10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One):
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x | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended March 31, 2016. |
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¨
| Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. |
Commission File Number: 001-14195
AMERICAN TOWER CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware | | 65-0723837 |
(State or other jurisdiction of Incorporation or Organization) | | (I.R.S. Employer Identification No.) |
116 Huntington Avenue
Boston, Massachusetts 02116
(Address of principal executive offices)
Telephone Number (617) 375-7500
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):
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Large accelerated filer | | x | | Accelerated filer | | ¨ |
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Non-accelerated filer | | ¨ | | Smaller reporting company | | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ¨ No x
As of April 22, 2016, there were 424,624,797 shares of common stock outstanding.
AMERICAN TOWER CORPORATION
TABLE OF CONTENTS
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDING MARCH 31, 2016
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PART I. FINANCIAL INFORMATION | | |
Item 1. | | | |
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Item 2. | | | |
Item 3. | | | |
Item 4. | | | |
PART II. OTHER INFORMATION | | |
Item 1. | | | |
Item 1A. | | | |
Item 6. | | | |
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PART I. | FINANCIAL INFORMATION |
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ITEM 1. | UNAUDITED CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data) |
| | | | | | | | |
| | March 31, 2016 | | December 31, 2015 |
ASSETS | | | | |
CURRENT ASSETS: | | | | |
Cash and cash equivalents | | $ | 336,403 |
| | $ | 320,686 |
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Restricted cash | | 140,865 |
| | 142,193 |
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Accounts receivable, net | | 217,457 |
| | 227,354 |
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Prepaid and other current assets | | 341,791 |
| | 306,235 |
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Total current assets | | 1,036,516 |
| | 996,468 |
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PROPERTY AND EQUIPMENT, net | | 9,917,985 |
| | 9,866,424 |
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GOODWILL | | 4,123,401 |
| | 4,091,805 |
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OTHER INTANGIBLE ASSETS, net | | 9,813,990 |
| | 9,837,876 |
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DEFERRED INCOME TAXES | | 216,643 |
| | 212,041 |
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DEFERRED RENT ASSET | | 1,201,841 |
| | 1,166,755 |
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NOTES RECEIVABLE AND OTHER NON-CURRENT ASSETS | | 753,939 |
| | 732,903 |
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TOTAL | | $ | 27,064,315 |
| | $ | 26,904,272 |
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LIABILITIES AND EQUITY | | | | |
CURRENT LIABILITIES: | | | | |
Accounts payable | | $ | 94,051 |
| | $ | 96,714 |
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Accrued expenses | | 437,546 |
| | 516,413 |
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Distributions payable | | 218,420 |
| | 210,027 |
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Accrued interest | | 87,899 |
| | 115,672 |
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Current portion of long-term obligations | | 137,853 |
| | 50,202 |
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Unearned revenue | | 222,387 |
| | 211,001 |
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Total current liabilities | | 1,198,156 |
| | 1,200,029 |
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LONG-TERM OBLIGATIONS | | 16,884,242 |
| | 17,068,807 |
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ASSET RETIREMENT OBLIGATIONS | | 888,040 |
| | 856,936 |
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OTHER NON-CURRENT LIABILITIES | | 1,093,662 |
| | 1,065,682 |
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Total liabilities | | 20,064,100 |
| | 20,191,454 |
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COMMITMENTS AND CONTINGENCIES | |
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EQUITY: | | | | |
Preferred stock: $.01 par value; 20,000,000 shares authorized; | | | | |
5.25%, Series A, 6,000,000 shares issued and outstanding; aggregate liquidation value of $600,000 | | 60 |
| | 60 |
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5.50%, Series B, 1,375,000 shares issued and outstanding, respectively; aggregate liquidation value of $1,375,000 | | 14 |
| | 14 |
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Common stock: $.01 par value; 1,000,000,000 shares authorized; 427,373,031 and 426,695,279 shares issued; and 424,563,005 and 423,885,253 shares outstanding, respectively | | 4,273 |
| | 4,267 |
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Additional paid-in capital | | 9,714,952 |
| | 9,690,609 |
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Distributions in excess of earnings | | (967,718 | ) | | (998,535 | ) |
Accumulated other comprehensive loss | | (1,610,592 | ) | | (1,836,996 | ) |
Treasury stock (2,810,026 shares at cost) | | (207,740 | ) | | (207,740 | ) |
Total American Tower Corporation equity | | 6,933,249 |
| | 6,651,679 |
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Noncontrolling interest | | 66,966 |
| | 61,139 |
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Total equity | | 7,000,215 |
| | 6,712,818 |
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TOTAL | | $ | 27,064,315 |
| | $ | 26,904,272 |
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See accompanying notes to unaudited consolidated and condensed consolidated financial statements.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
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| Three Months Ended March 31, |
| 2016 | | 2015 |
REVENUES: | | | |
Property | $ | 1,267,651 |
| | $ | 1,062,180 |
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Services | 21,396 |
| | 17,010 |
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Total operating revenues | 1,289,047 |
| | 1,079,190 |
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OPERATING EXPENSES: | | | |
Costs of operations (exclusive of items shown separately below): | | | |
Property (including stock-based compensation expense of $507 and $432, respectively) | 342,290 |
| | 259,257 |
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Services (including stock-based compensation expense of $151 and $139, respectively) | 9,155 |
| | 5,383 |
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Depreciation, amortization and accretion | 341,634 |
| | 263,520 |
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Selling, general, administrative and development expense (including stock-based compensation expense of $27,421 and $29,290, respectively) | 135,315 |
| | 123,290 |
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Other operating expenses | 8,800 |
| | 7,774 |
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Total operating expenses | 837,194 |
| | 659,224 |
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OPERATING INCOME | 451,853 |
| | 419,966 |
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OTHER INCOME (EXPENSE): | | | |
Interest income, TV Azteca, net of interest expense of $283 and $370, respectively | 2,716 |
| | 2,596 |
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Interest income | 3,534 |
| | 2,964 |
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Interest expense | (159,880 | ) | | (147,934 | ) |
Loss on retirement of long-term obligations | — |
| | (3,725 | ) |
Other income (expense) (including unrealized foreign currency gains (losses) of $29,362 and ($55,468), respectively) | 12,208 |
| | (54,503 | ) |
Total other expense | (141,422 | ) | | (200,602 | ) |
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | 310,431 |
| | 219,364 |
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Income tax provision | (29,124 | ) | | (23,872 | ) |
NET INCOME | 281,307 |
| | 195,492 |
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Net income attributable to noncontrolling interest | (6,148 | ) | | (2,175 | ) |
NET INCOME ATTRIBUTABLE TO AMERICAN TOWER CORPORATION STOCKHOLDERS | 275,159 |
| | 193,317 |
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Dividends on preferred stock | (26,781 | ) | | (9,819 | ) |
NET INCOME ATTRIBUTABLE TO AMERICAN TOWER CORPORATION COMMON STOCKHOLDERS | $ | 248,378 |
| | $ | 183,498 |
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NET INCOME PER COMMON SHARE AMOUNTS: | | | |
Basic net income attributable to American Tower Corporation common stockholders | $ | 0.59 |
| | $ | 0.45 |
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Diluted net income attributable to American Tower Corporation common stockholders | $ | 0.58 |
| | $ | 0.45 |
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WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | | | |
BASIC | 424,059 |
| | 405,111 |
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DILUTED | 427,888 |
| | 409,399 |
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DISTRIBUTIONS DECLARED PER COMMON SHARE | $ | 0.51 |
| | $ | 0.42 |
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See accompanying notes to unaudited consolidated and condensed consolidated financial statements.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
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| | Three Months Ended March 31, |
| | 2016 | | 2015 |
Net income | | $ | 281,307 |
| | $ | 195,492 |
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Other comprehensive income (loss): | | | | |
Changes in fair value of cash flow hedges, net of tax benefit of $0 and $51, respectively | | 74 |
| | (942 | ) |
Reclassification of unrealized (gains) losses on cash flow hedges to net income, net of tax benefit of $0 and $24, respectively | | (8 | ) | | 387 |
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Foreign currency translation adjustments, net of tax expense (benefit) of $4,188 and ($12,609), respectively | | 226,292 |
| | (432,961 | ) |
Other comprehensive income (loss) | | 226,358 |
| | (433,516 | ) |
Comprehensive income (loss) | | 507,665 |
| | (238,024 | ) |
Comprehensive (income) loss attributable to non-controlling interest | | (6,102 | ) | | 19,702 |
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Comprehensive income (loss) attributable to American Tower Corporation stockholders | | $ | 501,563 |
| | $ | (218,322 | ) |
See accompanying notes to unaudited consolidated and condensed consolidated financial statements.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) |
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| | Three Months Ended March 31, |
| | 2016 | | 2015 |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | |
Net income | | $ | 281,307 |
| | $ | 195,492 |
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Adjustments to reconcile net income to cash provided by operating activities | | | | |
Depreciation, amortization and accretion | | 341,634 |
| | 263,520 |
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Stock-based compensation expense | | 28,079 |
| | 29,861 |
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Loss on early retirement of long-term obligations | | — |
| | 3,725 |
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Other non-cash items reflected in statements of operations | | 12,451 |
| | 66,309 |
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Decrease in restricted cash | | 3,005 |
| | 28,180 |
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Increase in net deferred rent asset | | (16,171 | ) | | (25,074 | ) |
Increase in assets | | (30,535 | ) | | (2,779 | ) |
Decrease in liabilities | | (56,258 | ) | | (49,304 | ) |
Cash provided by operating activities | | 563,512 |
| | 509,930 |
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CASH FLOWS FROM INVESTING ACTIVITIES | | | | |
Payments for purchase of property and equipment and construction activities | | (154,222 | ) | | (159,184 | ) |
Payments for acquisitions, net of cash acquired | | (873 | ) | | (20,946 | ) |
Payment for Verizon transaction | | (4,655 | ) | | (5,058,019 | ) |
Proceeds from sale of short-term investments and other non-current assets | | 1,184 |
| | 72,684 |
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Payments for short-term investments | | — |
| | (82,557 | ) |
Deposits, restricted cash, investments and other | | (26,950 | ) | | (1,397 | ) |
Cash used for investing activities | | (185,516 | ) | | (5,249,419 | ) |
CASH FLOW FROM FINANCING ACTIVITIES | | | | |
Repayments of short-term borrowings, net | | (8,636 | ) | | — |
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Borrowings under credit facilities | | 31,504 |
| | 3,150,000 |
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Proceeds from issuance of senior notes, net | | 1,247,463 |
| | — |
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Proceeds from term loan | | — |
| | 500,000 |
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Repayments of notes payable, credit facilities and capital leases | | (1,388,613 | ) | | (2,490,771 | ) |
Distributions to noncontrolling interest holders, net | | (274 | ) | | (137 | ) |
Proceeds from stock options | | 14,582 |
| | 5,106 |
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Distributions paid on common stock | | (209,984 | ) | | (152,037 | ) |
Distributions paid on preferred stock | | (26,781 | ) | | (7,875 | ) |
Proceeds from the issuance of common stock, net | | — |
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| 2,440,390 |
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Proceeds from the issuance of preferred stock, net | | — |
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| 1,338,009 |
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Deferred financing costs and other financing activities | | (25,325 | ) | | (22,558 | ) |
Cash (used for) provided by financing activities | | (366,064 | ) | | 4,760,127 |
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Net effect of changes in foreign currency exchange rates on cash and cash equivalents | | 3,785 |
| | (10,730 | ) |
NET INCREASE IN CASH AND CASH EQUIVALENTS | | 15,717 |
| | 9,908 |
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CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | | 320,686 |
| | 313,492 |
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CASH AND CASH EQUIVALENTS, END OF PERIOD | | $ | 336,403 |
| | $ | 323,400 |
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CASH PAID FOR INCOME TAXES (NET OF REFUNDS OF $3,431 AND $922, RESPECTIVELY) | | $ | 19,368 |
| | $ | 14,714 |
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CASH PAID FOR INTEREST | | $ | 177,574 |
| | $ | 199,022 |
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NON-CASH INVESTING AND FINANCING ACTIVITIES: | | | | |
Decrease in accounts payable and accrued expenses for purchases of property and equipment and construction activities | | $ | 22,586 |
| | $ | 26,499 |
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Purchases of property and equipment under capital leases | | $ | 9,958 |
| | $ | 4,394 |
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See accompanying notes to unaudited consolidated and condensed consolidated financial statements.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(in thousands, except share data)
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| | Preferred Stock - Series A | | Preferred Stock - Series B | | Common Stock | | Treasury Stock | | Additional Paid-in Capital | | Accumulated Other Comprehensive Loss | | Distributions in Excess of Earnings | | Noncontrolling Interest | | Total Equity |
| | Issued Shares | | Amount | | Issued Shares | | Amount | | Issued Shares | | Amount | | Shares | | Amount | |
BALANCE, JANUARY 1, 2015 | | 6,000,000 |
| | $ | 60 |
| | — |
| | $ | — |
| | 399,508,751 |
| | $ | 3,995 |
| | (2,810,026 | ) | | $ | (207,740 | ) | | $ | 5,788,786 |
| | $ | (794,221 | ) | | $ | (837,320 | ) | | $ | 99,792 |
| | $ | 4,053,352 |
|
Stock-based compensation related activity | | — |
| | — |
| | — |
| | — |
| | 524,880 |
| | 5 |
| | — |
| | — |
| | 16,586 |
| | — |
| | — |
| | — |
| | 16,591 |
|
Issuance of common stock | | — |
| | — |
| | — |
| | — |
| | 25,850,000 |
| | 259 |
| | — |
| | — |
| | 2,440,131 |
| | — |
| | — |
| | — |
| | 2,440,390 |
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Issuance of preferred stock | | — |
| | — |
| | 1,375,000 |
| | 14 |
| | — |
| | — |
| | — |
| | — |
| | 1,337,995 |
| | — |
| | — |
| | — |
| | 1,338,009 |
|
Changes in fair value of cash flow hedges, net of tax | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (909 | ) | | — |
| | (33 | ) | | (942 | ) |
Reclassification of unrealized losses on cash flow hedges to net income, net of tax | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 372 |
| | — |
| | 15 |
| | 387 |
|
Foreign currency translation adjustment, net of tax | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (411,102 | ) | | — |
| | (21,859 | ) | | (432,961 | ) |
Distributions to noncontrolling interest | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (137 | ) | | (137 | ) |
Common stock dividends/distributions declared | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (178,542 | ) | | — |
| | (178,542 | ) |
Net income | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 193,317 |
| | 2,175 |
| | 195,492 |
|
BALANCE, MARCH 31, 2015 | | 6,000,000 |
| | $ | 60 |
| | 1,375,000 |
| | $ | 14 |
| | 425,883,631 |
| | $ | 4,259 |
| | (2,810,026 | ) | | $ | (207,740 | ) | | $ | 9,583,498 |
| | $ | (1,205,860 | ) | | $ | (822,545 | ) | | $ | 79,953 |
| | $ | 7,431,639 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
BALANCE, JANUARY 1, 2016 | | 6,000,000 |
| | $ | 60 |
| | 1,375,000 |
| | $ | 14 |
| | 426,695,279 |
| | $ | 4,267 |
| | (2,810,026 | ) | | $ | (207,740 | ) | | $ | 9,690,609 |
| | $ | (1,836,996 | ) | | $ | (998,535 | ) | | $ | 61,139 |
| | $ | 6,712,818 |
|
Stock-based compensation related activity | | — |
| | — |
| | — |
| | — |
| | 677,752 |
| | 6 |
| | — |
| | — |
| | 24,343 |
| | — |
| | — |
| | — |
| | 24,349 |
|
Changes in fair value of cash flow hedges, net of tax | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 74 |
| | — |
| | — |
| | 74 |
|
Reclassification of unrealized gains on cash flow hedges to net income | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (8 | ) | | — |
| | — |
| | (8 | ) |
Foreign currency translation adjustment, net of tax | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 226,338 |
| | — |
| | (46 | ) | | 226,292 |
|
Distributions to noncontrolling interest | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (275 | ) | | (275 | ) |
Common stock dividends/distributions declared | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (217,561 | ) | | — |
| | (217,561 | ) |
Preferred stock dividends declared | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (26,781 | ) | | — |
| | (26,781 | ) |
Net income | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 275,159 |
| | 6,148 |
| | 281,307 |
|
BALANCE, MARCH 31, 2016 | | 6,000,000 |
| | $ | 60 |
| | 1,375,000 |
| | $ | 14 |
| | 427,373,031 |
| | $ | 4,273 |
| | (2,810,026 | ) | | $ | (207,740 | ) | | $ | 9,714,952 |
| | $ | (1,610,592 | ) | | $ | (967,718 | ) | | $ | 66,966 |
| | $ | 7,000,215 |
|
See accompanying notes to unaudited consolidated and condensed consolidated financial statements.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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1. | DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES |
American Tower Corporation (together with its subsidiaries, “ATC” or the “Company”) is one of the largest global real estate investment trusts and a leading independent owner, operator and developer of multitenant communications real estate. The Company’s primary business is the leasing of space on communications sites to wireless service providers, radio and television broadcast companies, wireless data providers, government agencies and municipalities and tenants in a number of other industries, which the Company refers to as its property operations. Additionally, the Company offers tower-related services, referred to as its services operations, in the United States, including site acquisition, zoning and permitting and structural analysis, which primarily support its site leasing business, including the addition of new tenants and equipment on its sites.
The Company’s portfolio primarily consists of towers it owns and towers it operates pursuant to long-term lease arrangements, as well as distributed antenna system (“DAS”) networks, which provide seamless coverage solutions for in-building and outdoor wireless environments. In addition to the communications sites in its portfolio, the Company manages rooftop and tower sites for property owners under various contractual arrangements. The Company also holds property interests that it leases to communications service providers and third-party tower operators.
ATC is a holding company that conducts its operations through its directly and indirectly owned subsidiaries and its joint ventures. ATC’s principal domestic operating subsidiaries are American Towers LLC and SpectraSite Communications, LLC. ATC conducts its international operations primarily through its subsidiary, American Tower International, Inc., which in turn conducts operations through its various international holding and operating subsidiaries and joint ventures.
The Company operates as a real estate investment trust for U.S. federal income tax purposes (“REIT”). Accordingly, the Company generally is not subject to U.S. federal income taxes on income generated by its U.S. REIT operations, including the income derived from leasing space on its towers, as the Company receives a dividends paid deduction for distributions to stockholders that generally offsets its income and gains. However, the Company remains obligated to pay U.S. federal income taxes on earnings from its domestic taxable REIT subsidiaries (“TRSs”). In addition, the Company’s international assets and operations, regardless of their designation for U.S. tax purposes, continue to be subject to taxation in the foreign jurisdictions where those assets are held or those operations are conducted.
The use of TRSs enables the Company to continue to engage in certain businesses while complying with REIT qualification requirements. The Company may, from time to time, change the election of previously designated TRSs to be included as part of the REIT. As of March 31, 2016, the Company’s U.S. REIT-qualified businesses included its U.S. tower leasing business, most of its operations in Costa Rica, Germany and Mexico and a majority of its services segment and indoor DAS networks business.
The accompanying consolidated and condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. The financial information included herein is unaudited; however, the Company believes that all adjustments considered necessary for a fair presentation of its financial position and results of operations for such periods have been included herein. The consolidated and condensed consolidated financial statements and related notes should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 (the “2015 Form 10-K”). The results of operations for the three months ended March 31, 2016 are not necessarily indicative of the results that may be expected for the entire year.
Principles of Consolidation and Basis of Presentation—The accompanying consolidated and condensed consolidated financial statements include the accounts of the Company and those entities in which it has a controlling interest. Investments in entities that the Company does not control are accounted for using the equity or cost method, depending upon the Company’s ability to exercise significant influence over operating and financial policies. All intercompany accounts and transactions have been eliminated.
Significant Accounting Policies—The Company’s significant accounting policies are described in note 1 to the Company’s consolidated financial statements included in the 2015 Form 10-K. There have been no material changes to the Company’s significant accounting policies during the first three months of 2016.
Accounting Standards Updates—In May 2014, the Financial Accounting Standards Board (the “FASB”) issued new revenue recognition guidance, which requires an entity to recognize revenue in an amount that reflects the consideration to which the entity expects to be entitled in exchange for the transfer of promised goods or services to customers. The standard will replace most existing revenue recognition guidance and will become effective for the Company on January 1, 2018. Early adoption is
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
permitted for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2016. The standard permits the use of either the retrospective or cumulative effect transition method. Leases are not included in the scope of this standard. The Company is evaluating the impact this standard will have on its financial statements.
In January 2016, the FASB issued new guidance on the recognition and measurement of financial assets and financial liabilities. The guidance amends certain aspects of recognition, measurement, presentation and disclosure of financial instruments. This standard is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017. The Company does not expect the adoption of this guidance to have a material effect on the Company’s financial statements.
In February 2016, the FASB issued new guidance on the accounting for leases. The guidance amends the existing accounting standards for lease accounting, including the requirement that lessees recognize assets and liabilities for leases with terms greater than twelve months in the statement of financial position. Under the new guidance, lessor accounting is largely unchanged. This guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018. The Company is evaluating the impact this standard will have on its financial statements.
In March 2016, the FASB issued new guidance on the accounting for share-based payment transactions. The guidance amends the accounting for taxes related to stock-based compensation, including how excess tax benefits and a company’s payments for tax withholdings should be classified. This guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2016. The Company does not expect the adoption of this guidance to have a material effect on its financial statements.
2. PREPAID AND OTHER CURRENT ASSETS
Prepaid and other current assets consisted of the following (in thousands):
|
| | | | | | | |
| As of |
| March 31, 2016 | | December 31, 2015 |
Prepaid operating ground leases | $ | 124,450 |
| | $ | 128,542 |
|
Prepaid assets | 48,553 |
| | 32,892 |
|
Prepaid income tax | 44,133 |
| | 45,056 |
|
Unbilled receivables | 33,562 |
| | 34,173 |
|
Value added tax and other consumption tax receivables | 24,294 |
| | 30,239 |
|
Other miscellaneous current assets | 66,799 |
| | 35,333 |
|
Total | $ | 341,791 |
| | $ | 306,235 |
|
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3. GOODWILL AND OTHER INTANGIBLE ASSETS
The Company had no material changes in the carrying value of goodwill during the three months ended March 31, 2016. The effect of foreign currency translation on goodwill for the non-U.S. segments was $31.6 million.
The Company’s other intangible assets subject to amortization consisted of the following (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | As of March 31, 2016 | | As of December 31, 2015 |
| Estimated Useful Lives | | Gross Carrying Value | | Accumulated Amortization | | Net Book Value | | Gross Carrying Value | | Accumulated Amortization | | Net Book Value |
| (years) | | (in thousands) |
Acquired network location intangibles (1) | Up to 20 |
| | $ | 4,019,860 |
| | $ | (1,109,770 | ) | | $ | 2,910,090 |
| | $ | 3,980,281 |
| | $ | (1,052,393 | ) | | $ | 2,927,888 |
|
Acquired customer-related intangibles | 15-20 |
| | 8,747,912 |
| | (1,879,003 | ) | | 6,868,909 |
| | 8,640,554 |
| | (1,763,853 | ) | | 6,876,701 |
|
Acquired licenses and other intangibles | 3-20 |
| | 26,213 |
| | (1,707 | ) | | 24,506 |
| | 28,293 |
| | (5,486 | ) | | 22,807 |
|
Economic Rights, TV Azteca | 70 |
| | 21,799 |
| | (11,314 | ) | | 10,485 |
| | 21,688 |
| | (11,208 | ) | | 10,480 |
|
Total other intangible assets | | | $ | 12,815,784 |
| | $ | (3,001,794 | ) | | $ | 9,813,990 |
| | $ | 12,670,816 |
| | $ | (2,832,940 | ) | | $ | 9,837,876 |
|
_______________
| |
(1) | Acquired network location intangibles are amortized over the shorter of the term of the corresponding ground lease taking into consideration lease renewal options and residual value or up to 20 years, as the Company considers these intangibles to be directly related to the tower assets. |
The acquired network location intangibles represent the value to the Company of the incremental revenue growth that could potentially be obtained from leasing the excess capacity on acquired communications sites. The acquired customer-related intangibles typically represent the value to the Company of customer contracts and relationships in place at the time of an acquisition or similar transaction, including assumptions regarding estimated renewals.
The Company amortizes its acquired network location intangibles and customer-related intangibles on a straight-line basis over their estimated useful lives. As of March 31, 2016, the remaining weighted average amortization period of the Company’s intangible assets, excluding the TV Azteca Economic Rights detailed in note 5 to the Company’s consolidated financial statements included in the 2015 Form 10-K, was 16 years. Amortization of intangible assets for the three months ended March 31, 2016 and 2015 was $151.8 million and $110.5 million, respectively. Based on current exchange rates, the Company expects to record amortization expense as follows over the remaining current year and the five subsequent years (in millions):
|
| | | |
Fiscal Year | |
Remainder of 2016 | $ | 451.4 |
|
2017 | 603.8 |
|
2018 | 602.8 |
|
2019 | 600.4 |
|
2020 | 583.3 |
|
2021 | 574.4 |
|
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4. ACCRUED EXPENSES
Accrued expenses consisted of the following (in thousands):
|
| | | | | | | |
| As of |
| March 31, 2016 | | December 31, 2015 |
Accrued property and real estate taxes | $ | 81,799 |
| | $ | 75,827 |
|
Accrued rent | 42,229 |
| | 54,732 |
|
Payroll and related withholdings | 39,965 |
| | 62,334 |
|
Accrued construction costs | 14,120 |
| | 19,857 |
|
Other accrued expenses | 259,433 |
| | 303,663 |
|
Total | $ | 437,546 |
| | $ | 516,413 |
|
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5. LONG-TERM OBLIGATIONS
Outstanding amounts under the Company’s long-term obligations, reflecting discounts, premiums and debt issuance costs, consisted of the following (in thousands):
|
| | | | | | | | | |
| As of | | |
| March 31, 2016 | | December 31, 2015 | | Maturity Date |
Series 2013-1A securities (1) | $ | 497,769 |
| | $ | 497,478 |
| | March 15, 2018 |
Series 2013-2A securities (2) | 1,289,083 |
| | 1,288,689 |
| | March 15, 2023 |
Series 2015-1 notes (3) | 346,474 |
| | 346,262 |
| | June 15, 2020 |
Series 2015-2 notes (4) | 518,941 |
| | 518,776 |
| | June 16, 2025 |
2012 GTP notes (5) | 279,555 |
| | 281,902 |
| | Various |
Unison notes (6) | 201,492 |
| | 201,930 |
| | Various |
Shareholder loans (7) | 145,081 |
| | 145,540 |
| | Various |
BR Towers debentures (8) | 94,886 |
| | 85,219 |
| | October 15, 2023 |
Colombian credit facility (9) | 60,531 |
| | 59,640 |
| | April 24, 2021 |
South African facility (10) | 52,874 |
| | 53,175 |
| | December 17, 2020 |
Brazil credit facility (11) | 24,021 |
| | 21,868 |
| | January 15, 2022 |
Indian working capital facility (12) | — |
| | 8,752 |
| | N/A |
Total American Tower subsidiary debt | 3,510,707 |
| | 3,509,231 |
| | |
| | | | | |
2013 Credit Facility | 31,865 |
| | 1,225,000 |
| | June 28, 2019 |
Term Loan | 1,993,915 |
| | 1,993,601 |
| | January 29, 2021 |
2014 Credit Facility | 1,830,000 |
| | 1,980,000 |
| | January 29, 2021 |
4.500% senior notes | 997,974 |
| | 997,693 |
| | January 15, 2018 |
3.40% senior notes | 999,804 |
| | 999,769 |
| | February 15, 2019 |
7.25% senior notes | 296,502 |
| | 296,242 |
| | May 15, 2019 |
2.800% senior notes | 743,916 |
| | 743,557 |
| | June 1, 2020 |
5.050% senior notes | 697,381 |
| | 697,216 |
| | September 1, 2020 |
3.300% senior notes | 743,900 |
| | — |
| | February 15, 2021 |
3.450% senior notes | 643,024 |
| | 642,786 |
| | September 15, 2021 |
5.900% senior notes | 497,307 |
| | 497,188 |
| | November 1, 2021 |
4.70% senior notes | 695,545 |
| | 695,374 |
| | March 15, 2022 |
3.50% senior notes | 988,365 |
| | 987,966 |
| | January 31, 2023 |
5.00% senior notes | 1,003,403 |
| | 1,003,453 |
| | February 15, 2024 |
4.000% senior notes | 739,322 |
| | 739,057 |
| | June 1, 2025 |
4.400% senior notes | 494,911 |
| | — |
| | February 15, 2026 |
Total American Tower Corporation debt | 13,397,134 |
| | 13,498,902 |
| | |
Other debt, including capital lease obligations | 114,254 |
| | 110,876 |
| | |
Total | 17,022,095 |
| | 17,119,009 |
| | |
Less current portion of long-term obligations | (137,853 | ) | | (50,202 | ) | | |
Long-term obligations | $ | 16,884,242 |
| | $ | 17,068,807 |
| | |
_______________
(1) Maturity date represents anticipated repayment date; final legal maturity is March 15, 2043.
(2) Maturity date represents anticipated repayment date; final legal maturity is March 15, 2048.
(3) Maturity date represents anticipated repayment date; final legal maturity is June 15, 2045.
(4) Maturity date represents anticipated repayment date; final legal maturity is June 15, 2050.
| |
(5) | Secured debt assumed by the Company in connection with the acquisition of MIP Tower Holdings LLC (“MIPT”). Anticipated repayment dates begin March 15, 2017. |
| |
(6) | Secured debt assumed by the Company in connection with the acquisition of certain legal entities from Unison Holdings LLC and Unison Site Management II, L.L.C. Anticipated repayment dates begin April 15, 2017; final legal maturity date is April 15, 2040. |
| |
(7) | Reflects balances owed to the Company’s joint venture partners in Ghana and Uganda. The Ghana loan is denominated in Ghanaian Cedi and the Uganda loan is denominated in U.S. Dollars. |
| |
(8) | Publicly issued debentures assumed by the Company in connection with the acquisition of BR Towers S.A. Denominated in Brazilian Reais (“BRL”). |
(9) Denominated in Colombian Pesos.
| |
(10) | Denominated in South African Rand. |
(11) Denominated in BRL.
(12) Denominated in Indian Rupee (“INR”).
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Current portion of long-term obligations—The Company’s current portion of long-term obligations primarily includes $97.7 million outstanding under the Secured Tower Cellular Site Revenue Notes, Series 2012-1A and Series 2012-2A (included in the 2012 GTP notes) assumed in connection with the acquisition of MIPT.
3.300% Senior Notes and 4.400% Senior Notes Offering—On January 12, 2016, the Company completed a registered public offering of $750.0 million aggregate principal amount of 3.300% senior unsecured notes due 2021 (the “3.300% Notes”) and $500.0 million aggregate principal amount of 4.400% senior unsecured notes due 2026 (the “4.400% Notes”). The net proceeds from this offering were approximately $1,237.2 million, after deducting commissions and estimated expenses. The Company used the proceeds to repay existing indebtedness under its multicurrency senior unsecured revolving credit facility entered into in June 2013, as amended (the “2013 Credit Facility”) and for general corporate purposes.
The 3.300% Notes will mature on February 15, 2021 and bear interest at a rate of 3.300% per annum. The 4.400% Notes will mature on February 15, 2026 and bear interest at a rate of 4.400% per annum. Accrued and unpaid interest on the notes will be payable in U.S. Dollars semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2016. Interest on the notes is computed on the basis of a 360-day year comprised of twelve 30-day months and commenced accruing on January 12, 2016.
The Company may redeem each series of the notes at any time, in whole or in part, at a redemption price equal to 100% of the principal amount of the notes plus a make-whole premium, together with accrued interest to the redemption date. If the Company redeems the 3.300% Notes on or after January 15, 2021 or the 4.400% Notes on or after November 15, 2025, it will not be required to pay a make-whole premium. In addition, if the Company undergoes a change of control and corresponding ratings decline, each as defined in the supplemental indenture, it may be required to repurchase all of the notes at a purchase price equal to 101% of the principal amount of the notes, plus accrued and unpaid interest (including additional interest, if any), up to but not including the repurchase date. The notes rank equally with all of the Company’s other senior unsecured debt and are structurally subordinated to all existing and future indebtedness and other obligations of its subsidiaries.
The supplemental indenture contains certain covenants that restrict the Company’s ability to merge, consolidate or sell assets and its (together with its subsidiaries’) ability to incur liens. These covenants are subject to a number of exceptions, including that the Company, and its subsidiaries, may incur certain liens on assets, mortgages or other liens securing indebtedness, if the aggregate amount of such liens does not exceed 3.5x Adjusted EBITDA, as defined in the supplemental indenture.
Bank Facilities
2013 Credit Facility—During the three months ended March 31, 2016, the Company repaid an aggregate of $1.2 billion of revolving indebtedness under the 2013 Credit Facility. On March 30, 2016, one of the Company’s German subsidiaries borrowed EUR 28.0 million ($31.5 million on the date of borrowing) under the 2013 Credit Facility as a subsidiary borrower, the proceeds of which were used to partially fund an acquisition in Germany subsequent to the end of the period.
2014 Credit Facility—During the three months ended March 31, 2016, the Company repaid an aggregate of $150.0 million of revolving indebtedness under its senior unsecured revolving credit facility entered into in January 2012 and amended and restated in September 2014, as amended (the “2014 Credit Facility”).
As of March 31, 2016, the key terms under the 2013 Credit Facility, the 2014 Credit Facility and the Company’s unsecured term loan entered into in October 2013, as amended (the “Term Loan”) are as follows:
|
| | | | | | | | | | | | | | | |
| Outstanding Principal Balance (in millions) | | Undrawn letters of credit (in millions) | | Maturity Date | | Current margin over LIBOR (1) | | Current commitment fee (2) |
2013 Credit Facility | $ | 31.9 |
| | $ | 3.2 |
| | June 28, 2019 (3) | | 1.250 | % | | 0.150 | % |
2014 Credit Facility | $ | 1,830.0 |
| | $ | 7.4 |
| | January 29, 2021 (3) | | 1.250 | % | | 0.150 | % |
Term Loan | $ | 2,000.0 |
| | N/A |
| | January 29, 2021 | | 1.250 | % | | N/A |
|
_______________
(1) LIBOR means the London Interbank Offered Rate.
(2) Fee on undrawn portion of the credit facility.
(3) Subject to two optional renewal periods.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6. FAIR VALUE MEASUREMENTS
The Company determines the fair value of its financial instruments based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Below are the three levels of inputs that may be used to measure fair value:
|
| | |
| Level 1 | Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. |
| | |
| Level 2 | Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
| | |
| Level 3 | Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
Items Measured at Fair Value on a Recurring Basis—The fair value of the Company’s financial assets and liabilities that are required to be measured on a recurring basis at fair value was as follows (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2016 | | December 31, 2015 |
| | Fair Value Measurements Using | | Assets/Liabilities at Fair Value | | Fair Value Measurements Using | | Assets/Liabilities at Fair Value |
| | Level 2 | | Level 3 | | | Level 2 | | Level 3 | |
Assets: | | | | | | | | | | | | |
Interest rate swap agreements | | $ | 790 |
| | — |
| | $ | 790 |
| | $ | 692 |
| | — |
| | $ | 692 |
|
Embedded derivative in lease agreement | | — |
| | $ | 13,955 |
| | $ | 13,955 |
| | — |
| | $ | 14,176 |
| | $ | 14,176 |
|
Liabilities: | | | | | | | | | | | | |
Acquisition-related contingent consideration | | — |
| | $ | 11,816 |
| | $ | 11,816 |
| | — |
| | $ | 12,436 |
| | $ | 12,436 |
|
During the three months ended March 31, 2016, the Company has not made any changes to the methods used to measure the fair value of its interest rate swap agreements, the embedded derivative in one of its lease agreements and acquisition-related contingent consideration. The changes in fair value during the three months ended March 31, 2016 and 2015 were not material to the consolidated financial statements. As of March 31, 2016, the Company estimated that the value of all potential acquisition-related contingent consideration required payments to be between zero and $25.7 million.
Items Measured at Fair Value on a Nonrecurring Basis
Assets Held and Used—The Company’s long-lived assets are recorded at amortized cost and, if impaired, are adjusted to fair value using Level 3 inputs. During the three months ended March 31, 2016 and 2015, the Company did not record any asset impairment charges.
There were no other items measured at fair value on a nonrecurring basis during the three months ended March 31, 2016.
Fair Value of Financial Instruments—The Company’s financial instruments for which the carrying value reasonably approximates fair value at March 31, 2016 and December 31, 2015 include cash and cash equivalents, restricted cash, accounts receivable and accounts payable. The Company’s estimates of fair value of its long-term obligations, including the current portion, are based primarily upon reported market values. For long-term debt not actively traded, fair value is estimated using either indicative price quotes or a discounted cash flow analysis using rates for debt with similar terms and maturities. As of March 31, 2016 and December 31, 2015, the carrying value of long-term obligations, including the current portion, was $17.0 billion and $17.1 billion, respectively. As of March 31, 2016, the fair value of long-term obligations, including the current portion, was $17.6 billion, of which $10.1 billion was measured using Level 1 inputs and $7.5 billion was measured using Level 2 inputs. As of December 31, 2015, the fair value of long-term obligations, including the current portion, was $17.4 billion, of which $8.7 billion was measured using Level 1 inputs and $8.7 billion was measured using Level 2 inputs.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
7. INCOME TAXES
The Company provides for income taxes at the end of each interim period based on the estimated effective tax rate for the full fiscal year. Cumulative adjustments to the Company’s estimate are recorded in the interim period in which a change in the estimated annual effective tax rate is determined. As a REIT, the Company continues to be subject to income taxes on the income of its TRSs and income taxes in foreign jurisdictions where it conducts international operations. Under the provisions of the Internal Revenue Code of 1986, as amended, the Company may deduct amounts distributed to stockholders against the income generated by its REIT operations. In addition, the Company is able to offset certain income by utilizing its net operating losses, subject to specified limitations.
The Company provides valuation allowances if, based on the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets.
As of March 31, 2016 and December 31, 2015, the total unrecognized tax benefits that would impact the effective tax rate, if recognized, were approximately $35.5 million and $28.1 million, respectively. The amount of unrecognized tax benefits during the three months ended March 31, 2016 includes additions to the Company’s existing tax positions of $6.5 million and foreign currency fluctuations of $0.9 million. The Company expects the unrecognized tax benefits to change over the next 12 months if certain tax matters ultimately settle with the applicable taxing jurisdiction during this time frame, as described in note 12 to the Company’s consolidated financial statements included in the 2015 Form 10-K. The impact of the amount of these changes to previously recorded uncertain tax positions could range from zero to $14.5 million.
The Company recorded penalties and income tax-related interest expense during the three months ended March 31, 2016 and 2015 of $3.2 million and $0.9 million, respectively. As of March 31, 2016 and December 31, 2015, the total amount of accrued income tax related interest and penalties included in the consolidated balance sheets was $23.8 million and $20.2 million, respectively.
8. STOCK-BASED COMPENSATION
Summary of Stock-Based Compensation Plans—The Company maintains equity incentive plans that provide for the grant of stock-based awards to its directors, officers and employees. The 2007 Equity Incentive Plan (the “2007 Plan”) provides for the grant of non-qualified and incentive stock options, as well as restricted stock units, restricted stock and other stock-based awards. Exercise prices in the case of non-qualified and incentive stock options are not less than the fair value of the underlying common stock on the date of grant. Equity awards typically vest ratably, generally over four years for time-based restricted stock units (“RSUs”) and stock options and three years for performance-based restricted stock units (“PSUs”). Stock options generally expire ten years from the date of grant. As of March 31, 2016, the Company had the ability to grant stock-based awards with respect to an aggregate of 9.4 million shares of common stock under the 2007 Plan.
The Company recognized stock-based compensation expense of $28.1 million and $29.9 million during the three months ended March 31, 2016 and 2015, respectively. The Company capitalized stock-based compensation expense of $0.7 million and $0.5 million during the three months ended March 31, 2016 and 2015, respectively, as property and equipment.
Stock Options—The fair value of each option granted during the three months ended March 31, 2016 was estimated on the date of grant using the Black-Scholes option pricing model based on the assumptions noted in the table below. The expected life of stock options (estimated period of time outstanding) was estimated using the vesting term and historical exercise behavior of the Company’s employees. The risk-free interest rate was based on the U.S. Treasury yield with a term that approximated the estimated life in effect at the accounting measurement date. The expected volatility of the underlying stock price was based on historical volatility for a period equal to the expected life of the stock options. The expected annual dividend yield was the Company’s best estimate of expected future dividend yield.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Key assumptions used to apply this pricing model were as follows:
|
| | |
Range of risk-free interest rate | | 1.45% - 1.73% |
Weighted average risk-free interest rate | | 1.45% |
Range of expected life of stock options | | 4.5 - 5.2 years |
Range of expected volatility of the underlying stock price | | 20.64% - 21.45% |
Weighted average expected volatility of underlying stock price | | 21.45% |
Range of expected annual dividend yield | | 1.85% - 2.40% |
The weighted average grant date fair value per share during the three months ended March 31, 2016 was $14.56. As of March 31, 2016, total unrecognized compensation expense related to unvested stock options was $39.8 million and is expected to be recognized over a weighted average period of approximately three years.
The Company’s option activity for the three months ended March 31, 2016 was as follows:
|
| | | |
| | Number of Options |
Outstanding as of January 1, 2016 | | 7,680,819 |
|
Granted | | 1,132,596 |
|
Exercised | | (262,877 | ) |
Expired | | (500 | ) |
Outstanding as of March 31, 2016 | | 8,550,038 |
|
Restricted Stock Units—As of March 31, 2016, total unrecognized compensation expense related to unvested RSUs granted under the 2007 Plan was $120.7 million and is expected to be recognized over a weighted average period of approximately three years.
Performance-Based Restricted Stock Units—During the three months ended March 31, 2016, the Compensation Committee granted an aggregate of 169,340 PSUs to its executive officers and established the performance metrics for this award (the “2016 PSUs”). During the three months ended March 31, 2015, the Compensation Committee granted an aggregate of 70,135 PSUs to its executive officers and established the performance metric for this award (the “2015 PSUs”). Threshold, target and maximum parameters were established for the metrics for a three-year performance period with respect to the 2016 PSUs and for each year in the three-year performance period with respect to the 2015 PSUs and will be used to calculate the number of shares that will be issuable when the award vests, which may range from zero to 200% of the target amount. At the end of the three-year performance period, the number of shares that vest will depend on the degree of achievement against the pre-established performance goals. PSUs will be paid out in common stock at the end of the performance period, subject generally to the executive’s continued employment. PSUs will accrue dividend equivalents prior to vesting, which will be paid out only in respect of shares actually vested.
The performance metric related to the 2015 PSUs is tied to year-over-year growth, and actual results for the metric cannot be determined until the end of each respective fiscal year. As a result, as of March 31, 2016, the Company was unable to determine the annual target for the third year of the performance period for this award. Accordingly, an aggregate of 23,377 PSUs were not included in the table below.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Restricted Stock Units and Performance-Based Restricted Stock Units—The Company’s RSU and PSU activity for the three months ended March 31, 2016 was as follows:
|
| | | | | |
| RSUs | | PSUs |
Outstanding as of January 1, 2016 (1) | 1,656,993 |
| | 33,377 |
|
Granted (2) | 765,607 |
| | 192,719 |
|
Vested | (623,111 | ) | | — |
|
Forfeited | (21,573 | ) | | — |
|
Outstanding as of March 31, 2016 | 1,777,916 |
| | 226,096 |
|
_______________
| |
(1) | PSUs represent the shares issuable for the 2015 PSUs at the end of the three-year performance cycle based on exceeding the performance metric for the first year’s performance period. |
| |
(2) | PSUs represent the target number of shares issuable at the end of the three-year performance cycle attributable to the second year’s performance period for the 2015 PSUs and the target number of shares issuable at the end of the three-year performance cycle for the 2016 PSUs. |
During the three months ended March 31, 2016, the Company recorded $0.8 million in stock-based compensation expense for equity awards in which the performance goals have been established and were probable of being achieved. The remaining unrecognized compensation expense related to these awards at March 31, 2016 was $18.9 million based on the Company’s current assessment of the probability of achieving the performance goals. The weighted-average period over which the cost will be recognized is approximately two years.
9. EQUITY
Series A Preferred Stock—The Company has 6,000,000 shares of its 5.25% Mandatory Convertible Preferred Stock, Series A, par value $0.01 per share (the “Series A Preferred Stock”) outstanding, which were issued in May 2014.
Unless converted or redeemed earlier, each share of the Series A Preferred Stock will automatically convert on May 15, 2017, into between 0.9174 and 1.1468 shares of the Company’s common stock, depending on the applicable market value of the Company’s common stock and subject to anti-dilution adjustments. Subject to certain restrictions, at any time prior to May 15, 2017, holders of the Series A Preferred Stock may elect to convert all or a portion of their shares into common stock at the minimum conversion rate then in effect.
Dividends on shares of the Series A Preferred Stock are payable on a cumulative basis when, as and if declared by the Company’s Board of Directors at an annual rate of 5.25% on the liquidation preference of $100.00 per share, on February 15, May 15, August 15 and November 15 of each year, commencing on August 15, 2014 to, and including, May 15, 2017.
Series B Preferred Stock—The Company has 13,750,000 depositary shares, each representing a 1/10th interest in a share of its 5.50% Mandatory Convertible Preferred Stock, Series B, par value $0.01 per share (the “Series B Preferred Stock” and, together with the Series A Preferred Stock, the “Mandatory Convertible Preferred Stock”) outstanding, which were issued in March 2015.
Unless converted or redeemed earlier, each share of the Series B Preferred Stock will automatically convert on February 15, 2018, into between 8.5911 and 10.3093 shares of the Company’s common stock, depending on the applicable market value of the Company’s common stock and subject to anti-dilution adjustments. Subject to certain restrictions, at any time prior to February 15, 2018, holders of the Series B Preferred Stock may elect to convert all or a portion of their shares into common stock at the minimum conversion rate then in effect.
Dividends on shares of the Series B Preferred Stock are payable on a cumulative basis when, as and if declared by the Company’s Board of Directors at an annual rate of 5.50% on the liquidation preference of $1,000.00 per share (and, correspondingly, $100.00 per share with respect to the depositary shares) on February 15, May 15, August 15 and November 15 of each year, commencing on May 15, 2015 to, and including, February 15, 2018.
The Company may pay dividends in cash or, subject to certain limitations, in shares of common stock or any combination of cash and shares of common stock. The terms of the Mandatory Convertible Preferred Stock provide that, unless full cumulative dividends have been paid or set aside for payment on all outstanding Mandatory Convertible Preferred Stock for all prior dividend periods, no dividends may be declared or paid on common stock.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Sales of Equity Securities—The Company receives proceeds from the sale of its equity securities pursuant its employee stock purchase plan and upon exercise of stock options granted under its equity incentive plan. During the three months ended March 31, 2016, the Company received an aggregate of $14.6 million in proceeds upon exercises of stock options.
Distributions—During the three months ended March 31, 2016, the Company declared or paid the following cash distributions:
|
| | | | | | | | | | | | |
Declaration Date | | Payment Date | | Record Date | | Distribution per share | | Aggregate Payment Amount (in millions) |
Common Stock | | | | | | | | |
December 3, 2015 | | January 13, 2016 | | December 16, 2015 | | $ | 0.49 |
| | $ | 207.7 |
|
March 9, 2016 | | April 28, 2016 | | April 12, 2016 | | $ | 0.51 |
| | $ | 216.5 |
|
| | | | | | | | |
Series A Preferred Stock | | | | | | | | |
January 14, 2016 | | February 16, 2016 | | February 1, 2016 | | $ | 1.3125 |
| | $ | 7.9 |
|
| | | | | | | | |
Series B Preferred Stock | | | | | | | | |
January 14, 2016 | | February 16, 2016 | | February 1, 2016 | | $ | 13.75 |
| | $ | 18.9 |
|
The Company accrues distributions on unvested restricted stock units, which are payable upon vesting. As of March 31, 2016, the amount accrued for distributions payable related to unvested restricted stock units was $3.9 million. During the three months ended March 31, 2016, the Company paid $2.3 million of distributions upon the vesting of restricted stock units. To maintain its qualification for taxation as a REIT, the Company expects to continue paying distributions, the amount, timing and frequency of which will be determined, and subject to adjustment, by the Company’s Board of Directors.
10. EARNINGS PER COMMON SHARE
The following table sets forth basic and diluted net income per common share computational data (in thousands, except per share data):
|
| | | | | | | |
| Three Months Ended March 31, |
| 2016 | | 2015 |
Net income attributable to American Tower Corporation stockholders | $ | 275,159 |
| | $ | 193,317 |
|
Dividends on preferred stock | (26,781 | ) | | (9,819 | ) |
Net income attributable to American Tower Corporation common stockholders | 248,378 |
| | 183,498 |
|
Basic weighted average common shares outstanding | 424,059 |
| | 405,111 |
|
Dilutive securities | 3,829 |
| | 4,288 |
|
Diluted weighted average common shares outstanding | 427,888 |
| | 409,399 |
|
Basic net income attributable to American Tower Corporation common stockholders per common share | $ | 0.59 |
| | $ | 0.45 |
|
Diluted net income attributable to American Tower Corporation common stockholders per common share | $ | 0.58 |
| | $ | 0.45 |
|
Shares Excluded From Dilutive Effect—The following shares were not included in the computation of diluted earnings per share because the effect would be anti-dilutive (in thousands, on a weighted average basis):
|
| | | | | |
| Three Months Ended March 31, |
| 2016 | | 2015 |
Restricted stock awards | 152 |
| | 3 |
|
Stock options | 2,322 |
| | 501 |
|
Preferred stock | 17,413 |
| | 9,194 |
|
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
11. COMMITMENTS AND CONTINGENCIES
Litigation—The Company periodically becomes involved in various claims, lawsuits and proceedings that are incidental to its business. In the opinion of Company management, after consultation with counsel, there are no matters currently pending that would, in the event of an adverse outcome, materially impact the Company’s consolidated financial position, results of operations or liquidity.
Verizon Transaction—In March 2015, the Company entered into an agreement with various operating entities of Verizon Communications Inc. (“Verizon”) that provides for the lease, sublease or management of 11,286 wireless communications sites from Verizon commencing March 27, 2015. The average term of the lease or sublease for all sites at the inception of the agreement was approximately 28 years, assuming renewals or extensions of the underlying ground leases for the sites. The Company has the option to purchase the leased sites in tranches, subject to the applicable lease, sublease or management right upon its scheduled expiration. Each tower is assigned to an annual tranche, ranging from 2034 to 2047, which represents the outside expiration date for the sublease rights to the towers in each tranche. The purchase price for each tranche is a fixed amount stated in the lease for such tranche plus the fair market value of certain alterations made to the related towers. The aggregate purchase option price for the towers leased and subleased is approximately $5.0 billion. Verizon will occupy the sites as a tenant for an initial term of ten years with eight optional successive five-year terms; each such term shall be governed by standard master lease agreement terms established as a part of the transaction.
AT&T Transaction—The Company has an agreement with SBC Communications Inc., a predecessor entity to AT&T Inc. (“AT&T”), that currently provides for the lease or sublease of approximately 2,370 towers from AT&T with the lease commencing between December 2000 and August 2004. Substantially all of the towers are part of the securitization transaction entered into in 2013. The average term of the lease or sublease for all sites at the inception of the agreement was approximately 27 years, assuming renewals or extensions of the underlying ground leases for the sites. The Company has the option to purchase the sites subject to the applicable lease or sublease upon its expiration. Each tower is assigned to an annual tranche, ranging from 2013 to 2032, which represents the outside expiration date for the sublease rights to that tower. The purchase price for each site is a fixed amount stated in the lease for that site plus the fair market value of certain alterations made to the related tower by AT&T. As of March 31, 2016, the Company has purchased an aggregate of 60 of the subleased towers upon expiration of the applicable agreement. The aggregate purchase option price for the remaining towers leased and subleased is $713.4 million and will accrete at a rate of 10% per annum through the applicable expiration of the lease or sublease of a site. For all such sites purchased by the Company prior to June 30, 2020, AT&T will continue to lease the reserved space at the then-current monthly fee which shall escalate in accordance with the standard master lease agreement for the remainder of AT&T’s tenancy. Thereafter, AT&T shall have the right to renew such lease for up to four successive five-year terms. For all such sites purchased by the Company subsequent to June 30, 2020, AT&T has the right to continue to lease the reserved space for successive one-year terms at a rent equal to the lesser of the agreed upon market rate and the then-current monthly fee, which is subject to an annual increase based on changes in the U.S. Consumer Price Index.
ALLTEL Transaction—In December 2000, the Company entered into an agreement with ALLTEL, a predecessor entity to Verizon Wireless, to acquire towers through a 15-year sublease agreement. Pursuant to the agreement, as amended, with Verizon Wireless, the Company acquired rights to approximately 1,800 towers in tranches between April 2001 and March 2002. The Company has the option to purchase each tower at the expiration of the applicable sublease. The Company will exercise the purchase options for approximately 1,525 towers in a single closing to occur on or before November 30, 2016. The purchase price per tower as of the original closing date was $27,500 and will accrete at a rate of 3% per annum through the expiration of the applicable sublease. The aggregate purchase option price for the subleased towers was $75.8 million as of March 31, 2016. The purchase price would be payable in cash or, at Verizon Wireless’s or its assignee’s option, as applicable, with 769 shares of the Company’s common stock per tower.
Other Contingencies—The Company is subject to income tax and other taxes in the geographic areas where it operates, and periodically receives notifications of audits, assessments or other actions by taxing authorities. The Company evaluates the circumstances of each notification based on the information available and records a liability for any potential outcome that is probable or more likely than not unfavorable if the liability is also reasonably estimable.
12. ACQUISITIONS
During the three months ended March 31, 2016, the Company adopted new guidance on the accounting for measurement-period adjustments related to business combinations. This guidance requires that an acquirer make adjustments to the provisional amounts recognized at acquisition date with a corresponding adjustment to goodwill in the current period. Additionally, the effects on earnings of all measurement-period adjustments are included in current period earnings.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company did not complete any material acquisitions during the three months ended March 31, 2016. In addition, during the three months ended March 31, 2016, there were no adjustments made to the preliminary purchase price allocations for acquisitions consummated in 2015.
For those acquisitions accounted for as business combinations, the Company recognizes acquisition and merger related expenses in the period in which they are incurred and services are received. Acquisition and merger related expenses may include finder’s fees, advisory, legal, accounting, valuation and other professional or consulting fees, fair value adjustments to contingent consideration and general administrative costs directly related to the transaction. Integration costs include incremental and non-recurring costs necessary to convert data, retain employees and otherwise enable the Company to operate new businesses efficiently. The Company records acquisition and merger related expenses, as well as integration costs, in Other operating expenses in the consolidated statements of operations.
The Company recorded acquisition and merger related expenses and integration costs as follows (in thousands):
|
| | | | | | | | |
| | Three Months Ended March 31, |
| | 2016 | | 2015 |
Acquisition and merger related expenses | | $ | 985 |
| | $ | 2,966 |
|
Integration costs | | $ | 3,271 |
| | $ | 1,755 |
|
Pro Forma Consolidated Results
The following table presents the unaudited pro forma financial results as if the acquisition of (i) the exclusive right to lease, acquire or otherwise operate and manage approximately 11,500 wireless communications sites from Verizon in the United States, (ii) over 4,700 sites from Bharti Airtel Limited (“Airtel”) in Nigeria and (iii) nearly 5,500 sites from TIM Celular S.A. in Brazil, had occurred on January 1, 2015. Management relied on various estimates and assumptions due to the fact that some of the sites were never operated as a business and were utilized solely by the seller as a component of their network infrastructure. As a result, historical operating results may not be available. The pro forma results do not include any anticipated cost synergies, costs or other integration impacts. Accordingly, such pro forma amounts are not necessarily indicative of the results that actually would have occurred had the transactions been completed on the date indicated, nor are they indicative of the future operating results of the Company.
|
| | | | |
| | Three Months Ended March 31, 2015 |
Pro forma revenues | | $ | 1,263,174 |
|
Pro forma net income attributable to American Tower Corporation common stockholders | | $ | 150,024 |
|
Pro forma net income per common share amounts: | | |
Basic net income attributable to American Tower Corporation common stockholders | | $ | 0.35 |
|
Diluted net income attributable to American Tower Corporation common stockholders | | $ | 0.35 |
|
Other Signed Acquisitions
Viom—On October 21, 2015, the Company, through its wholly owned subsidiary, ATC Asia Pacific Pte. Ltd. (“ATC Asia”), entered into a definitive agreement (the “Share Purchase Agreement”) with Viom Networks Limited (“Viom”), a telecommunications infrastructure company that owns and operates over 42,000 wireless communications towers and 200 indoor DAS networks in India, and certain existing Viom shareholders, including the current managing shareholder, SREI Infrastructure Finance Limited, several other minority shareholders and Tata Teleservices Limited (collectively, the “Selling Shareholders”), to acquire a 51% controlling ownership interest in Viom from the Selling Shareholders for cash consideration of 76.4 billion INR ($1.1 billion at the date of acquisition), subject to certain adjustments (the “Viom Acquisition”). The Viom Acquisition closed on April 21, 2016 (see note 14). The Company expects that it will consolidate the full financial results for Viom.
On October 21, 2015, ATC Asia also entered into a shareholders agreement (the “Shareholders Agreement”) with Viom and certain remaining Viom shareholders, including Tata Sons Limited, Tata Teleservices Limited, IDFC Private Equity Fund III, Macquarie SBI Investments Pte Limited and SBI Macquarie Infrastructure Trust (collectively, the “Remaining Shareholders”). The Shareholders Agreement became effective on the closing date of the Viom Acquisition. The Shareholders Agreement provides that, among other things, the Remaining Shareholders will have certain governance, anti-dilution and contractual
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
rights. The Remaining Shareholders will have put options and ATC Asia will have a call option subject to the time periods and conditions outlined in the Shareholders Agreement.
Airtel Tanzania—On March 17, 2016, the Company entered into a definitive agreement with Airtel, through its subsidiary company Airtel Tanzania Limited (“Airtel Tanzania”), pursuant to which the Company may acquire approximately 1,350 of Airtel Tanzania’s communications towers in Tanzania, for total consideration of approximately $179.0 million, subject to customary adjustments. Under the agreement, the Company may pay additional consideration to acquire up to approximately 100 additional sites currently in development. The Company expects to close the transaction during the second quarter of 2016, subject to customary closing conditions and regulatory approval.
13. BUSINESS SEGMENTS
In 2015, as a result of recent investment activity, including signed acquisitions, the Company reviewed and changed its reportable segments to divide its international segment into three regional segments: Asia property, Europe, Middle East and Africa (“EMEA”) property, and Latin America property, resulting in five total segments. The change in reportable segments had no impact on the Company’s consolidated and condensed consolidated financial statements for any periods. However, certain expenses previously reflected in segment selling, general, administrative and development expense have been reclassified and are now reflected as Other selling, general, administrative and development expense. Historical financial information included in this Quarterly Report on Form 10-Q has been adjusted to reflect the change in reportable segments.
The Company’s primary business is leasing space on multitenant communications sites to wireless service providers, radio and television broadcast companies, wireless data providers, government agencies and municipalities and tenants in a number of other industries. This business is referred to as the Company’s property operations, which as of March 31, 2016, consisted of the following:
| |
• | U.S.: property operations in the United States; |
| |
• | Asia: property operations in India; |
| |
• | EMEA: property operations in Germany, Ghana, Nigeria, South Africa and Uganda; and |
| |
• | Latin America: property operations in Brazil, Chile, Colombia, Costa Rica, Mexico and Peru. |
The Company has applied the aggregation criteria to operations within the EMEA and Latin America property operating segments on a basis consistent with management’s review of information and performance evaluations of these regions.
The Company’s services segment offers tower-related services in the United States, including site acquisition, zoning and permitting services and structural analysis services, which primarily support its site leasing business, including the addition of new tenants and equipment on its sites. The services segment is a strategic business unit that offers different services from the property operating segments and requires different resources, skill sets and marketing strategies.
The accounting policies applied in compiling segment information below are similar to those described in note 1 to the Company’s consolidated financial statements included in the 2015 Form 10-K. Among other factors, in evaluating financial performance in each business segment, management uses segment gross margin and segment operating profit. The Company defines segment gross margin as segment revenue less segment operating expenses excluding stock-based compensation expense recorded in costs of operations; Depreciation, amortization and accretion; Selling, general, administrative and development expense; and Other operating expenses. The Company defines segment operating profit as segment gross margin less Selling, general, administrative and development expense attributable to the segment, excluding stock-based compensation expense and corporate expenses. For reporting purposes, the Latin America property segment gross margin and segment operating profit also include Interest income, TV Azteca, net. These measures of segment gross margin and segment operating profit are also before Interest income, Interest expense, Gain (loss) on retirement of long-term obligations, Other income (expense), Net income (loss) attributable to noncontrolling interest and Income tax benefit (provision). The categories of expenses indicated above, such as depreciation, have been excluded from segment operating performance as they are not considered in the review of information or the evaluation of results by management. There are no significant revenues resulting from transactions between the Company’s operating segments. All intercompany transactions are eliminated to reconcile segment results and assets to the consolidated statements of operations and consolidated balance sheets.
Summarized financial information concerning the Company’s reportable segments for the three months ended March 31, 2016 and 2015 is shown in the following tables. The “Other” column (i) represents amounts excluded from specific segments, such as business development operations, stock-based compensation expense and corporate expenses included in Selling, general, administrative and development expense; Other operating expenses; Interest income; Interest expense; Gain (loss) on retirement
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
of long-term obligations; and Other income (expense), and (ii) reconciles segment operating profit to Income from continuing operations before income taxes, as the amounts are not utilized in assessing each segment’s performance.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Property | Total Property | |
Services | | Other | | Total |
Three Months Ended March 31, 2016 | | U.S. | | Asia | | EMEA | | Latin America | |
| | (in thousands) |
Segment revenues | | $ | 851,744 |
| | $ | 63,216 |
| | $ | 129,640 |
| | $ | 223,051 |
| | $ | 1,267,651 |
| | $ | 21,396 |
| | | | $ | 1,289,047 |
|
Segment operating expenses (1) | | 177,722 |
| | 33,080 |
| | 55,659 |
| | 75,322 |
| | 341,783 |
| | 9,004 |
| | | | 350,787 |
|
Interest income, TV Azteca, net | | — |
| | — |
| | — |
| | 2,716 |
| | 2,716 |
| | — |
| | | | 2,716 |
|
Segment gross margin | | 674,022 |
| | 30,136 |
| | 73,981 |
| | 150,445 |
| | 928,584 |
| | 12,392 |
| | | | 940,976 |
|
Segment selling, general, administrative and development expense (1) | | 37,286 |
| | 6,576 |
| | 16,152 |
| | 14,584 |
| | 74,598 |
| | 2,916 |
| | | | 77,514 |
|
Segment operating profit | | $ | 636,736 |
| | $ | 23,560 |
| | $ | 57,829 |
| | $ | 135,861 |
| | $ | 853,986 |
| | $ | 9,476 |
| | | | $ | 863,462 |
|
Stock-based compensation expense | | | | | | | | | | | | | | $ | 28,079 |
| | 28,079 |
|
Other selling, general, administrative and development expense | | | | | | | | | | | | | | 30,380 |
| | 30,380 |
|
Depreciation, amortization and accretion | | | | | | | | | | | | | | 341,634 |
| | 341,634 |
|
Other expense (2) | | | | | | | | | | | | | | 152,938 |
| | 152,938 |
|
Income from continuing operations before income taxes | | | | | | | | | | | | | | | | $ | 310,431 |
|
Total assets | | $ | 19,110,950 |
| | $ | 698,798 |
| | $ | 2,327,461 |
| | $ | 4,668,298 |
| | $ | 26,805,507 |
| | $ | 61,117 |
| | $ | 197,691 |
| | $ | 27,064,315 |
|
_______________
| |
(1) | Segment operating expenses and segment selling, general, administrative and development expenses exclude stock-based compensation expense of $0.7 million and $27.4 million, respectively. |
| |
(2) | Primarily includes interest expense. |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Property | | Total Property | |
Services | | Other | | Total |
Three Months Ended March 31, 2015 | | U.S. | | Asia | | EMEA | | Latin America | |
| | (in thousands) |
Segment revenues | | $ | 717,880 |
| | $ | 57,127 |
| | $ | 75,801 |
| | $ | 211,372 |
| | $ | 1,062,180 |
| | $ | 17,010 |
| | | | $ | 1,079,190 |
|
Segment operating expenses (1) | | 133,032 |
| | 29,660 |
| | 28,515 |
| | 67,618 |
| | 258,825 |
| | 5,244 |
| | | | 264,069 |
|
Interest income, TV Azteca, net | | — |
| | — |
| | — |
| | 2,596 |
| | 2,596 |
| | — |
| | | | 2,596 |
|
Segment gross margin | | 584,848 |
| | 27,467 |
| | 47,286 |
| | 146,350 |
| | 805,951 |
| | 11,766 |
| | | | 817,717 |
|
Segment selling, general, administrative and development expense (1) | | 26,822 |
| | 6,829 |
| | 8,859 |
| | 17,262 |
| | 59,772 |
| | 3,436 |
| | | | 63,208 |
|
Segment operating profit | | $ | 558,026 |
| | $ | 20,638 |
| | $ | 38,427 |
| | $ | 129,088 |
| | $ | 746,179 |
| | $ | 8,330 |
| | | | $ | 754,509 |
|
Stock-based compensation expense | | | | | | | | | | | | | | $ | 29,861 |
| | 29,861 |
|
Other selling, general, administrative and development expense (2) | | | | | | | | | | | | | | 30,792 |
| | 30,792 |
|
Depreciation, amortization and accretion | | | | | | | | | | | | | | 263,520 |
| | 263,520 |
|
Other expense (3) | | | | | | | | | | | | | | 210,972 |
| | 210,972 |
|
Income from continuing operations before income taxes | | | | | | | | | | | | | | | | $ | 219,364 |
|
Total assets (4) | | $ | 19,560,579 |
| | $ | 755,290 |
| | $ | 1,195,027 |
| | $ | 4,239,821 |
| | $ | 25,750,717 |
| | $ | 67,226 |
| | $ | 112,251 |
| | $ | 25,930,194 |
|
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
_______________
| |
(1) | Segment operating expenses and segment selling, general, administrative and development expenses exclude stock-based compensation expense of $0.6 million and $29.3 million, respectively. |
(2) Includes $1.7 million of expense previously recorded as segment selling, general, administrative and development expense.
(3) Primarily includes interest expense.
(4) $21.7 million of assets previously recorded to the Asia Property segment have been reclassified to the Other segment.
14. SUBSEQUENT EVENTS
Viom Acquisition
On April 21, 2016, the Company acquired a 51% controlling ownership interest in Viom for cash consideration of approximately 76.4 billion INR ($1.1 billion at the date of acquisition) as well as the assumption of approximately 50.6 billion INR ($0.8 billion at the date of acquisition) in existing INR-denominated debt pursuant to its previously announced agreement. The purchase price is subject to post-closing adjustments. The Company borrowed $1.2 billion under the 2013 Credit Facility, which it primarily used, together with cash on hand, to fund the cash portion of the purchase price. The acquisition is consistent with the Company’s strategy to expand in selected geographic areas.
The following table summarizes the preliminary allocation of the purchase price for the Viom Acquisition based upon the estimated fair value at the date of acquisition (in thousands):
|
| | | | |
Current assets | | $ | 215,060 |
|
Non-current assets | | 61,456 |
|
Property and equipment | | 757,564 |
|
Intangible assets (1): | | |
Customer-related intangible assets | | 1,366,217 |
|
Network location intangible assets | | 640,259 |
|
Other intangible assets | | 10,543 |
|
Current liabilities | | (189,133 | ) |
Deferred tax liability | | (644,262 | ) |
Other non-current liabilities | | (86,659 | ) |
Net assets acquired | | 2,131,045 |
|
Goodwill (2) | | 905,984 |
|
Fair value of net assets acquired | | 3,037,029 |
|
Debt assumed | | (762,797 | ) |
Preferred stock outstanding | | (25,002 | ) |
Non-controlling interest | | (1,099,250 | ) |
Purchase Price | | $ | 1,149,980 |
|
_______________
(1) Customer-related intangible assets and network location intangible assets are amortized on a straight-line basis over periods of up to 20 years.
(2) Goodwill was allocated to the Company’s Asia property segment. The Company expects goodwill will not be deductible for local tax
purposes.
|
| |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
This Quarterly Report on Form 10-Q contains forward-looking statements relating to our goals, beliefs, plans or current expectations and other statements that are not of historical facts. For example, when we use words such as “project,” “believe,” “anticipate,” “expect,” “forecast,” “estimate,” “intend,” “should,” “would,” “could,” “may” or other words that convey uncertainty of future events or outcomes, we are making forward-looking statements. Certain important factors may cause actual results to differ materially from those indicated by our forward-looking statements, including those set forth under the caption “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2015 (the “2015 Form 10-K”). Forward-looking statements represent management’s current expectations and are inherently uncertain. We do not undertake any obligation to update forward-looking statements made by us.
The discussion and analysis of our financial condition and results of operations that follow are based upon our consolidated and condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates and such differences could be material to the financial statements. This discussion should be read in conjunction with our consolidated and condensed consolidated financial statements herein and the accompanying notes thereto, information set forth under the caption “Critical Accounting Policies and Estimates” of the 2015 Form 10-K, and in particular, the information set forth therein under Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Overview
We are one of the largest global real estate investment trusts and a leading independent owner, operator and developer of multitenant communications real estate. Our primary business is the leasing of space on communications sites to wireless service providers, radio and television broadcast companies, wireless data providers, government agencies and municipalities and tenants in a number of other industries. In addition to the communications sites in our portfolio, we manage rooftop and tower sites for property owners under various contractual arrangements. We also hold property interests that we lease to communications service providers and third-party tower operators. We refer to this business as our property operations, which accounted for 98% of our total revenues for the three months ended March 31, 2016 and includes our U.S. property segment, Asia property segment, Europe, Middle East and Africa (“EMEA”) property segment and Latin America property segment.
Through our services segment, we offer tower-related services, including site acquisition, zoning and permitting and structural analysis services, which primarily support our site leasing business, including the addition of new tenants and equipment on our sites.
On April 21, 2016, we acquired a 51% controlling ownership interest in Viom Networks Limited (“Viom”), a telecommunications infrastructure company that owns and operates over 42,000 wireless communications towers and 200 indoor distributed antenna system (“DAS”) networks in India (the “Viom Acquisition”). Upon closing, we expect to consolidate the full financial results for Viom.
The following table details the number of communications sites, excluding managed sites, we owned or operated as of March 31, 2016:
|
| | | | | | | | | |
| | Number of Owned Towers | | Number of Operated Towers (1) | | Number of Owned DAS Sites |
U.S. | | 21,851 |
| | 18,233 |
| | 341 |
|
Asia: | | | | | | |
India | | 15,328 |
| | — |
| | 33 |
|
EMEA: | | | | | | |
Germany | | 2,028 |
| | — |
| | — |
|
Ghana | | 2,109 |
| | — |
| | 17 |
|
Nigeria | | 4,717 |
| | — |
| | — |
|
South Africa | | 1,927 |
| | — |
| | — |
|
Uganda | | 1,393 |
| | — |
| |
|
|
EMEA total | | 12,174 |
| | — |
| | 17 |
|
Latin America: | | | | | | |
Brazil | | 15,792 |
| | 2,268 |
| | 53 |
|
Chile | | 1,206 |
| | — |
| | 6 |
|
Colombia | | 3,058 |
| | 706 |
| | |