“In the second quarter, we generated solid results that were in line with our expectations as our business continues to perform well during this period of unprecedented uncertainty,” said Crown Castle CEO Jay Brown at yesterday afternoon’s unveiling of the company’s second quarter earnings. “We continue to anticipate a significant increase in industry activity in the second half of this year as our carrier customers invest to improve their existing networks and as 5G investments ramp.”
Highlights for the quarter included:
- Site rental revenues. Site rental revenues grew approximately 4.4 percent, or $56 million, from second quarter 2019 to second quarter 2020, inclusive of approximately $69 million in Organic Contribution to Site Rental Revenues and a $13 million decrease in straight-lined revenues. The $69 million in Organic Contribution to Site Rental Revenues represents approximately 5.6 percent growth, comprised of approximately 9.4 percent growth from new leasing activity and contracted tenant escalations, net of approximately 3.8 percent from tenant non-renewals.
- Capital Expenditures. Capital expenditures during the quarter were $414 million, made up of $24 million of sustaining capital expenditures and $390 million of discretionary capital expenditures. Discretionary capital expenditures included approximately $295 million attributable to Fiber, approximately $88 million attributable to Towers, and approximately $7 million attributable to Other.
- Common stock dividend. During the quarter, Crown Castle paid common stock dividends of approximately $500 million in the aggregate, or $1.20 per common share, an increase of approximately 7 percent on a per share basis compared to the same period a year ago.
- Financing Activity. In April, Crown Castle issued $1.25 billion in aggregate principal amount of senior unsecured notes, with a combination of 10-year and 30-year maturities, resulting in a weighted average maturity and coupon of 18 years and approximately 3.6 percent, respectively. Net proceeds from the offering were used to repay outstanding borrowings under its revolving credit facility. In June, Crown Castle issued $2.5 billion in aggregate principal amount of senior unsecured notes, with a combination of 5-year, 10-year and 30-year maturities, resulting in a weighted average maturity and coupon of 16 years and approximately 2.4 percent, respectively. In July, net proceeds from the offering were used to retire $2.4 billion of senior unsecured notes in the aggregate, resulting in a $95 million loss on the retirement of debt. After giving effect to the refinancing of the outstanding senior unsecured notes, Crown Castle had approximately $18.9 billion of total debt outstanding.
“We are excited about the significant network investments our customers are pursuing as they deploy 5G, and how well we are positioned with our comprehensive infrastructure offering across towers and fiber to meet our customers’ needs and create significant value for our shareholders,” stated Crown Castle CFO Dan Schlanger.
Brown said, “We believe our ability to offer towers, small cells and fiber solutions, which are all integral components of communications networks and are shared among multiple tenants, provides us the best opportunity to generate significant growth while delivering high returns for our shareholders. We believe that the U.S. represents the best market in the world for communications infrastructure ownership, and we are pursuing that compelling opportunity with our comprehensive offering. As we look forward, I am excited about the opportunity we see for Crown Castle to deliver long-term value to our shareholders while delivering dividend per share growth of 7 percent to 8 percent per year.”
In a nod to recent strained discussions with a top investor Elliott Associates, Brown said, “We have appreciated the thoughtful exchange of ideas during those discussions as well as the feedback they have given us. During these conversations, we heard two consistent points of investor feedback: they want more visibility into how our strategy and business are performing and they would like us to make certain improvements to our corporate governance practices. To address this feedback, we will discuss some increased disclosure around our small cell and fiber strategy during our earnings call tomorrow and, as we disclosed in a separate press release today, we are making changes to our corporate governance.”
Among those changes are the following, according to Seeking Alpha:
- A mandatory board retirement policy, under which the board will not nominate a non-employee director who’s reached 72 years of age.
- Robert E. Garrison II, Edward “Chap” Hutcheson Jr. and Robert F. McKenzie won’t be nominated for re-election at the 2021 annual meeting. And Lee Hogan and J. Landis “Lanny” Martin won’t be nominated for re-election in 2022, at which point the board will select a new independent chair.
- The Compensation Committee will review compensation to hold management accountable to the performance metrics.