American Tower Corporation Reports First Quarter 2013 Financial Results
FIRST QUARTER 2013 HIGHLIGHTS
Total revenue increased 15.2% to $802.7 million
Operating income increased 9.2% to $299.7 million
Cash provided by operating activities decreased 2.0% to $394.0 million
Domestic rental and management segment revenue increased 5.9% to $515.7 million
International rental and management segment revenue increased 32.9% to $261.8 million
Network development services segment revenue was $25.3 million
Jim Taiclet, American Tower's Chief Executive Officer stated, "Our strong first quarter results, enhanced network investment programs announced by wireless carriers in the U.S. and around the world, and my recent interactions with our field teams on the ground all confirm continuing robust demand for tower space. Leading the charge toward pervasive 4G services are our four major U.S. tenants, who we believe will need to substantially upgrade their existing networks to meet the capacity and elevated signal quality required to deliver services such as LTE video and voice over IP."
FIRST QUARTER 2013 OPERATING RESULTS OVERVIEW
American Tower generated the following operating results for the quarter ended March 31, 2013 (unless otherwise indicated, all comparative information is presented against the quarter ended March 31, 2012).
Total revenue increased 15.2% to $802.7 million and total rental and management revenue increased 13.7% to $777.4 million. Total rental and management revenue Core Growth was approximately 20.3%. Please refer to the selected statement of operations detail on page 13, which highlights the items affecting all Core Growth percentages for the quarter ended March 31, 2013.
Total rental and management Gross Margin increased 12.6% to $589.9 million. Total selling, general, administrative and development expense was $101.2 million, including $20.6 million of stock-based compensation expense. Adjusted EBITDA increased 13.4% to $524.4 million, Core Growth in Adjusted EBITDA was 19.6%, and the Adjusted EBITDA Margin was 65%.
Adjusted Funds From Operations (AFFO) increased 9.9% to $357.8 million, Core Growth in AFFO was approximately 20.9%, and AFFO per Share increased 9.8% to $0.90. AFFO reflects the impact of the introduction of a new category of capital expenditures, "Start-Up Capital Projects," as further described below.
Operating income increased 9.2% to $299.7 million, while net income attributable to American Tower Corporation decreased 22.5% to $171.4 million. The decrease was primarily attributable to the $35.3 million loss on retirement of long-term obligations related to the refinancing of the Company's $1.75 billion securitization and a year over year decline in unrealized foreign currency gains of $33.7 million. Net income attributable to American Tower Corporation per both basic and diluted common share decreased 23.2% to $0.43.
Cash provided by operating activities decreased 2.0% to $394.0 million, which was primarily attributable to non-recurring tax refunds received in the first quarter of 2012.
Domestic Rental and Management Segment - Domestic rental and management segment revenue increased 5.9% to $515.7 million, which represented 64% of total revenues and reflects the positive impact of two non-recurring items during the first quarter of 2012. These items include a tenant billing settlement of $6.0 million and a lease termination settlement of $9.6 million. In addition, domestic rental and management segment Gross Margin increased 7.6% to $423.8 million, while domestic rental and management segment Operating Profit increased 7.0% to $400.9 million.Domestic rental and management segment Operating Profit Margin was 78%.
International Rental and Management Segment - International rental and management segment revenue increased 32.9% to $261.8 million, which represented 33% of total revenues. International rental and management segment pass-through revenues increased 43.2% to $69.7 million. In addition, international rental and management segment Gross Margin increased 27.8% to $166.1 million, while international rental and management segment Operating Profit increased 28.8% to $136.5 million.International rental and management segment Operating Profit Margin was 52% (71%, excluding the impact of $69.7 million of pass-through revenues).
Network Development Services Segment - Network development services segment revenue was $25.3 million, which represented 3% of total revenues. Network development services segment Gross Margin was $15.0 million, and network development services segment Operating Profit was $12.1 million. Network development services segment Operating Profit Margin was 48%.
Please refer to "Non-GAAP and Defined Financial Measures" on pages 5 and 6 for definitions of Gross Margin, Operating Profit, Operating Profit Margin, Adjusted EBITDA, Adjusted EBITDA Margin, NAREIT 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 11 through 14.
Distributions - On April 25, 2013, the Company paid its first quarter distribution to stockholders of record at the close of business on April 10, 2013 of $0.26 per share, or approximately $102.8 million.
Cash Paid for Capital Expenditures - During the first quarter of 2013,total capital expenditures of $123.9 million included $57.3 million for discretionary capital projects, including spending to complete the construction of 48 towers and the installation of 3 distributed antenna system networks and 124 shared generators domestically and the construction of 393 towers and the installation of 8 distributed antenna system networks internationally; $14.8 million to purchase land under the Company's communications sites; $21.7 million for the redevelopment of existing communications sites to accommodate new tenant equipment; and $23.4 million for capital improvements and corporate capital expenditures.
To provide further transparency of capital expenditures incurred in connection with recently announced new markets or acquisitions, the Company is introducing a new category of capital expenditures, "Start-Up Capital Projects." Included in this category are expenditures that are specific to acquisitions and new market launches and that are contemplated in the business cases for these investments. Examples of these costs include spending to upgrade acquired assets for security purposes or meet Company structural specifications or to open offices within the local market. During the first quarter of 2013, spending on Start-Up Capital Projects totaled $6.7 million.
Cash Paid for Acquisitions - During the first quarter of 2013, the Company spent $245.1 million for the purchase of 2 domestic towers and 898 international towers. These international towers consisted of those acquired pursuant to previously announced agreements, including 885 towers in Mexico and 13 towers in Colombia. During the first quarter of 2013, the Company added 20 towers to its domestic portfolio as part of a previously announced transaction. The construction of these sites, which were acquired as work in progress sites during the fourth quarter of 2012, was completed in the first quarter of 2013.
Stock Repurchase Program - During the first quarter of 2013, the Company repurchased a total of approximately 0.2 million shares of its common stock for approximately $12.5 million pursuant to its stock repurchase program. Between April 1, 2013 and April 19, 2013, the Company repurchased approximately 0.2 million additional shares of its common stock for an aggregate of approximately $16.1 million.
Leverage - For the quarter ended March 31, 2013, the Company's net leverage ratio was approximately 4.0x net debt (total debt less cash and cash equivalents) to first quarter 2013 annualized Adjusted EBITDA.
Liquidity - As of March 31, 2013, the Company had approximately $2.1 billion of total liquidity, comprised of approximately $441.7 million in cash and cash equivalents and the ability to borrow an aggregate of approximately $1.7 billion under its two revolving credit facilities, net of any outstanding letters of credit.
In March 2013, the Company completed the refinancing of its $1.75 billion securitization with the proceeds from the private offering of $1.8 billion aggregate principal amount of Secured Tower Revenue Securities, Series 2013-1A and Series 2013-2A. As a result, the weighted average maturity was extended to 8.6 years and the weighted average interest rate was reduced to 2.648%.
FULL YEAR 2013 OUTLOOK
The following estimates are based on a number of assumptions that management believes to be reasonable and reflect the Company's expectations as of May 1, 2013. Actual results may differ materially from these estimates as a result of various factors, and the Company refers you to the cautionary language regarding "forward-looking" statements included in this press release when considering this information.
The Company's outlook has been updated to reflect the issuance of the Secured Tower Revenue Securities; the introduction of a new category of capital expenditures, "Start-up Capital Projects"; and is based on the following average foreign currency exchange rates to 1.00 U.S. Dollar for the remainder of the year 2013: (a) 2.00 Brazilian Reais; (b) 475.00 Chilean Pesos; (c) 1,800.00 Colombian Pesos; (d) 0.78 Euros; (e) 1.90 Ghanaian Cedi; (f) 54.00 Indian Rupees; (g) 12.25 Mexican Pesos; (h) 2.55 Peruvian Soles; (i) 9.00 South African Rand; and (j) 2,600.00 Ugandan Schillings.
($ in millions)
Full Year 2013
Total rental and management revenue
Adjusted EBITDA (1)
Adjusted Funds From Operations(1)
(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 $2,080 million; and (2) international rental and management segment revenue of $1,105 million, which includes approximately $285 million of pass-through revenue.
The calculation of midpoint Core Growth is as follows:
Total Rental and
Outlook midpoint Core Growth
Estimated impact of fluctuations in foreign currency exchange rates
Impact of straight-line revenue and expense recognition
Impact of significant one-time items
Outlook midpoint growth
Outlook for Capital Expenditures:
($ in millions)
(Totals may not add due to rounding.)
Full Year 2013
Discretionary capital projects(1)
Ground lease purchases
Start-up capital projects(2)
(1) Includes the construction of approximately 2,250 to 2,750 new communications sites.
(2) Includes costs associated with acquisitions and newly launched markets.
Reconciliations of Outlook for Net Income to Adjusted EBITDA:
($ in millions)
Full Year 2013
Depreciation, amortization and accretion
Stock-based compensation expense
Other, including other operating expenses, interest income, loss on retirement of long-term
Reconciliations of Outlook for Net Income to Adjusted Funds From Operations:
($ in millions)
(Totals may not add due to rounding.)
Full Year 2013
Depreciation, amortization and accretion
Stock-based compensation expense
Non-cash portion of tax provision
Other, including other operating expenses, interest expense, amortization of deferred financing
Capital improvement capital expenditures
Corporate capital expenditures
Adjusted Funds From Operations
Conference Call Information
American Tower will host a conference call today at 8:30 a.m. ET to discuss its financial results for the first quarter ended March 31, 2013 and its outlook for the full year 2013. 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
When available, a replay of the call can be accessed until 11:59 p.m. ET on May 15, 2013. The replay dial-in numbers are as follows:
U.S./Canada dial-in: (855) 859-2056
International dial-in: (404) 537-3406
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 owner, operator and developer of wireless and broadcast communications real estate. American Tower currently owns and operates approximately 56,000 communications sites in the United States, Brazil, Chile, Colombia, Germany, 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, NAREIT Funds From Operations, Adjusted Funds From Operations, Adjusted Funds From Operations per Share, Core Growth and Net Leverage Ratio. The Company uses Funds From Operations as defined by the National Association of Real Estate Investment Trusts (NAREIT), referred to herein as NAREIT Funds From Operations.
The Company defines Gross Margin as revenues less 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 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 and income taxes. 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. NAREIT Funds From Operations is defined as net income before gains or losses from the sale or disposal of real estate, real estate related impairment charges and real estate related depreciation, amortization and accretion, and including adjustments for unconsolidated affiliates and noncontrolling interest. The Company defines Adjusted Funds From Operations as NAREIT Funds From Operations before straight-line revenue and expense, stock-based compensation expense, the non-cash portion of our tax provision, non-real estate related depreciation, amortization and accretion, amortization of deferred financing costs, capitalized interest and debt discounts and premiums, other (income) expense, loss on retirement of long-term obligations, other operating (income) expense, unconsolidated affiliates, and noncontrolling interest, 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. 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, NAREIT 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 2013 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) new technologies or changes in a tenant's business model could make our tower leasing business less desirable and result in decreasing revenues; (3) 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; (4) 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; (5) we could suffer adverse tax or other financial consequences if taxing authorities do not agree with our tax positions; (6) a substantial portion of our revenue is derived from a small number of tenants, and we are sensitive to changes in the creditworthiness and financial strength of our tenants; (7) 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; (8) our expansion initiatives involve a number of risks and uncertainties that could adversely affect our operating results, disrupt our operations or expose us to additional risk if we are not able to successfully integrate operations, assets and personnel; (9) if we are unable to protect our rights to the land under our towers, it could adversely affect our business and operating results; (10) increasing competition in the tower industry may create pricing pressures that may materially and adversely affect us; (11) 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; (12) if we elect not 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 otherwise available; (13) we may be limited in our ability to fund required distributions using cash generated through our TRSs; (14) complying with REIT requirements may limit our flexibility or cause us to forego otherwise attractive opportunities; (15) certain of our business activities may be subject to corporate level income tax and foreign taxes, which reduce our cash flows, and may have deferred and contingent tax liabilities; (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 agreement related to our securitization transaction, 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) we may incur goodwill and other intangible asset impairment charges which could result in a significant reduction to our earnings; (20) we have limited experience operating as a REIT, which may adversely affect our financial condition, results of operations, cash flow and ability to satisfy debt service obligations; (21) we could have liability under environmental and occupational safety and health laws; (22) 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 (23) 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-K for the year ended December 31, 2012. We undertake no obligation to update the information contained in this press release to reflect subsequently occurring events or circumstances.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
Cash and cash equivalents
Accounts receivable, net
Prepaid and other current assets
Deferred income taxes
Total current assets
Property and equipment, net
Other intangible assets, net
Deferred income taxes
Deferred rent asset
Notes receivable and other non-current assets
Current portion of long-term obligations
Total current liabilities
Asset retirement obligations
Other non-current liabilities
COMMITMENTS AND CONTINGENCIES
Additional paid-in capital
Distributions in excess of earnings