CS&L earnings one penny better than Wall Street expectations

Communications Sales & Leasing Inc. on Thursday (May 12) reported that its third quarter earnings came in slightly above Wall Street expectations as the Little Rock-based real estate investment trust (REIT) heightened expectations on possible future acquisitions.

For the period ended March 31, CS&L reported funds from operations (FFO) of $97 million, or 65 cents per share. Quarterly revenue came in at $174.7 million. Funds from operations is a closely watched measure in the REIT industry. It takes net income and adds back items such as depreciation and amortization.

Wall Street had expected CS&L to report first quarter earnings of 64 cents per share on revenue of $174.3 million, according to a survey of analysts by Thomson Reuters.

Earlier this month, CS&L completed its $409 million acquisition of PEG Bandwidth LLC, a Lewisville, Texas-based operator of dark fiber and cell site backhaul assets for mostly rural telecom carriers and enterprises.

The deal is the first acquisition for CS&L since the Little Rock-based real estate investment trust (REIT) was spun off from Windstream Holdings Inc. just over one year ago. PEG has an extensive fiber network consisting of over 300,000 strand miles in the Northeast/Mid-Atlantic, Illinois and South Central regions of the U.S.

The purchase price for all of PEG’s outstanding equity interest includes $315 million in cash, the issuance of one million shares of the CS&L common stock, and the distribution of 87,500 shares of the telecom trust’s 3% Series A Convertible Preferred Stock.

At the end of the first quarter, CS&L also announced it had entered into a $3 million deal with its former parent company to acquire 32 wireless towers owned by Windstream as well as operating rights for 49 wireless towers previously conveyed to the trust in its spin-off from the Little Rock telecom in April of last year.

CS&L officials also said the Little Rock REIT has invested another $3 million in wireless tower assets, including the acquisition of Summit Wireless Infrastructure LLC. Summit is a wireless infrastructure provider in Mexico and was recently awarded an agreement to construct wireless towers for a major international wireless carrier. In connection with this transaction, Summit CEO Lawrence Gleason has joined CS&L as a senior vice president.

At the end of the quarter, CS&L said it had $665 million in liquidity that includes $165 million in unrestricted cash on hand. The Arkansas telecom trust also borrowed $321 million under its revolving credit facility to fund the cash portion of the purchase price and transaction costs, company officials said.

Going forward, CS&L forecasted full year earnings to range between $2.60 and $2.62 per common share, up from previous expectations of $2.56 and $2.58. The eight-month contribution from the PEG’s operating results is expected to bring in $55 million in revenues and $21 million of adjusted earnings before taxes and other items.