American Tower Corporation Reports Third Quarter and Year to Date 2012 Financial Results

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American Tower Corporation Reports Third Quarter and Year to Date 2012 Financial Results

CONSOLIDATED HIGHLIGHTS

Third Quarter 2012

  • Total revenue increased 13.2% to $713.3 million
  • Operating income increased 29.5% to $295.6 million
  • Cash provided by operating activities increased 21.7% to $353.7 million

Year to Date 2012

  • Total revenue increased 17.7% to $2,107.6 million
  • Operating income increased 25.0% to $840.5 million
  • Cash provided by operating activities increased 31.4% to $1,116.5 million

SEGMENT HIGHLIGHTS

Third Quarter 2012

  • Domestic rental and management segment revenue increased 10.0% to $480.4 million
  • International rental and management segment revenue increased 22.0% to $217.2 million
  • Network development services segment revenue was $15.8 million

Year to Date 2012

  • Domestic rental and management segment revenue increased 12.6% to $1,440.8 million
  • International rental and management segment revenue increased 33.7% to $623.0 million
  • Network development services segment revenue was $43.8 million

BOSTON--(BUSINESS WIRE)-- American Tower Corporation (NYS: AMT) today reported financial results for the quarter ended September 30, 2012.

Jim Taiclet, American Tower's Chief Executive Officer stated, "During the third quarter, our disciplined investments in portfolio growth and industry-leading operational efficiency once again yielded strong results, with Core Growth in revenue, Adjusted EBITDA and AFFO all over 18%.

We expect a strong finish to 2012, given the robust business momentum we are seeing both in the U.S. and our international markets. Looking forward, we are focused on providing our investors with a compelling total return opportunity, supported by solid growth in both AFFO per share and our dividend."

THIRD QUARTER 2012 OPERATING RESULTS OVERVIEW

American Tower generated the following operating results for the quarter ended September 30, 2012 (unless otherwise indicated, all comparative information is presented against the quarter ended September 30, 2011).

Total revenue increased 13.2% to $713.3 million and total rental and management revenue increased 13.5% to $697.6 million. Total rental and management revenue Core Growth was approximately 18.4%. Please refer to the selected statement of operations detail on page 14, which highlights the items affecting all Core Growth percentages for the quarter ended September 30, 2012.

Total rental and management Gross Margin increased 14.2% to $524.0 million. Total selling, general, administrative and development expense was $81.5 million, including approximately $12.6 million of stock-based compensation expense. Adjusted EBITDA increased 15.7% to $463.6 million, Core Growth in Adjusted EBITDA was approximately 19.1% and the Adjusted EBITDA Margin was 65%.

Adjusted Funds From Operations (AFFO) increased 10.2% to $284.1 million, Core Growth in AFFO was approximately 20.2% and AFFO per Share increased 9.2% to $0.71.

Operating income increased 29.5% to $295.6 million, and net income attributable to American Tower Corporation increased to $232.1 million. Net income attributable to American Tower Corporation per basic and diluted common share increased to $0.59 and $0.58, respectively.

Cash provided by operating activities increased 21.7% to $353.7 million.

Segment Results

Domestic Rental and Management Segment - Domestic rental and management segment revenue increased 10.0% to $480.4 million, which represented 67% of total revenue. In addition, domestic rental and management segment Gross Margin increased 12.3% to $388.3 million, while domestic rental and management segment Operating Profit increased 13.2% to $368.1 million.Domestic rental and management segment Operating Profit Margin was 77%.

International Rental and Management Segment - International rental and management segment revenue increased 22.0% to $217.2 million, which represented 31% of total revenue. International rental and management segment pass-through revenues increased 6.5% to $57.2 million. In addition, international rental and management segment Gross Margin increased 19.9% to $135.7 million, while international rental and management segment Operating Profit increased 20.9% to $110.7 million.International rental and management segment Operating Profit Margin was 51% (69%, excluding the impact of $57.2 million of pass-through revenues).

Network Development Services Segment - Network development services segment revenue was $15.8 million, which represented 2% of total revenue. Network development services segment Gross Margin was $8.5 million, and network development services segment Operating Profit was $6.3 million. Network development services segment Operating Profit Margin was 40%.

YEAR TO DATE 2012 OPERATING RESULTS OVERVIEW

American Tower generated the following operating results for the nine months ended September 30, 2012 (unless otherwise indicated, all comparative information is presented against the nine months ended September 30, 2011).

Total revenue increased 17.7% to $2,107.6 million and total rental and management revenue increased 18.2% to $2,063.8 million. Total rental and management revenue Core Growth was approximately 21.7%. Please refer to the selected statement of operations detail on page 14, which highlights the items affecting all Core Growth percentages for the nine months ended September 30, 2012.

Total rental and management Gross Margin increased 18.5% to $1,569.0 million. Total selling, general, administrative and development expense was $237.9 million, including approximately $38.3 million of stock-based compensation expense. Adjusted EBITDA increased 19.3% to $1,391.8 million, Core Growth in Adjusted EBITDA was approximately 21.9% and the Adjusted EBITDA Margin was 66%.

AFFO increased 16.6% to $908.4 million, Core Growth in AFFO was approximately 22.1%, and AFFO per Share increased 16.9% to $2.28.

Operating income increased 25.0% to $840.5 million, and net income attributable to American Tower Corporation increased to $501.6 million. Net income attributable to American Tower Corporation per basic and diluted common share increased to $1.27 and $1.26, respectively.

Cash provided by operating activities increased 31.4% to $1,116.5 million.

Segment Results

Domestic Rental and Management Segment - Domestic rental and management segment revenue increased 12.6% to $1,440.8 million, which represented 68% of total revenue. In addition, domestic rental and management segment Gross Margin increased 14.8% to $1,167.6 million, while domestic rental and management segment Operating Profit increased 15.2% to $1,107.0 million.Domestic rental and management segment Operating Profit Margin was 77%.

International Rental and Management Segment - International rental and management segment revenue increased 33.7% to $623.0 million, which represented 30% of total revenue. International rental and management segment pass-through revenues increased 27.2% to $161.2 million. In addition, international rental and management segment Gross Margin increased 30.8% to $401.4 million, while international rental and management segment Operating Profit increased 35.2% to $332.9 million.International rental and management segment Operating Profit Margin was 53% (72%, excluding the impact of $161.2 million of pass-through revenues).

Network Development Services Segment - Network development services segment revenue was $43.8 million, which represented 2% of total revenue. Network development services segment Gross Margin was $22.4 million, and network development services segment Operating Profit was $18.0 million. Network development services segment Operating Profit Margin was 41%.

Please refer to "Non-GAAP and Defined Financial Measures" on pages 6 and 7 for definitions of Gross Margin, Operating Profit, Operating Profit Margin, Adjusted EBITDA, Adjusted EBITDA Margin, Funds From Operations, Adjusted Funds From Operations, Adjusted Funds From Operations per Share, Core Growth and Net Leverage Ratio. For additional financial information, including reconciliations to GAAP measures, please refer to the unaudited selected financial information on pages 12 through 16.

INVESTING OVERVIEW

Distributions - On October 15, 2012, the Company paid its third quarter distribution of $0.23 per share, or a total of approximately $90.9 million, to stockholders of record at the close of business on October 1, 2012.

During the nine months ended September 30, 2012, the Company declared an aggregate of $0.66 per share in distributions, or a total of approximately $260.7 million to its stockholders. Subject to the discretion of the Company's Board of Directors, the Company expects to continue paying regular distributions, the amount and timing of which will be determined by the Board.

Cash Paid for Capital Expenditures - During the third quarter of 2012,total capital expenditures of $150.6 million included $78.9 million for capital projects, including the construction of 64 communications sites, including 2 distributed antenna system networks, domestically and 580 towers internationally and the installation of 96 shared generators domestically; $21.3 million to purchase land under the Company's communications sites; $17.7 million for the redevelopment of existing communications sites to accommodate new tenant equipment; and $32.7 million for capital improvements and corporate capital expenditures.

During the nine months ended September 30, 2012, total capital expenditures of $377.0 million included $192.2 million for capital projects, including the construction of 157 communications sites, including 9 distributed antenna system networks, domestically and 1,677 towers internationally and the installation of 299 shared generators domestically; $48.5 million to purchase land under the Company's communications sites; $58.7 million for the redevelopment of existing communications sites to accommodate new tenant equipment; and $77.7 million for capital improvements and corporate capital expenditures.

Cash Paid for Acquisitions - During the third quarter of 2012, the Company spent $289.9 million for the purchase of 6 domestic towers and 850 international towers. The international towers consisted of those acquired pursuant to previously announced agreements, including 140 towers in Colombia, 282 towers in Mexico and 236 towers in South Africa, and also included the acquisition of an additional 192 towers in Brazil.

During the nine months ended September 30, 2012, the Company spent $822.7 million for the purchase of 86 domestic towers and 3,470 international towers.

The Company currently expects to close on up to 700 communications sites globally during the fourth quarter of 2012.

Stock Repurchase Program - During the third quarter of 2012, the Company repurchased a total of approximately 0.1 million shares of its common stock for approximately $5.9 million pursuant to its stock repurchase program. Between October 1, 2012 and October 18, 2012, the Company repurchased a total of 16,689 additional shares of its common stock for approximately $1.2 million.

During the nine months ended September 30, 2012, the Company repurchased a total of approximately 0.3 million shares of its common stock for approximately $16.7 million pursuant to its stock repurchase program.

FINANCING OVERVIEW

Leverage - For the quarter ended September 30, 2012, the Company's net leverage ratio was approximately 3.8x net debt (total debt less cash and cash equivalents) to third quarter 2012 annualized Adjusted EBITDA.

Liquidity - As of September 30, 2012, the Company had approximately $2.4 billion of total liquidity, comprised of approximately $382.3 million in cash and cash equivalents, plus the ability to borrow an aggregate of approximately $2.0 billion under its two revolving credit facilities, net of any outstanding letters of credit.

FULL YEAR 2012 OUTLOOK

The following estimates are based on a number of assumptions that management believes to be reasonable and reflect the Company's expectations as of October 31, 2012. These estimates include the Company's new contract renegotiation and extension with one if its major U.S. customers. Actual results may differ materially from these estimates as a result of various factors and the Company refers you to the cautionary language regarding "forward-looking" statements included in this press release when considering this information.

The Company's outlook is based on the following average foreign currency exchange rates to 1.00 U.S. Dollar for the fourth quarter of 2012: (a) 2.00 Brazilian Reais; (b) 480.00 Chilean Pesos; (c) 1,800.00 Colombian Pesos; (d) 1.90 Ghanaian Cedi; (e) 53.50 Indian Rupees; (f) 12.80 Mexican Pesos; (g) 2.60 Peruvian Soles; (h) 8.50 South African Rand; and (i) 2,550.00 Ugandan Schillings.

($ in millions)  Midpoint Midpoint Core

(Totals may not add due to rounding.)

Full Year 2012GrowthGrowth
Total rental and management revenue$2,775 to $2,80516.9%20.3%
Adjusted EBITDA (1)$1,850to$1,88016.9%19.7%
Adjusted Funds From Operations(1)$1,185to$1,20713.3%17.5%
Net Income$625to$66068.3%N/A

_____

(1) See "Non-GAAP and Defined Financial Measures" below.
 

The Company's outlook for total rental and management revenue reflects the following at the midpoint: (1) domestic rental and management segment revenue of $1,935 million; and (2) international rental and management segment revenue of $855 million, which includes approximately $200 million of pass-through revenue.

 

Total Rental and

  
The calculation of midpoint Core Growth is as follows:

Management

Adjusted

(Totals may not add due to rounding.)

RevenueEBITDA

AFFO(1)

Outlook midpoint Core Growth20.3%19.7%17.5%
Estimated impact of fluctuations in foreign currency exchange rates(3.7)%(3.0)%(3.5)%
Impact of straight-line revenue and expense recognition(0.1)%--
Impact of significant one-time items0.5%0.3%(0.7)%
Outlook midpoint growth16.9%16.9%13.3%

_____

(1) Core Growth in AFFO reflects approximately $25 million of one-time start-up capital improvement capital expenditures related to our joint ventures in Colombia, Ghana and Uganda.
 
Outlook for Capital Expenditures: 
($ in millions)

(Totals may not add due to rounding.)

Full Year 2012

Capital improvement$85 to $95
Corporate16to20
Redevelopment75to85
Ground lease purchases70to80
Discretionary capital projects(1)254to270
Total$500to$550

_____

(1) Includes the construction of approximately 2,000 to 2,200 new communications sites.
 

Reconciliations of Outlook for Net Income to Adjusted EBITDA:

($ in millions) 

(Totals may not add due to rounding.)

Full Year 2012
Net income$625  to  $660
Interest expense400to395
Depreciation, amortization and accretion630to622
Stock-based compensation expense55to53
Other, including other operating expenses, interest income, loss on retirement of long-term obligations, (income) loss on equity method investments, other (income) expense and income tax provision (benefit)140to150
Adjusted EBITDA$1,850to$1,880
 
 

Reconciliations of Outlook for Net Income to Adjusted Funds From Operations:

($ in millions)

(Totals may not add due to rounding.)

Full Year 2012
Net income$625to$660
Straight-line revenue(166)-(166)
Straight-line expense34-34
Depreciation, amortization and accretion630to622
Stock-based compensation expense55to53
Non-cash portion of tax provision26to30
Other, including other operating expenses, interest expense, amortization of deferred financing costs, debt discounts and capitalized interest, loss on retirement of long-term obligations and other (income) expense82to89
Capital improvement capital expenditures(85)to(95)
Corporate capital expenditures(16)to(20)
Adjusted Funds From Operations$1,185to$1,207
 

Conference Call Information

American Tower will host a conference call today at 8:30 a.m. ET to discuss its financial results for the third quarter ended September 30, 2012 and its outlook for the full year 2012. Supplemental materials for the call will be available on the Company's website, www.americantower.com. The conference call dial-in numbers are as follows:

U.S./Canada dial-in: (866) 740-9153
International dial-in: (706) 645-9644
Passcode: 39720713

When available, a replay of the call can be accessed until 11:59 p.m. ET on November 14, 2012. The replay dial-in numbers are as follows:

U.S./Canada dial-in: (855) 859-2056
International dial-in: (404) 537-3406
Passcode: 39720713

American Tower will also sponsor a live simulcast and replay of the call on its website, www.americantower.com.

About American Tower

American Tower is a leading independent global owner, operator and developer of wireless communications sites. American Tower currently owns and operates over 50,000 communications sites in the United States, Brazil, Chile, Colombia, Ghana, India, Mexico, Peru, South Africa and Uganda. For more information about American Tower, please visit www.americantower.com.

Non-GAAP and Defined Financial Measures

In addition to the results prepared in accordance with generally accepted accounting principles in the United States (GAAP) provided throughout this press release, the Company has presented the following non-GAAP and defined financial measures: Gross Margin, Operating Profit, Operating Profit Margin, Adjusted EBITDA, Adjusted EBITDA Margin, Funds From Operations, Adjusted Funds From Operations, Adjusted Funds From Operations per Share, Core Growth and Net Leverage Ratio.

The Company defines Gross Margin as revenues less operating expenses, excluding stock-based compensation expense. The Company defines Operating Profit as Gross Margin less selling, general, administrative and development expense, excluding stock-based compensation expense and corporate expenses. For reporting purposes, the international rental and management segment Operating Profit and Gross Margin also include interest income, TV Azteca, net. These measures of Gross Margin and Operating Profit are also before interest income, interest expense, loss on retirement of long-term obligations, other income (expense), net income attributable to non-controlling interest, income (loss) on equity method investments, income taxes and discontinued operations. The Company defines Operating Profit Margin as the percentage that results from dividing Operating Profit by revenue. The Company defines Adjusted EBITDA as net income before income (loss) from discontinued operations, net, income (loss) from equity method investments, income tax provision (benefit), other (income) expense, loss on retirement of long-term obligations, interest expense, interest income, other operating expenses, depreciation, amortization and accretion and stock-based compensation expense. The Company defines Adjusted EBITDA Margin as the percentage that results from dividing Adjusted EBITDA by total revenue. The Company defines Funds From Operations as net income before real estate related depreciation, amortization and accretion. The Company defines Adjusted Funds From Operations as Funds From Operations before straight-line revenue and expense, stock-based compensation expense, non-cash portion of tax provision, non-real estate related depreciation, amortization and accretion, amortization of deferred financing costs, debt discounts and capitalized interest, other (income) expense, loss on retirement of long-term obligations, other operating (income) expense, less cash payments related to capital improvements and cash payments related to corporate capital expenditures. The Company defines Adjusted Funds From Operations per Share as Adjusted Funds From Operations divided by the diluted weighted average common shares outstanding. Funds From Operations for the three and nine months ended September 30, 2011 are presented on a pro forma basis and reflect adjustments for income tax provision as if the REIT conversion had occurred on January 1, 2011. The Company defines Core Growth in total rental and management revenue, Adjusted EBITDA and Adjusted Funds From Operations as the increase or decrease, expressed as a percentage, resulting from a comparison of financial results for a current period with corresponding financial results for the corresponding period in a prior year, in each case, excluding the impact of straight-line revenue and expense recognition, foreign currency exchange rate fluctuations and significant one-time items. The Company defines Net Leverage Ratio as net debt (total debt, less cash and cash equivalents) divided by last quarter annualized Adjusted EBITDA. These measures are not intended to replace financial performance measures determined in accordance with GAAP. Rather, they are presented as additional information because management believes they are useful indicators of the current financial performance of the Company's core businesses. The Company believes that these measures can assist in comparing company performances on a consistent basis irrespective of depreciation and amortization or capital structure. Depreciation and amortization can vary significantly among companies depending on accounting methods, particularly where acquisitions or non-operating factors, including historical cost bases, are involved. Notwithstanding the foregoing, the Company's measures of Gross Margin, Operating Profit, Operating Profit Margin, Adjusted EBITDA, Adjusted EBITDA Margin, Funds From Operations, Adjusted Funds From Operations, Adjusted Funds From Operations per Share, Core Growth and Net Leverage Ratio may not be comparable to similarly titled measures used by other companies.

Cautionary Language Regarding Forward-Looking Statements

This press release contains "forward-looking statements" concerning our goals, beliefs, expectations, strategies, objectives, plans, future operating results and underlying assumptions, and other statements that are not necessarily based on historical facts. Examples of these statements include, but are not limited to statements regarding our full year 2012 outlook, foreign currency exchange rates and our expectation regarding the declaration of regular distributions. Actual results may differ materially from those indicated in our forward-looking statements as a result of various important factors, including: (1) decrease in demand for our communications sites would materially and adversely affect our operating results and we cannot control that demand; (2) if our tenants consolidate, merge or share site infrastructure with each other to a significant degree, our growth, revenue and ability to generate positive cash flows could be materially and adversely affected; (3) new technologies or changes in a tenant's business model could make our tower leasing business less desirable and result in decreasing revenues; (4) our expansion initiatives may disrupt our operations or expose us to additional risk if we are not able to successfully integrate operations, assets and personnel; (5) if we fail to qualify as a REIT or fail to remain qualified as a REIT, we would be subject to tax at corporate income tax rates, which would substantially reduce funds available; (6) we could suffer adverse tax and other financial consequences if taxing authorities do not agree with our tax positions; (7) failure to make required distributions would subject us to additional federal corporate income tax, and we may be limited in our ability to fund these distributions using cash generated through our taxable REIT subsidiaries (TRSs); (8) certain of our business activities may be subject to corporate level income tax and foreign taxes, which reduce our cash flows, and we will have potential deferred and contingent tax liabilities; (9) complying with REIT requirements may limit our flexibility or cause us to forego otherwise attractive opportunities; (10) our extensive use of TRSs, in particular for our international operations, may cause us to fail to qualify as a REIT; (11) our foreign operations are subject to economic, political and other risks that could materially and adversely affect our revenues or financial position, including risks associated with fluctuations in foreign currency exchange rates; (12) our business is subject to government regulations and changes in current or future laws or regulations could restrict our ability to operate our business as we currently do; (13) a substantial portion of our revenue is derived from a small number of tenants; (14) due to the long-term expectations of revenue growth from tenant leases, we are sensitive to changes in the creditworthiness and financial strength of our tenants; (15) if we are unable to protect our rights to the land under our towers, it could adversely affect our business and operating results; (16) we may need additional financing to fund capital expenditures, future growth and expansion initiatives and to satisfy our REIT distribution requirements; (17) our leverage and debt service obligations may materially and adversely affect us; (18) restrictive covenants in the loan agreements related to our Securitization, the loan agreements for our credit facilities and the indentures governing our debt securities could materially and adversely affect our business by limiting flexibility; (19) increasing competition in the tower industry may create pricing pressures that may materially and adversely affect us; (20) if we are unable or choose not to exercise our rights to purchase towers that are subject to lease and sublease agreements at the end of the applicable period, our cash flows derived from such towers would be eliminated; (21) we may incur goodwill and other intangible impairment charges which may require us to record a significant charge to earnings; (22) we have limited experience operating as a REIT, which may adversely affect our financial condition, results of operations, cash flow, per share trading price of our common stock and ability to satisfy debt service obligations; (23) distributions payable by REITs generally do not qualify for reduced tax rates; (24) we could have liability under environmental and occupational safety and health laws; (25) our towers or data centers may be affected by natural disasters and other unforeseen events for which our insurance may not provide adequate coverage; and (26) our costs could increase and our revenues could decrease due to perceived health risks from radio emissions, especially if these perceived risks are substantiated. For additional information regarding factors that may cause actual results to differ materially from those indicated in our forward-looking statements, we refer you to the information contained in Item 1A of our Form 10-Q for the six months ended June 30, 2012. We undertake no obligation to update the information contained in this press release to reflect subsequently occurring events or circumstances.

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UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
 
September 30,December 31,
20122011(1)
ASSETS
Current assets:
Cash and cash equivalents$382,312$330,191
Restricted cash43,48242,770
Short-term investments and available-for-sale securities-22,270
Accounts receivable, net148,807100,792
Prepaid and other current assets270,541254,750
Deferred income taxes 27,641  29,596 
Total current assets 872,783  780,369 
Property and equipment, net5,242,7814,901,012
Goodwill2,763,7062,676,971
Other intangible assets, net2,595,0592,497,611
Deferred income taxes233,472207,044
Deferred rent asset731,343609,529
Notes receivable and other long-term assets 522,160  557,278 
Total$12,961,304 $12,229,814 
 
LIABILITIES:
Current liabilities:
Accounts payable$87,380$216,448
Accrued expenses334,034304,208
Distributions payable91,063-
Accrued interest74,34365,729
Current portion of long-term obligations130,209101,816
Unearned revenue 133,896  92,708 
Total current liabilities 850,925  780,909