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American Tower Corporation Reports First Quarter 2015 Financial ResultsAmerican Tower Corporation (NYSE:AMT) today reported financial results for the quarter ended March 31, 2015. Jim Taiclet, American Tower's Chief Executive Officer stated, "Our U.S. and international operations maintained strong leasing momentum through the first quarter of 2015, driving global Organic Core Growth of over 9%. We also completed the largest tower transaction in the domestic tower industry's history by adding over 11,400 Verizon assets to our portfolio. Additionally, in Latin America, we closed on nearly 4,200 TIM Brazil sites in April. Our regional management teams are intently focused on integrating these assets and closing our Airtel Nigeria transaction as quickly and efficiently as possible. These three portfolios solidify our strategic positioning in the most populous countries in North America, South America and EMEA, respectively, securing our ability to benefit from their vibrant wireless markets far into the future." FIRST QUARTER 2015 OPERATING RESULTS OVERVIEW American Tower generated the following operating results for the quarter ended March 31, 2015 (unless otherwise indicated, all comparative information is presented against the quarter ended March 31, 2014). Please note that the definitions of Core Growth, Organic Core Growth and New Property Core Growth now exclude the impacts of pass-through.
Segment Results Domestic Rental and Management Segment
International Rental and Management Segment
Network Development Services Segment
Please refer to "Non-GAAP and Defined Financial Measures" below for definitions of Gross Margin, Operating Profit, Operating Profit Margin, Adjusted EBITDA, Adjusted EBITDA Margin, NAREIT Funds From Operations, AFFO, AFFO per Share, Core Growth, Organic Core Growth, New Property Core Growth and Net Leverage Ratio. For additional financial information, including reconciliations to GAAP measures, please refer to the unaudited selected financial information below. INVESTING OVERVIEW Common Stock Distributions - During the quarter ended March 31, 2015, the Company paid its fourth quarter 2014 distribution of $0.38 per share, or a total of approximately $151 million, to common stockholders. Subsequent to the end of the first quarter, the Company paid its first quarter distribution of $0.42 per share, or a total of approximately $178 million, to common stockholders. Mandatory Convertible Preferred Stock Dividends - During the first quarter ended March 31, 2015, the Company paid its Series A Preferred Stock dividend of approximately $8 million. Subsequent to the end of the first quarter, the Company declared dividends attributable to its Series A and Series B Preferred Stock in an aggregate amount of $23 million, payable on May 15, 2015 to stockholders of record at the close of business on May 1, 2015. Cash Paid for Capital Expenditures - During the first quarter of 2015, total capital expenditures of $159 million included:
Cash Paid for Acquisitions - During the first quarter of 2015, the Company spent approximately $120 million to acquire 190 sites in the U.S. and six sites internationally. In addition to the 163 wireless communications sites the Company purchased from Verizon on March 27, 2015, which are reflected above, the Company also expanded its domestic portfolio by obtaining the exclusive right to lease or otherwise operate and manage 11,285 sites for a total cash payment of approximately $5.0 billion. American Tower funded the transaction with proceeds from its concurrent registered public offerings, borrowings under its revolving credit facilities and cash on hand. Subsequent to the end of the first quarter, the Company closed on 4,176 sites as part of its previously announced TIM Brazil transaction, for a total consideration of approximately $644 million and expects to close on the remaining sites over the next twelve months. The Company's previously announced Airtel Nigeria transaction is still expected to close during the second quarter of 2015. FINANCING OVERVIEW Leverage - For the quarter ended March 31, 2015, the Company's Net Leverage Ratio was approximately 5.3x net debt (total debt less cash and cash equivalents) to first quarter 2015 annualized Adjusted EBITDA. Liquidity - As of March 31, 2015, the Company had approximately $2.7 billion of total liquidity, comprised of the ability to borrow up to an aggregate of approximately $2.4 billion under its revolving credit facilities, net of outstanding letters of credit, and approximately $0.3 billion in cash and cash equivalents. Subsequent to the end of the first quarter, the Company completed the redemption of all of its outstanding 7.000% senior notes due 2017, at 114.0629% of the principal amount, plus accrued and unpaid interest. The total aggregate redemption price was approximately $571.7 million, including approximately $1.4 million in accrued interest. The redemption was funded with borrowings under the Company's existing credit facilities and cash on hand. FULL YEAR 2015 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 April 30, 2015. 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 raised the midpoint of its full year 2015 outlook for total rental and management revenue by $290 million, Adjusted EBITDA by $150 million and AFFO by $85 million. These estimates include the impacts of the Verizon transaction, which closed on March 27, 2015 and the first tranche of 4,176 TIM Brazil sites, which closed on April 29, 2015. The impacts of the approximately 2,300 TIM Brazil sites that have not yet closed are not included in our current outlook. We expect to close our Airtel Nigeria acquisition during the second quarter of 2015 and anticipate that the over 4,800 Airtel towers will contribute approximately $145 million in revenue, $38 million in Adjusted EBITDA and $22 million in AFFO in 2015, at current exchange rates. These contributions are not currently included in our outlook. The Company's outlook is based on the following average foreign currency exchange rates to 1.00 U.S. Dollar for the remainder of 2015: (a) 3.25 Brazilian Reais; (b) 640 Chilean Pesos; (c) 2,625 Colombian Pesos; (d) 0.95 Euros; (e) 3.75 Ghanaian Cedi; (f) 63.00 Indian Rupees; (g) 15.15 Mexican Pesos; (h) 3.15 Peruvian Soles; (i) 12.25 South African Rand; and (j) 3,000 Ugandan Shillings. The result of the updated foreign currency exchange rates assumptions versus our prior outlook was a reduction of approximately $75 million in rental and management revenue, $45 million in Adjusted EBITDA and $45 million in AFFO for the full year. These assumptions are based on the more conservative of: (a) the 30-day average spot rate; or (b) the average Bloomberg forecast for each currency.
(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) Reflects growth at the midpoint of outlook ranges. Excludes pass-through revenue. (2) Revenue growth attributable to sites added to the portfolio on or after January 1, 2014.
(1) Includes the construction of approximately 2,750 to 3,250 communications sites.
Conference Call Information American Tower will host a conference call today at 8:30 a.m. ET to discuss its financial results for the quarter ended March 31, 2015 and its outlook for 2015. 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: (877) 586-5042 When available, a replay of the call can be accessed until 11:59 p.m. ET on May 7, 2015. The replay dial-in numbers are as follows:
U.S./Canada dial-in: (855) 859-2056 American Tower will also sponsor a live simulcast and replay of the call on its website, www.americantower.com. About American Tower American Tower, one of the largest global REITs, is a leading independent owner, operator and developer of multitenant communications real estate with a portfolio of over 87,000 communications sites. For more information about American Tower, please visit the "Earnings Materials" and "Company & Industry Resources" sections of our investor relations website at 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, AFFO, AFFO per Share, Core Growth, Organic Core Growth, New Property 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, gain (loss) on retirement of long-term obligations, other income (expense), net income (loss) attributable to non-controlling interest, income (loss) on equity method investments and income tax benefit (provision). 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 benefit (provision), other income (expense), gain (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, real estate related depreciation, amortization and accretion and dividends on preferred stock, and including adjustments for (i) unconsolidated affiliates and (ii) noncontrolling interest. The Company defines AFFO 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, debt discounts and premiums and long-term deferred interest charges, (vi) other income (expense), (vii) gain (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 AFFO per Share as AFFO divided by the diluted weighted average common shares outstanding. The Company defines Core Growth in total rental and management revenue, Adjusted EBITDA and AFFO 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 pass-through revenue (expense), where applicable, straight-line revenue and expense recognition, foreign currency exchange rate fluctuations and significant one-time items. The Company defines Organic Core Growth in rental and management revenue 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 pass-through revenue (expense), straight-line revenue and expense recognition, foreign currency exchange rate fluctuations, significant one-time items and revenue associated with new properties that the Company has added to the portfolio since the beginning of the prior period. The Company defines New Property Core Growth in rental and management revenue as the increase or decrease, expressed as a percentage, on the properties the Company has added to its portfolio since the beginning of the prior period, in each case, excluding the impact of pass-through revenue (expense), 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, AFFO, AFFO per Share, Core Growth, Organic Core Growth, New Property 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 2015 outlook, foreign currency exchange rates, our expectation regarding the leasing demand for communications real estate and our anticipated closing dates of acquisitions. 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 share site infrastructure to a significant degree or consolidate or merge, our growth, revenue and ability to generate positive cash flows could be materially and adversely affected; (3) increasing competition for tenants in the tower industry may materially and adversely affect our pricing; (4) competition for assets could adversely affect our ability to achieve our return on investment criteria; (5) 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; (6) our leverage and debt service obligations may materially and adversely affect us; (7) failure to successfully and efficiently integrate acquired or leased assets, including those leased from Verizon, into our operations may adversely affect our business, operations and financial condition; (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; (9) 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; (10) 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; (11) new technologies or changes in a tenant's business model could make our tower leasing business less desirable and result in decreasing revenues; (12) if we fail to remain qualified as a REIT, we will be subject to tax at corporate income tax rates, which may substantially reduce funds otherwise available; (13) complying with REIT requirements may limit our flexibility or cause us to forego otherwise attractive opportunities; (14) certain of our business activities may be subject to corporate level income tax and foreign taxes, which reduce our cash flows and may create deferred and contingent tax liabilities; (15) we may need additional financing to fund capital expenditures, future growth and expansion initiatives and to satisfy our REIT distribution requirements; (16) if we are unable to protect our rights to the land under our towers, it could adversely affect our business and operating results; (17) 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 will be eliminated; (18) restrictive covenants in the agreements related to our securitization transactions, our credit facilities and our debt securities could materially and adversely affect our business by limiting flexibility, and we may be prohibited from paying dividends on our common stock if we fail to pay scheduled dividends on our preferred stock, which may jeopardize our qualification for taxation as a REIT; (19) our costs could increase and our revenues could decrease due to perceived health risks from radio emissions, especially if these perceived risks are substantiated; (20) we could have liability under environmental and occupational safety and health laws; and (21) our towers, data centers or computer systems may be affected by natural disasters and other unforeseen events for which our insurance may not provide adequate coverage. 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, 2014. We undertake no obligation to update the information contained in this press release to reflect subsequently occurring events or circumstances.
(1) December 31, 2014 balances have been revised to reflect purchase accounting measurement period adjustments.
(1) Excludes stock-based compensation expense.
(1) Pro Forma for the following activity in April 2015, (i) the redemption of all of the outstanding 7.000% senior notes due in 2017 in accordance with the terms thereof and (ii) net borrowings of $1,552 million under the 2013 Credit Facility, the proceeds of which, together with cash on hand, were used to fund the closing of the first tranche of TIM Brazil sites, redeem the 7.000% senior notes, fund our Q1 common stock distribution and will also be used to repay the Mexican Loan. (2) The GTP Notes are secured debt and were assumed in connection with the acquisition. (3) The Unison Notes are secured debt and were assumed in connection with the acquisition. (4) Denominated in local currency. (5) The BR Towers debentures were assumed in connection with the acquisition. (6) Reflects balances attributable to minority shareholder loans in the Company's joint ventures in Ghana and Uganda. The Ghana shareholder loan is denominated in Ghanaian Cedi and the Uganda shareholder loan is denominated in USD.
(1) As of March 31, 2015, excludes (a) 4.2 million potentially dilutive common shares associated with vested and exercisable stock options with an average exercise price of $54.08 per common share, (b) 4.2 million potentially dilutive common shares associated with unvested stock options, (c) 1.7 million potentially dilutive common shares associated with unvested restricted stock units and (d) the potentially dilutive common shares associated with the Company's preferred stock.
(1) In accordance with GAAP, the Company recognizes rental and management revenue and expense related to non-cancellable tenant and ground lease agreements with fixed escalations on a straight-line basis, over the applicable lease term. As a result, the Company's revenue recognized may differ materially from the amount of cash collected per tenant lease, and the Company's expense incurred may differ materially from the amount of cash paid per ground lease. Additional information regarding straight-line accounting can be found in the Company's Annual Report on Form 10-K for the year ended December 31, 2014 in the section entitled "Revenue Recognition," in note 1, "Business and Summary of Significant Accounting Policies" within the notes to the consolidated financial statements. The above table sets forth a summary of total rental and management straight-line revenue and expense, which represents the non-cash revenue and expense recorded due to straight-line recognition.
(1) Reflects cash received for capital contributions and prepayments associated with long-term tenant leases and amortization of GAAP revenue associated with the leases corresponding to the capital contributions or prepayments. (2) Includes the impact of fluctuations in foreign currency exchange rates.
The following table reflects the estimated impact of foreign currency exchange rate fluctuations, pass-through revenue (expense), straight-line revenue and expense recognition and material one-time items on total rental and management revenue, Adjusted EBITDA and AFFO: The calculation of Core Growth is as follows:
The components of Core Growth in rental and management revenue are as follows:
(1) Revenue growth attributable to sites added to the portfolio on or after January 1, 2014.
(1) Excludes in-building and outdoor distributed antenna system networks.
(1) Primarily includes unrealized losses on foreign currency exchange rate fluctuations. (2) Primarily includes acquisition related costs, integration costs, losses from sale of assets and impairment charges.
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