Crown Castle(CCI) - 2024 Q2 - Quarterly Report

PART I—FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial information, including statements, notes, and management's discussion and analysis Financial Statements This section presents the unaudited condensed consolidated financial statements for Crown Castle Inc. as of June 30, 2024, detailing financial position and performance Condensed Consolidated Financial Statements The condensed consolidated financial statements reveal a decrease in key performance metrics, including net revenues, operating income, and net income, compared to the prior year Condensed Consolidated Statement of Operations (Six Months Ended June 30) | Metric | 2024 (in millions) | 2023 (in millions) | Change | | :--- | :--- | :--- | :--- | | Net revenues | $3,267 | $3,640 | -10.2% | | Operating income | $1,023 | $1,295 | -21.0% | | Net income | $562 | $874 | -35.7% | | Diluted EPS | $1.29 | $2.01 | -35.8% | Condensed Consolidated Balance Sheet Highlights (as of June 30, 2024) | Account | June 30, 2024 (in millions) | Dec 31, 2023 (in millions) | | :--- | :--- | :--- | | Total assets | $38,246 | $38,527 | | Total liabilities | $32,594 | $32,146 | | Total equity | $5,652 | $6,381 | Condensed Consolidated Statement of Cash Flows (Six Months Ended June 30) | Cash Flow Activity | 2024 (in millions) | 2023 (in millions) | | :--- | :--- | :--- | | Net cash from operating activities | $1,367 | $1,725 | | Net cash used for investing activities | ($650) | ($806) | | Net cash used for financing activities | ($666) | ($758) | Notes to Condensed Consolidated Financial Statements The notes provide detailed explanations of the financial statements, covering business segments, revenue recognition, debt portfolio, and restructuring plans - The company's core business is providing access to its shared communications infrastructure (towers and fiber) through long-term contracts, operating in two segments: Towers and Fiber[35][44][63] - Site rental revenues in the Fiber segment for the first six months of 2024 include only $4 million from Sprint cancellation payments, compared to $154 million in the same period of 2023, with $57 million of accelerated prepaid rent amortization recognized in 2023 not recurring in 2024[48][69] - As of June 30, 2024, the company has total debt and other obligations of $23.7 billion, with a weighted-average interest rate of 3.9% and a weighted-average maturity of approximately seven years, with 89% of the debt having fixed rate coupons[75][161] - The company initiated restructuring plans in July 2023 and June 2024, incurring total restructuring charges of $56 million for the six months ended June 30, 2024, primarily for employee severance and office closures[97][121][180] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses the company's strategy, business fundamentals, and financial results, highlighting revenue and profit declines, and maintaining a strong liquidity position Results of Operations Total site rental revenues decreased by 5% and net income fell 36% year-over-year, primarily due to non-recurring Sprint cancellation payments and increased interest expense Results of Operations Highlights (Six Months Ended June 30) | Metric | 2024 (in millions) | 2023 (in millions) | % Change | | :--- | :--- | :--- | :--- | | Total Site Rental Revenues | $3,168 | $3,352 | -5% | | Towers Operating Profit | $1,650 | $1,702 | -3% | | Fiber Operating Profit | $582 | $761 | -24% | | Net Income | $562 | $874 | -36% | | Adjusted EBITDA | $2,043 | $2,292 | -11% | - The decrease in site rental revenue was primarily driven by a $150 million reduction in payments associated with Sprint Cancellations and a $57 million decline in prepaid rent amortization, which were recognized in 2023 but did not recur in 2024[147][148] - Towers services and other gross margin decreased by $41 million (52%) in the first half of 2024 due to lower carrier network activity and the discontinuation of installation services as part of the 2023 Restructuring Plan[204][121] - Interest expense increased by $46 million (11%) in the first half of 2024, driven by higher variable interest rates on the 2016 Term Loan A and increased overall indebtedness to fund capital expenditures[151] Liquidity and Capital Resources The company maintained approximately $7.3 billion in total liquidity, despite a 21% decrease in operating cash flow, and plans for debt obligations and dividends Liquidity Position as of June 30, 2024 | Component | Amount (in millions) | | :--- | :--- | | Cash and cash equivalents | $331 | | Undrawn 2016 Revolver availability | $6,960 | | Total Liquidity | ~$7,300 | - Net cash provided by operating activities decreased by $358 million (21%) year-over-year, primarily due to lower operating profit and the absence of Sprint Cancellation payments[214] Capital Expenditures (Six Months Ended June 30) | Category | 2024 (in millions) | 2023 (in millions) | | :--- | :--- | :--- | | Discretionary | $600 | $687 | | Sustaining | $49 | $33 | | Total | $649 | $720 | - Over the next 12 months, liquidity uses are expected to include $2.3 billion in debt obligations and approximately $2.7 billion in common stock dividends[186][190] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate risk, affecting its floating-rate debt, with a hypothetical 0.25% rate increase impacting annual interest expense by $6 million - As of June 30, 2024, approximately 11% ($2.6 billion) of the company's total debt is floating-rate, exposing it to interest rate fluctuations[228] - A hypothetical 0.25% (25 basis points) unfavorable change in market interest rates would increase the company's interest expense by approximately $6 million over a 12-month period[244] - The company has $700 million in Tower Revenue Notes with an anticipated repayment date in 2025, which it currently expects to refinance on or prior to that date[230] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal control over financial reporting - The CEO and CFO concluded that as of June 30, 2024, the company's disclosure controls and procedures were effective[29] - No changes occurred during the fiscal quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[233] PART II—OTHER INFORMATION This section provides additional information including legal proceedings, risk factors, and exhibits Legal Proceedings The company is involved in various claims and lawsuits in the ordinary course of business, not expected to materially affect its financial position or results - The company states that while there are various legal proceedings arising from the ordinary course of business, management believes the ultimate outcome will not have a material adverse effect[109][234] Risk Factors No material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023, were reported - No material changes to the risk factors discussed in the 2023 Form 10-K were reported[235] Other Information No other material information was reported under this item for the period - The report indicates 'None' for this item, signifying no other material information was required to be disclosed[236] Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and financial statements formatted in Inline XBRL - The exhibits filed with this report include Sarbanes-Oxley Section 302 and 906 certifications from the CEO and CFO[249]