation includes certain non-gaap financial measures, including recurring cash flow and Adjusted EBITDA. Tables reconciling such non-gaap financial measures are available at the end of this presentation and under the investor section of the Company s website at 2

3 Overview Section 1

4 Crown Castle International Real estate provider to the wireless industry 4

5 Business Overview Q2 06 Tower Revenue US 91% Annualized = $677 million AUS 9% Primary business is leasing tower space to wireless operators under long-term leases Recurring in nature and produces approximately 87% of revenue, 93% of gross margin and nearly 100% of cash flow 83% of recurring revenue from investment-grade rated tenants Secondary service business Non-recurring in nature, minimal cash flow 5

6 Attractive Business Fundamentals High incremental margins on new revenue Average of 93% incremental site rental gross margins over the last 4 quarters Minimal sustaining capital expenditure requirements Approximately $12 million of sustaining capital expenditures over the last 4 quarters Majority of outstanding debt rated investment grade Goal of 20% - 25% growth per year of recurring cash flow per share (1) Potential to achieve additional growth and value from complementary investments (1) Recurring cash flow per share is defined as Adjusted EBITDA less interest expense and amortization of deferred financing costs less sustaining capital expenditures divided by common shares outstanding 6

7 Solid Execution Section 2

8 Summary Q Results Over the last four quarters, recurring cash flow per share has increased 50% from $0.80 to $ % $169 $ in millions $ % $99 $ % $83 $ % $64 $44 Site Rental Revenue Site Rental Gross Margin Adjusted EBITDA Recurring Cash Flow Q2 '05 Q2 '06 8

9 Strong Demand For Our Towers Site Rental Revenue $ in millions $93M Wireless Voice carriers consistently represent 95%+ of our new US revenues $53M $59M Approximately 30% of new US tenant revenues are from amendments to existing tenant leases E (1) (1) 2006E site rental revenue based on midpoint of Outlook issued on 08/03/2006 9

10 Consistent Performance $ in millions $133 $135 $87 $90 $140 $141 $92 $93 $147 $99 $153 $102 $155 $105 $162 $112 $169 $118 Annualized gross margin (1) increase of $125 million, or $0.61 per share (2) Q2:04 Q3:04 Q4:04 Q1:05 Q2:05 Q3:05 Q4:05 Q1:06 Q2:06 11,996 Towers Site Rental Revenue Site Rental Gross Margin 12,441 Towers (1) Gross margin is defined as site rental revenues less site rental cost of operations (2) Based on million common shares outstanding as of 06/30/

11 Recurring Cash Flow Per Share $1.12 Since the focus shifted from acquisitions to operational excellence in August 2001: Site rental revenues increased 90% G&A down significantly Average interest coupon of 6% compared to 9% in Q Focus on recurring cash flow per share Long-term targeted growth rate of 20% to 25% (1) Based on Outlook issued on 08/03/2006 using million weighted average common shares outstanding for the six months ended 06/30/2006 Recurring Cash Flow per Share ($0.37) $1.12 $0.86 $0.32 ($0.11) ($0.31) * * * * E (1) (1) 11

12 High Quality of US Cash Flows 96% (1) wireless telephony US Recurring Revenue (1) 83% investment grade revenues Cingular 29% Sprint/ Nextel 17% Minimal historical churn High quality of cash flows drives lower cost of capital (1) Run-rate July 2006 site rental revenue Verizon 23% Paging, Gov't & Other 4% T-Mobile 10% Other Wireless Telephony 17% 12

13 Strong Margin Expansion Site Rental Gross Margin 69% Additional site rental revenue comes with very little additional costs 58% $217M $477M Virtually all site rental direct expenses escalate at approximately the rate of inflation Circa 43% of US towers have > 3 tenants per tower E (1) Circa 38% of US towers have site rental gross margins > 80% (1) Based on Outlook issued on 08/03/

14 Capital Allocation and Structure Section 3

15 Capital Allocation $550 million - $600 million (1) of expected capital to invest annually from recurring cash flow and 5x 7x borrowing on expected Adjusted EBITDA growth CapEx on existing sites Construction of new sites Tower acquisitions Land purchases Common stock purchases Capital Allocated to Maximize Long-Term Recurring Cash Flow per Share (1) Based on outlook for 2006 recurring cash flow of $237 million to $242 million and Adjusted EBITDA growth of $50 million annually 15

16 Invested Capital Since January 2003, approximately $2.4 billion has been Land purchases 1% FiberTower 3% Existing Sites 3% Modeo 1% Purchase of Verizon's JV Interest 12% invested, with the vast majority being invested Acquired Sites 18% in the core business New Sites 2% Stock & Convert Notes 60% 16

17 Significant Reduction in Shares Share Purchases (1) $ in millions $518 $310 Amount invested ($M) Price per share # of shares % return (2) 2002 purchases $57.7 $ % 2003 purchases $52.4 $ % 2004 purchases $48.2 $ % 2005 purchases $310.0 $ % 2006 YTD purchases $518.0 $ % Total / weighted average $986.3 $ % $58 $52 $ (1) Excludes $305.9 M spent on purchases of 4% Convertible Notes in % purchases represented 15.3 M potential shares outstanding at an average price of $19.99 per share. Excludes $204 M spent on redemption of 8 ¼% Convertible Preferred Stock, which had a conversion price of $26.875, thereby removing the potential dilution of 7.44 M shares. (2) Closing price of $33.60 on 08/07/

18 Value Creation from Share Purchases 100% $6.8 billion of market cap at August 06 $1.6 billion of value transferred to remaining shareholders + 25% of estimated Q3 06 RCF / share attributed to share purchases (3) $1.09 $ % Represents increasing share of current market capitalization from share purchases over time $0.87 $ % Jan '02 Aug '06 Q3 2006E (2) RCF/Share Without Purchases (3) Q3 2006E (2) RCF/Share (1) (1) Does not include impact of 5.2 mm shares purchased in July 2006 (2) Annualized Q3 06 Outlook (3) Share purchases from January 2002 through June

19 Debt Summary $1.9 Billion of investment grade rated Notes 60%+ rated AAA/Aaa by Fitch and Moody s $1.25 Billion senior credit facility $1.0 billion Term Loan fully drawn $250 million Revolver undrawn and available Flexibility to invest the cash flow Structure permits the leveraging of cash flow growth Annualized run-rate interest expense of approximately 5.6% 75% of debt outstanding is not exposed to LIBOR fluctuations until at least July 2011 $1.9 Billion forward starting swap, effectively locking the interest rate on the core component of the balance sheet until June 2015 at approximately 5.18% 19

20 Strong Revenue and Recurring Cash Flow Growth Potential Section 4

21 US Market Opportunities 2010 E 2005 Mobile Penetration (%) 71 M Incremental Subs 69% 83% US market offers significant growth potential: Large population Low wireless penetration Estimated annual wireless network MOUs (1) In billions (CAGR = 15%) High expected growth in wireless network MOUs 2010 E 3, ,851 * Source: Goldman Sachs research estimates (1) Numbers represent estimates of big 4 wireless carriers (VZW, Cingular, Sprint/Nextel, T-mobile) 21

22 Significant Wireless Network Spending Estimated Wireless Capital Expenditures $ in billions $28 $28 $27 $27 $27 Growth in MOUs drives the need for additional sites Decreases in equipment costs allow for more deployed sites with similar levels of capital expenditures Improved network quality reduces subscriber churn 2006E 2007E 2008E 2009E 2010E * Source: Goldman Sachs Research estimates 22

23 Superior US Tower Assets 11,056 towers in the US 68% in the Top 100 BTA s (1) Original Cellular Tower Networks Sold by Operators (2) CCI AMT SBAC GSL 75% with Verizon or Cingular as the anchor tenant NYNEX Mobile Bell Atlantic Mobile Bell South Mobility 96% of site rental revenue with wireless voice carriers Ameritech Wireless SBC Wireless Airtouch GTE Wireless 1/2 1/2 (1) Basic Trading Areas as defined by Rand McNally & Co and as used by the FCC to determine service areas for PCS wireless licenses. (2) Major US metro areas; US West and AT&T wireless towers were not sold. Total

24 CCIsites CCIsites is a web-based tool that stores all the information our towers Includes: Tenant leases Ground leases Regulatory information Normal Real Estate Information RF signal strength by carrier Demographic data Site readiness Competitive structures CCI Advantage 24

25 Potential Revenue Growth to RCF per Share The addition of 1.3 tenants per tower could equate to an estimated incremental $1.27 recurring cash flow per share Estimated Incremental RCF / share $1.27 Q2 '06 Annualized Site rental revenue / tower $54,400 Adjusted EBITDA / tower $33,400 Recurring Cash Flow / tower $20,600 Common shares / tower (1) 16, E RCF / share $1.12 Project Southpointe assumed demand (2) $23,400 Assumed incremental EBITDA margin 90.0% Incremental RCF / share $1.27 Tower count 12,441 (1) Common shares outstanding as of 06/30/2006 of million (2) Project Southpointe assumed demand for CCI towers = 1.3 tenants per tower * $18,000 annual revenue per tenant 25

26 Components of Future RCF per Share 06E RCF per share of $1.12 per share (1) + Measured Demand + + Future Demand Invested Capital 1.3 tenants / tower of measured need Estimated incremental $1.27 per share of RCF MOU growth Subscriber growth Data usage growth Wireline replacement Tower acquisitions Tower builds Stock purchases Land purchases = Future RCF per Share (1) Based on Outlook issued on 08/03/2006 using million weighted average common shares outstanding for the six months ended 06/30/

27 CCI s Compelling Business Model 1. Growth based on wireless network expansion 2. Long-term contracted revenue with contracted escalations 3. High credit quality of revenue stream 4. Long-term control of assets 5. Relatively fixed operating costs 6. Minimal required CapEx 7. Significant internally generated capital Highly efficient capital structure converts growth and investment into recurring cash flow per share 27

28 2006 Outlook $ in millions Third Quarter 2006 Full Year 2006 Site rental revenue $177 to 179 $687 to 692 Site rental cost of operations (1) $54 to 56 $212 to 215 Site rental gross margin $121 to 123 $474 to 479 Adjusted EBITDA $106 to 108 $411 to 416 Interest expense and amortization of deferred financing costs $46 to 47 $162 to 164 Sustaining capital expenditures $4 to 6 $11 to 15 Recurring cash flow $55 to 57 $237 to 242 (1) Exclusive of depreciation, amortization and accretion (1) Exclusive of depreciation, amortization and accretion 28

29 Non-GAAP Reconciliations Non-GAAP Financial Measures: This presentation 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, (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 cash flow from operations or operating results (as determined in accordance with Generally Accepted Accounting Principles (GAAP)). 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 or operating results (as determined in accordance with GAAP). Adjusted EBITDA and recurring cash flow are presented as additional information because management believes these measures are useful indicators of the financial performance of our core businesses. In addition, Adjusted EBITDA is a measure of current financial performance used in our debt covenant calculations. 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. 29

30 Non-GAAP Reconciliations Adjusted EBITDA, recurring cash flow, and recurring cash flow per share for the years ended December 31, 2001, December 31, 2002, December 31, 2003, December 31, 2004 and December 31, 2005 are computed as follows: Twelve Months Ended December 31, 2001 December 31, 2002 December 31, 2003 December 31, 2004 December 31, 2005 (in thousands, except per share amounts) (As restated) (As restated) (As restated) (As restated) Net income (loss) $ (396,607) $ (316,332) $ (451,611) $ 233,107 $ (401,537) Income (loss) from discontinued operations, net of tax 45,158 (7,340) (4,430) (534,688) (848) Minority interests (9,724) (11,770) (3,992) (398) (3,525) Credit (provision) for income taxes 465 4,407 2,465 (5,370) 3,225 Interest expense and amortization of deferred financing costs 270, , , , ,806 Interest and other income (expense) (2,489) (64,924) 131,792 78, ,443 Depreciation, amortization and accretion 262, , , , ,118 Operating stock-based compensation charges 3,488 3,488 13,986 13,088 19,947 Asset write-down charges 13,024 52,598 14,317 7,652 2,925 Cumulative effect of change in accounting principle ,031 Restructuring charges (credits) 17,577 8,665 1,291 3,729 8,477 Adjusted EBITDA $ 203,700 $ 219,113 $ 244,231 $ 287,145 $ 335,062 Less: Interest expense and amortization of deferred financing costs 270, , , , ,806 Less: Sustaining capital expenditures 12,000 12,000 8,887 9,795 13,845 Recurring cash flow $ (79,066) $ (66,729) $ (23,490) $ 70,580 $ 187,411 Weighted average common shares outstanding 214, , , , ,759 Recurring cash flow per share $ (0.37) $ (0.31) $ (0.11) $ 0.32 $

31 Non-GAAP Reconciliations Adjusted EBITDA, recurring cash flow, and recurring cash flow per share for the quarters ended December 31, 2005, December 31, 2004, June 30, 2006, June 30, 2005 and June 30, 2003 are computed as follows: Three Months Ended December 31, 2005 December 31, 2004 June 30, 2006 June 30, 2005 June 30, 2003 (in thousands, except per share amounts) (As restated) (As restated) (As restated) Net income (loss) $ (23,303) $ (87,651) $ (13,335) $ (225,751) $ (93,731) Income (loss) from discontinued operations, net of tax (2,347) (2,099) Minority interests (760) (1,168) (4) (727) (869) Credit (provision) for income taxes 2, Interest expense and amortization of deferred financing costs 30,544 40,599 37,455 35,393 63,809 Interest and other income (expense) (2,592) 37,985 2, ,635 11,271 Depreciation, amortization and accretion 69,986 72,774 69,374 70,730 69,961 Operating stock-based compensation charges 3,947 3,228 5,380 1,863 5,834 Asset write-down charges 773 3,836 1, ,380 Cumulative effect of change in accounting principle 9, Restructuring charges (credits) - 4, ,349 Adjusted EBITDA $ 90,443 $ 74,386 $ 103,838 $ 82,498 $ 58,532 Less: Interest expense and amortization of deferred financing costs 30,544 40,599 37,455 35,393 63,809 Less: Sustaining capital expenditures (4) 4,449 3,790 2,307 2,751 3,000 Recurring cash flow $ 55,450 $ 29,997 $ 64,076 $ 44,354 $ (8,277) Weighted average common shares outstanding 213, , , , ,969 Recurring cash flow per share $ 0.26 $ 0.13 $ 0.30 $ 0.20 $ (0.04) (4) Crown Castle did not disclose sustaining capital expenditures in 2003; therefore, assumes $12 million annually of sustaining capital expenditures for the three months ended June 30,

32 Non-GAAP Outlook Reconciliations Adjusted EBITDA, recurring cash flow and recurring cash flow per share for the quarter ending September 30, 2006 and the year ending December 31, 2006 are forecasted as follows: Forecast Ranges (in millions, except per share amounts) Q Full Year 2006 Net income (loss) $(29) to (12) $(90) to (43) Income (loss) from discontinued operations, net of tax -- (5) to (6) Minority interests 0 to (1) (1) to (3) Credit (provision) for income taxes 0 to 2 3 to 5 Interest expense and amortization of deferred financing costs 46 to to 164 Interest and other income (expense) 0 to 2 3 to 7 Depreciation, amortization and accretion 71 to to 305 Operating stock-based compensation charges 4 to 6 15 to 20 Asset write-down charges 0 to 2 4 to 6 Restructuring charges Adjusted EBITDA $106 to $108 $411 to 416 Less: Interest expense and amortization of deferred financing costs 46 to to 164 Less: Sustaining capital expenditures 4 to 6 11 to 15 Recurring cash flow $55 to 57 $237 to 242 Shares outstanding/weighted average common shares outstanding(1) Recurring cash flow per share $0.26 to $0.28 $1.11 to $1.13 (1) Based on million shares outstanding at June 30, 2006 for third quarter 2006 Outlook and million weighted average shares outstanding for the six months ended June 30, 2006 for the full year 2006 Outlook. 32

33 Other Calculations Sustaining capital expenditures for the years ended December 31, 2003, December 31, 2004 and December 31, 2005 is computed as follows: Twelve Months Ended (in thousands) December 31, 2003 December 31, 2004 December 31, 2005 Capital expenditures $ 27,126 $ 42,918 $ 64,678 Less: Revenue enhancing on existing sites 11,638 23,592 22,690 Less: Land purchases 218 2,528 9,777 Less: New site construction 6,383 7,003 18,366 Sustaining capital expenditures $ 8,887 $ 9,795 $ 13,845 Sustaining capital expenditures for the quarters ended Septmeber 30, 2005, December 31, 2005 and March 31, 2006 is computed as follows: Three Months Ended September 30, 2005 December 31, 2005 March 31, 2006 (in thousands) Capital expenditures $ 16,867 $ 25,879 $ 22,066 Less: Revenue enhancing on existing sites (5,495) 8,766 7,950 Less: Land purchases (2,868) 5,791 4,576 Less: New site construction (5,036) 6,873 7,623 Sustaining capital expenditures $ 3,468 $ 4,449 $ 1,917 Sustaining capital expenditures for the quarters ended December 31, 2005, December 31, 2004, June 30, 2006 and June 30, 2005 is computed as follows: Three Months Ended December 31, 2005 December 31, 2004 June 30, 2006 June 30, 2005 (in thousands) (As restated) (As restated) Capital expenditures $ 25,879 $ 14,111 $ 27,209 $ 12,333 Less: Revenue enhancing on existing sites 8,766 7,623 9,292 4,887 Less: Land purchases 5, , Less: New site construction 6,873 2,197 11,439 3,900 Sustaining capital expenditures $ 4,449 $ 3,790 $ 2,307 $ 2,751 33

34 Other Calculations Site rental gross margin (tower gross margin) for the quarters ended March 31, 2004, June 30, 2004, September 30, 2004, December 31, 2004, March 31, 2005, June 30, 2005, September 30, 2005, December 31, 2005, March 31, 2006, and June 30, 2006 is computed as follows: Three Months Ended March 31, 2004 June 30, 2004 September 30, 2004 December 31, 2004 March 31, 2005 (in thousands) (As restated) (As restated) (As restated) (As restated) (As restated) Site rental revenue $ 130,383 $ 132,724 $ 135,447 $ 139,755 $ 141,468 Less: Site rental cost of operations (2) 44,632 45,648 45,834 48,159 48,323 Site rental gross margin $ 85,751 $ 87,076 $ 89,613 $ 91,596 $ 93,145 Three Months Ended June 30, 2005 September 30, 2005 December 31, 2005 March 31, 2006 June 30, 2006 (As restated) (As restated) Site rental revenue $ 147,409 $ 152,802 $ 155,446 $ 161,897 $ 169,160 Less: Site rental cost of operations (2) 48,402 50,671 49,959 49,690 50,927 Site rental gross margin $ 99,007 $ 102,131 $ 105,487 $ 112,207 $ 118,233 Site rental gross margin (Tower gross margin) for the years ended December 31, 2001, December 31, 2002, December 31, 2003, December 31, 2004, and December 31, 2005 is computed as follows: Twelve Months Ended December 31, 2001 December 31, 2002 December 31, 2003 December 31, 2004 December 31, 2005 (In thousands of dollars) (In thousands of dollars) (In thousands of dollars) (In thousands of dollars) (In thousands of dollars) (As restated) (As restated) (As restated) (As restated) Site rental revenue $ 377,326 $ 447,271 $ 484,841 $ 538,309 $ 597,125 Less: Site rental cost of operations (2) 160, , , , ,355 Site rental gross margin $ 217,055 $ 272,004 $ 305,536 $ 354,036 $ 399,770 Site rental gross margin for the quarter ending September 30, 2006 and the year ending December 31, 2006 is forecasted as follows: (in millions) Q Full Year 2006 Site rental revenue $177 to 179 $687 to 692 Less: Site rental cost of operations (2) 54 to to 215 Site rental gross margin $121 to 123 $474 to 479 (2) Exclusive of amortization, depreciation and accretion Forecast Ranges 34

35 Other Calculations Annualized recurring cash flow per share for the quarters ended December 31, 2005, December 31, 2004, June 30, 2006 and June 30, 2005 is computed as follows: Three Months Ended Three Months Ended December 31, 2005 December 31, 2004 Change June 30, 2006 June 30, 2005 Change (As restated) (As restated) Recurring cash flow per share $ 0.26 $ 0.13 $ 0.13 $ 0.30 $ 0.20 $ 0.10 multiply by four Annualized recurring cash flow per share $ 1.04 $ 0.52 $ 0.52 $ 1.20 $ 0.80 $ 0.40 Annualized site rental gross margin change (nominal and per share amounts) from the quarter ended March 31, 2004 to December 31, 2005 is computed as follows: June 30, 2004 June 30, 2006 Change Annualized Per Share (3) (In thousands of dollars) (In thousands of dollars) (As restated) Site rental revenue $ 132,724 $ 169,160 Less: Site rental cost of operations (2) 45,648 50,927 Site rental gross margin $ 87,076 $ 118,233 $ 31,157 $ 124,628 $ 0.61 (2) Exclusive of amortization, depreciation and accretion (3) Based on common shares outstanding of million as of 6/30/2006 Three Months Ended 35

36 Other Calculations Potential revenue growth to recurring cash flow per share as of June 30, 2006 is computed as follows: Average annual revenue per tenant per tower $ 18,000 Project Southpointe estimated demand (tenant per tower) 1.3 Total estimated incremental revenue per tower $ 23,400 Assumed incremental margin 90% Incremental recurring cash flow per tower $ 21,060 Incremental recurring cash flow $ 262,007,460 Common shares 205,499,595 Incremental recurring cash flow per share $ 1.27 Tower count as of 6/30/06 12,441 Three Months Ended June 30, 2006 Annualized Per tower (In thousands of dollars) (In thousands of dollars) Site rental revenue $ 169,160 $ 676,640 $ 54,388 Adjusted EBITDA $ 103,838 $ 415,352 $ 33,386 Recurring cash flow $ 64,076 $ 256,304 $ 20,602 Common shares/tower 16,518 (1) Based on million shares outstanding at June 30, 2006 for third quarter 2006 Outlook and million weighted average shares outstanding for the six months ended June 30, 2006 for the full year 2006 Outlook. (2) Exclusive of amortization, depreciation and accretion (3) Based on common shares outstanding of million as of 6/30/2006 (4) Crown Castle did not disclose sustaining capital expenditures in 2003; therefore, assumes $12 million annually of sustaining capital expenditures for the three months ended June 30,