American Tower Corporation Reports Second Quarter and First Half 2013 Financial Results

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American Tower Corporation Reports Second Quarter and First Half 2013 Financial Results

Consolidated Highlights


Second Quarter 2013

  • Total revenue increased 15.9% to $808.8 million
  • Operating income increased 15.6% to $312.8 million
  • Cash provided by operating activities increased 8.2% to $390.5 million

First Half 2013

  • Total revenue increased 15.6% to $1,611.6 million
  • Operating income increased 12.4% to $612.5 million
  • Cash provided by operating activities increased 2.8% to $784.5 million

Segment Highlights

Second Quarter 2013

  • Domestic rental and management segment revenue increased 10.1% to $521.0 million
  • International rental and management segment revenue increased 28.4% to $268.2 million
  • Network development services segment revenue was $19.6 million

First Half 2013

  • Domestic rental and management segment revenue increased 7.9% to $1,036.7 million
  • International rental and management segment revenue increased 30.6% to $529.9 million
  • Network development services segment revenue was $44.9 million

BOSTON--(BUSINESS WIRE)-- American Tower Corporation (NYS: AMT) today reported financial results for the quarter ended June 30, 2013.

Jim Taiclet, American Tower's Chief Executive Officer stated, "During the second quarter of 2013, our Core results significantly outperformed our internal expectations as demand for tower space drove robust leasing activity across our global portfolio. The combination of our extensive, high quality asset base and long-term master lease agreements with leading mobile operators resulted in strong growth in each of our key operating metrics.

"We expect the favorable leasing trends we have seen so far this year to continue generating solid Core performance, offsetting potential headwinds from the translation of foreign currency exchange rates. As a result, we are reaffirming our full year outlook for total rental and management revenue and raising our full year outlook for Adjusted EBITDA by $5 million and AFFO by $10 million."

SECOND QUARTER 2013 OPERATING RESULTS OVERVIEW

American Tower generated the following operating results for the quarter ended June 30, 2013 (unless otherwise indicated, all comparative information is presented against the quarter ended June 30, 2012).

Total revenue increased 15.9% to $808.8 million and total rental and management revenue increased 15.7% to $789.2 million. Total rental and management revenue Core Growth was approximately 18.1%. 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 June 30, 2013.

Total rental and management Gross Margin increased 14.2% to $594.8 million. Total selling, general, administrative and development expense was $99.8 million, including $16.6 million of stock-based compensation expense. Adjusted EBITDA increased 12.5% to $524.0 million, Core Growth in Adjusted EBITDA was 14.7%, and Adjusted EBITDA Margin was 65%.

As previously disclosed, during the second quarter of 2012, the Company's results were positively impacted by the reversal of approximately $4.9 million of revenue reserves and approximately $3.8 million of bad debt expense reserves, attributable to one of the Company's tenants in Mexico.

Adjusted Funds From Operations (AFFO) increased 19.5% to $366.2 million, which includes the receipt of a one-time income tax refund during the quarter ended June 30, 2013 of $4.5 million in one of the Company's international markets. AFFO per Share increased 19.5% to $0.92, and Core Growth in AFFO was approximately 18.2%.

Operating income increased 15.6% to $312.8 million, and net income attributable to American Tower Corporation increased 107.1% to $99.8 million. Net income attributable to American Tower Corporation per both basic and diluted common share increased 108.3% to $0.25.

Cash provided by operating activities increased 8.2% to $390.5 million.

Segment Results

Domestic Rental and Management Segment- Domestic rental and management segment revenue increased 10.1% to $521.0 million, which represented 64% of total revenues, and domestic rental and management segment Gross Margin increased 10.5% to $425.8 million. Domestic rental and management segment Operating Profit increased 10.3% to $401.6 million, and domestic rental and management segment Operating Profit Margin was 77%.

International Rental and Management Segment- International rental and management segment revenue increased 28.4% to $268.2 million, which represented 33% of total revenues. International rental and management segment Gross Margin increased 24.5% to $169.0 million, while international rental and management segment Operating Profit increased 17.5% to $136.5 million. International rental and management segment Operating Profit Margin was 51% (69%, excluding the impact of $71.3 million of pass-through revenues).

Network Development Services Segment- Network development services segment revenue was $19.6 million, which represented 3% of total revenues. Network development services segment Gross Margin was $12.3 million, and network development services segment Operating Profit was $10.0 million. Network development services segment Operating Profit Margin was 51%.

FIRST HALF 2013 OPERATING RESULTS OVERVIEW

American Tower generated the following operating results for the six months ended June 30, 2013 (unless otherwise indicated, all comparative information is presented against the six months ended June 30, 2012).

Total revenue increased 15.6% to $1,611.6 million and total rental and management revenue increased 14.7% to $1,566.6 million. Total rental and management revenue Core Growth was approximately 19.2%. Please refer to the selected statement of operations detail on page 13, which highlights the items affecting all Core Growth percentages for the six months ended June 30, 2013.

Total rental and management Gross Margin increased 13.4% to $1,184.8 million. Total selling, general, administrative and development expense was $201.0 million, including $37.3 million of stock-based compensation expense. Adjusted EBITDA increased 12.9% to $1,048.4 million, Core Growth in Adjusted EBITDA was 17.1%, and the Adjusted EBITDA Margin was 65%.

AFFO increased 14.6% to $724.0 million, AFFO per Share increased 14.6% to $1.81, and Core Growth in AFFO was approximately 19.6%.

Operating income increased 12.4% to $612.5 million, while net income attributable to American Tower Corporation increased 0.6% to $271.2 million. Net income attributable to American Tower Corporation per basic common share increased 1.5% to $0.69, and net income attributable to American Tower Corporation per diluted common share remained at $0.68.

Cash provided by operating activities increased 2.8% to $784.5 million.

Segment Results

Domestic Rental and Management Segment- Domestic rental and management segment revenue increased 7.9% to $1,036.7 million, which represented 64% of total revenues. Domestic rental and management segment Gross Margin increased 9.0% to $849.7 million, while domestic rental and management segment Operating Profit increased 8.6% to $802.5 million. Domestic rental and management segment Operating Profit Margin was 77%.

International Rental and Management Segment- International rental and management segment revenue increased 30.6% to $529.9 million, which represented 33% of total revenues. International rental and management segment Gross Margin increased 26.1% to $335.1 million, while international rental and management segment Operating Profit increased 22.8% to $273.0 million. International rental and management segment Operating Profit Margin was 52% (70%, excluding the impact of $140.9 million of pass-through revenues).

Network Development Services Segment- Network development services segment revenue was $44.9 million, which represented 3% of total revenues. Network development services segment Gross Margin was $27.3 million, and network development services segment Operating Profit was $22.1 million. Network development services segment Operating Profit Margin was 49%.

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.

INVESTING OVERVIEW

Distributions - On July 16, 2013, the Company paid its second quarter distribution of $0.27 per share, or a total of approximately $106.7 million, to stockholders of record at the close of business on June 17, 2013.

During the first half of 2013, the Company declared an aggregate of $0.53 per share in distributions, or a total of approximately $209.5 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 second quarter of 2013, total capital expenditures of $156.7 million included $72.9 million for discretionary capital projects, including spending to complete the construction of 96 towers and the installation of 3 distributed antenna system networks and 224 shared generators domestically and the construction of 303 towers and the installation of 17 distributed antenna system networks internationally; $17.1 million to purchase land under the Company's communications sites; $7.8 million for start-up capital projects in recently launched markets; $23.4 million for the redevelopment of existing communications sites to accommodate new tenant equipment; and $35.6 million for capital improvements and corporate capital expenditures.

During the first half of 2013, total capital expenditures of $280.6 million included $130.1 million for discretionary capital projects, including spending to complete the construction of 144 towers and the installation of 6 distributed antenna system networks and 348 shared generators domestically and the construction of 696 towers and the installation of 25 distributed antenna system networks internationally; $31.9 million to purchase land under the Company's communications sites; $14.5 million for start-up capital projects in recently launched markets; $45.1 million for the redevelopment of existing communications sites to accommodate new tenant equipment; and $59.0 million for capital improvements and corporate capital expenditures.

Cash Paid for Acquisitions- During the second quarter of 2013, the Company spent $66.1 million for the purchase of 34 domestic towers and 119 international towers. The international towers consisted of those acquired pursuant to previously announced agreements, including 93 towers in Brazil and 26 towers in Colombia.

During the first half of 2013, the Company spent $311.2 million for the purchase of 36 domestic towers and 1,017 international towers.

Stock Repurchase Program - During the second quarter of 2013, the Company repurchased a total of approximately 0.8 million shares of its common stock for approximately $62.1 million pursuant to its stock repurchase program. Between July 1, 2013 and July 19, 2013, the Company repurchased an additional approximately 0.2 million shares of its common stock for an aggregate of approximately $18.2 million.

During the first half of 2013, the Company repurchased a total of approximately 1.0 million shares of its common stock for approximately $74.6 million pursuant to its stock repurchase program.

FINANCING OVERVIEW

Leverage- For the quarter ended June 30, 2013, the Company's net leverage ratio was approximately 4.0x net debt (total debt less cash and cash equivalents) to second quarter 2013 annualized Adjusted EBITDA.

Liquidity- As of June 30, 2013, the Company had approximately $2.6 billion of total liquidity, comprised of approximately $448.4 million in cash and cash equivalents, plus the ability to borrow an aggregate of approximately $2.2 billion under its two revolving credit facilities, net of any outstanding letters of credit.

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 July 31, 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.

As reflected in the table below, the Company has reaffirmed the midpoint of its full year 2013 outlook for total rental and management revenue and increased the midpoint of its full year 2013 outlook for Adjusted EBITDA by $5 million and AFFO by $10 million.

The Company's outlook is based on the following average foreign currency exchange rates to 1.00 U.S. Dollar for the second half of 2013: (a) 2.20 Brazilian Reais; (b) 500.00 Chilean Pesos; (c) 1,900.00 Colombian Pesos; (d) 0.78 Euros; (e) 2.05 Ghanaian Cedi; (f) 59.00 Indian Rupees; (g) 12.60 Mexican Pesos; (h) 2.70 Peruvian Soles; (i) 10.00 South African Rand; and (j) 2,600.00 Ugandan Schillings.

      
($ in millions)Full Year 2013Midpoint

Growth

Midpoint Core
Growth

 
Total rental and management revenue$3,160 to $3,21013.6%17.8%
Adjusted EBITDA(1)$2,085to$2,13511.5%16.0%
Adjusted Funds From Operations(1)$1,430to$1,48019.0%21.3%
Net Income$655to$69513.6%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 $2,100 million; and (2) international rental and management segment revenue of $1,085 million, which includes approximately $292 million of pass-through revenue.

The calculation of midpoint Core Growth is as follows:
(Totals may not add due to rounding.)

   

Total Rental and
Management

Revenue

Adjusted

EBITDA

AFFO
Outlook midpoint Core Growth17.8%16.0%21.3%
Estimated impact of fluctuations in foreign currency exchange rates(1.6)%(1.1)%(1.3)%
Impact of straight-line revenue and expense recognition(1.9)%(2.4)%
Impact of significant one-time items(0.7)%(1.0)%(0.8)%
Outlook midpoint growth13.6%11.5%19.0%
 
    
Outlook for Capital Expenditures:
($ in millions)
(Totals may not add due to rounding.)Full Year 2013
Discretionary capital projects(1)$210to$270
Ground lease purchases85to105
Start-up capital projects2020
Redevelopment95to105
Capital improvement(2)85to95
Corporate30 30
Total$525 to$625
 

(1) Includes the construction of approximately 1,750 to 2,250 new communications sites.

(2) Includes spending related to a lighting system upgrade in the U.S. of approximately $15 million.

 
Reconciliations of Outlook for Net Income to Adjusted EBITDA:
($ in millions) 
(Totals may not add due to rounding.)Full Year 2013
Net income$655  to $695
Interest expense420to410
Depreciation, amortization and accretion755to735
Income tax provision35to50
Stock-based compensation expense65to70
Other, including other operating expenses, interest income, loss on retirement of long-term obligations, (income) loss on equity method investments and other (income) expense155 to175

Adjusted EBITDA

$2,085 to$2,135
 
 
Reconciliations of Outlook for Net Income to Adjusted Funds From Operations:
($ in millions) 
(Totals may not add due to rounding.)Full Year 2013
Net income$655 to $695
Straight-line revenue(139)(139)
Straight-line expense3232
Depreciation, amortization and accretion755to735
Stock-based compensation expense65to70
Non-cash portion of tax provision(16)to(1)
Other, including other operating expenses, interest expense, amortization of deferred financing costs, capitalized interest, debt discounts and premiums, loss on retirement of long-term obligations, other (income) expense and non-cash interest related to joint venture shareholder loans193to213
Capital improvement capital expenditures(85)to(95)
Corporate capital expenditures(30)(30)
Adjusted Funds From Operations$1,430 to$1,480 
 

Conference Call Information

American Tower will host a conference call today at 8:30 a.m. ET to discuss its financial results for the second quarter and six months ended June 30, 2013 and its outlook for 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
Passcode: 17956884

When available, a replay of the call can be accessed until 11:59 p.m. ET on August 14, 2013. The replay dial-in numbers are as follows:

U.S./Canada dial-in: (855) 859-2056
International dial-in: (404) 537-3406
Passcode: 17956884

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 over 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) on 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 income (expense), 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 (i) unconsolidated affiliates and (ii) noncontrolling interest. The Company defines Adjusted Funds From Operations as NAREIT Funds From Operations before (i) straight-line revenue and expense, (ii) stock-based compensation expense, (iii) the non-cash portion of our tax provision, (iv) non-real estate related depreciation, amortization and accretion, (v) amortization of deferred financing costs, capitalized interest and debt discounts and premiums, (vi) other income (expense), (vii) loss on retirement of long-term obligations, (viii) other operating income (expense); and adjustments for (ix) unconsolidated affiliates and (x) 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-Q for the quarter ended March 31, 2013. 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

(In thousands)

 

June 30, 2013

December 31, 2012(1)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$448,447$368,618
Restricted cash97,27769,316
Short-term investments14,2576,018
Accounts receivable, net130,861143,772
Prepaid and other current assets232,436222,895
Deferred income taxes22,773 25,754 
Total current assets946,051 836,373 
Property and equipment, net5,811,0815,766,254
Goodwill2,832,3922,850,573
Other intangible assets, net3,214,3833,197,640
Deferred income taxes216,463209,589
Deferred rent asset842,093776,201
Notes receivable and other non-current assets476,931 452,788 
TOTAL$14,339,394 $
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