American tower corporation reports third
quarter 2015 financial results
Boston--(business wire)--american tower corporation (nyse:amt) today reported financial results for the quarter ended september 30, 2015. jim taiclet, american tower's chief executive officer stated, "our nearly 14% growth in affo per share in the third quarter was fueled by continuing exponential growth in mobile data demand in both the u.s. and in our international markets. we believe that this growth in demand will go on for many years to come, driven by a combination of lower cost smartphones proliferating around the world, additional spectrum being deployed for mobile data and the competitive imperative for mobile operators to steadily invest in their networks. our strategic objective is to capture this long-term growth opportunity by building strong positions in the world’s largest free market economies with attractive wireless industry structures. so far in 2015, we have made tremendous progress on expanding american tower’s global growth platform through our acquisitions of rights to the verizon towers in the u.s., telecom italia’s towers in brazil, airtel’s portfolio in nigeria and our recently announced viom transaction in india. we expect that these strategically located assets will further lengthen and strengthen our affo per share growth trajectory well into the future." third quarter 2015 operating results overview american tower generated the following operating results for the quarter ended september 30, 2015 (unless otherwise indicated, all comparative information is presented against the quarter ended september 30, 2014). total revenue increased 19.2% to $1,238 million, and total rental and management revenue increased 20.0% to $1,213 million. total rental and management revenue core growth was approximately 27.4%, and total rental and management organic core growth was approximately 7.3%. total rental and management gross margin increased 16.0% to $860 million, and total rental and management gross margin percentage was 71%. adjusted ebitda increased 17.0% to $779 million, core growth in adjusted ebitda was 26.0%, and adjusted ebitda margin was 63%. adjusted funds from operations (affo) increased 21.4% to $558 million, affo per share increased 13.9% to $1.31, and core growth in affo was approximately 32.6%, each of which excludes the impact of the one-time gtp cash tax payment described below. the company incurred one-time cash costs of approximately $93 million in the third quarter in connection with its previously disclosed tax election, pursuant to which global tower partners (gtp) reit was folded into the american tower reit and no longer operates as a separate reit for federal and state income tax purposes. net income attributable to american tower common stockholders decreased 61.9% to $76 million, and net income attributable to american tower common stockholders per both basic and diluted common share decreased to $0.18. the decreases were primarily attributable to the one-time gtp cash tax item as well as the non-cash impacts of unfavorable foreign currency exchange rate fluctuations on intercompany balances. cash provided by operating activities decreased 1.7% to $1,544 million for the first nine months of 2015. segment results domestic rental and management segment revenue increased 21.8% to $808 million; organic core growth in revenue was 6.0%; gross margin increased 17.2% to $621 million; gross margin percentage was 77%; operating profit increased 18.2% to $589 million, which represented 73% of total operating profit; and operating profit margin was 73%. international rental and management segment revenue increased 16.5% to $405 million, and core growth in revenue was 43.5%; organic core growth in revenue was 10.7%; gross margin increased 12.9% to $240 million; gross margin percentage was 59% (84% excluding the impact of $119 million of pass-through revenues); operating profit increased 14.6% to $205 million, which represented 25% of total operating profit; and operating profit margin was 51% (72% excluding the impact of pass-through revenues). network development services segment revenue was $25 million; gross margin was $16 million; gross margin percentage was 63%; operating profit was $12 million, which represented 2% of total operating profit; and operating profit margin was 48%. 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. capital allocation overview common stock distributions – during the third quarter of 2015, the company paid its second quarter 2015 distribution of $0.44 per share, or a total of approximately $186 million, to common stockholders. subsequent to the end of the third quarter, the company paid its third quarter distribution of $0.46 per share, or a total of approximately $195 million, to common stockholders. mandatory convertible preferred stock dividends – during the third quarter of 2015, the company paid an aggregate amount of approximately $27 million in series a and series b preferred stock dividends. subsequent to the end of the third quarter, the company declared dividends on its series a and series b preferred stock in an aggregate amount of approximately $27 million, payable on november 16, 2015 to such stockholders of record at the close of business on november 1, 2015. cash paid for capital expenditures – during the third quarter of 2015, total capital expenditures of $207 million included: $71 million for discretionary capital projects, including spending to complete the construction of 22 towers and the installation of two distributed antenna system networks domestically and the construction of 737 towers and the installation of nine distributed antenna system networks internationally; $38 million to purchase land under the company’s communications sites; $28 million for start-up capital projects; $43 million for the redevelopment of existing communications sites to accommodate new tenant equipment; and $27 million for capital improvements and corporate capital expenditures. cash paid for acquisitions – during the third quarter of 2015, the company spent approximately $946 million to acquire five sites in the u.s. and 6,206 sites internationally. this included the company’s acquisition of 4,700 communications sites in nigeria in the third quarter, as part of its previously announced transaction with bharti airtel, for a total consideration of approximately $1.1 billion, including vat. of the purchase price, approximately $807 million of the consideration has been paid, with the remainder to be paid prior to january 15, 2016. further, on september 30, 2015, the company closed on an additional 1,125 communications sites in brazil as part of a previously announced transaction with tim celular s.a., for an aggregate purchase price of approximately brl 517 million (approximately $131 million at the date of acquisition). subsequent to the end of the third quarter, the company announced that one of its wholly owned subsidiaries had entered into a definitive agreement to acquire a 51% controlling interest in viom networks limited, which owns and operates approximately 42,200 wireless communications towers and 200 indoor distributed antenna systems across india, for a total cash consideration of approximately inr 76 billion (approximately $1,157 million assuming an exchange rate of 66 inr per usd). the company expects the transaction to close in mid-2016. financing overview leverage – for the quarter ended september 30, 2015, the company’s net leverage ratio was approximately 5.4x net debt (total debt less cash and cash equivalents) to third quarter 2015 annualized adjusted ebitda. liquidity – as of september 30, 2015, the company had approximately $2.0 billion of total liquidity, comprised of the ability to borrow up to an aggregate of approximately $1.7 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 quarter, the company extended the maturity dates of its 2014 credit facility, 2013 credit facility and term loan to january 29, 2021, june 28, 2019 and january 29, 2021, respectively. 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 october 29, 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. the company’s current outlook reflects unfavorable impacts of foreign currency fluctuations of approximately $56 million for total rental and management revenue, $30 million for adjusted ebitda and $28 million for affo, relative to the foreign exchange rate assumptions used in the company's prior outlook. after incorporating these impacts, the company has reduced the midpoint of its full year 2015 outlook for total rental and management revenue by $20 million, and raised the midpoint 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 fourth quarter of 2015: (a) 3.95 brazilian reais; (b) 695 chilean pesos; (c) 3,100 colombian pesos; (d) 0.91 euros; (e) 4.10 ghanaian cedi; (f) 66.00 indian rupees; (g) 16.80 mexican pesos; (h) 200 nigerian naira; (i) 3.25 peruvian soles; (j) 13.75 south african rand; and (k) 3,700 ugandan shillings. 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. midpointgrowth midpoint coregrowth the company’s outlook for total rental and management revenue reflects the following at the midpoint: domestic rental and management segment revenue of $3,145 million and organic core growth of approximately 7%; and international rental and management segment revenue of $1,505 million and organic core growth of nearly 11%. international rental and management segment revenue includes approximately $413 million of pass-through revenue. (totals may not add due to rounding) total rental andmanagementrevenue adjustedebitda (totals may not add due to rounding) (totals may not add due to rounding) ($ in millions) (totals may not add due to rounding) other, including other operating expenses, interest income, (gain) loss on retirement of long-term obligations, (income) loss on equity method investments and other expense (income) ($ in millions) (totals may not add due to rounding) other, including other operating expenses, amortization of deferred financing costs, capitalized interest, debt discounts and premiums, (gain) loss on retirement of long-term obligations, other expense (income), non-cash interest related to joint venture shareholder loans and dividends on preferred stock 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 september 30, 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) 586-5042international dial-in: (706) 645-9644passcode: 54299144 when available, a replay of the call can be accessed until 11:59 p.m. et on november 5, 2015. the replay dial-in numbers are as follows: u.s./canada dial-in: (855) 859-2056international dial-in: (404) 537-3406passcode: 54299144 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 99,000 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 the anticipated closing 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. unaudited condensed consolidated balance sheets (in thousands) 5.50%, series b preferred stock unaudited condensed consolidated statements of operations (in thousands, except per share data) rental and management (including stock-based compensation expense of$396, $344, $1,218 and $1,059, respectively) network development services (including stock-based compensationexpense of $99, $101, $336 and $343, respectively) selling, general, administrative and development expense (including stock-based compensation expense of $17,850, $17,824, $70,697 and $60,306, respectively) other expense (including unrealized foreign currency losses of $77,864,$36,998, $107,871 and $62,556, respectively) net income attributable to american tower corporationstockholders net income attributable to american tower corporationcommon stockholders basic net income attributable to american tower corporation commonstockholders diluted net income attributable to american tower corporation commonstockholders unaudited condensed consolidated statements of cash flows (in thousands) unaudited results from operations, by segment (in thousands, except percentages. totals may not add due to rounding.) segment selling, general, administrative and development expense (1) segment selling, general, administrative and development expense (1) unaudited selected financial information (in thousands, except where noted. totals may not add due to rounding.) selected balance sheet detail: secured tower cellular side revenue notes, series, 2012-1 class a, series 2012-2 class a,series 2012-2 class b and series 2012-2 class c(1) reflects balances attributable to minority shareholder loans in the company's joint ventures in ghana and uganda. the ghana shareholder loan isdenominated in ghanaian cedi and the uganda shareholder loan is denominated in usd. unaudited selected financial information (in thousands, except where noted. totals may not add due to rounding.) selected balance sheet detail (continued): three months endedseptember 30, 2015 three months endedseptember 30, 2015 selected statement of operations detail: rental and management segment straight-line revenue and expense (1): three months ended september 30, international straight-line revenue and expense detail: 2015 2014 straight-line revenue $ 6,472 $ 8,154 straight-line expense $ 1,682 $ 2,676 unaudited selected financial information ($ in thousands. totals may not add due to rounding.) selected statement of operations detail (continued): 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: total rental andmanagementrevenue adjustedebitda the components of core growth in rental and management revenue are as follows: unaudited selected financial information ($ in thousands. totals may not add due to rounding.) selected cash flow detail: selected portfolio detail – owned and operated sites: as ofjune 30, 2015 as ofseptember 30, 2015 unaudited reconciliations to gaap measures and the calculation of defined financial measures (in thousands, except per share data and percentages. totals may not add due to rounding.) the reconciliation of net income to adjusted ebitda and the calculation of adjusted ebitda margin are as follows: the reconciliation of net income to nareit funds from operations and the calculation of affo and affo per share are presented below: amortization of deferred financing costs, capitalized interest, debt discounts andpremiums and long-term deferred interest charges
