American tower corporation reports second
quarter and first half 2012 financial results
Boston--(business wire)--american tower corporation (nyse: amt) today reported financial results for the quarter ended june 30, 2012. jim taiclet, american tower’s chief executive officer stated, “during the second quarter, we continued to translate strong global wireless trends into solid performance. we added substantial new lease and amendment business in both the u.s. and across our global markets, and for the first time in our company’s history, our international segment generated higher commenced new business than our domestic segment. as a result, we delivered core growth that was ahead of internal expectations in all of our key business metrics, including 23% growth in rental revenue and 24% growth in adjusted ebitda. our expectations for the full year are that disciplined cost management and outperformance in our core business will exceed potential headwinds from foreign currency fluctuations, and we are therefore maintaining our full year 2012 outlook for rental revenue and raising outlook for adjusted ebitda and affo.” second quarter 2012 operating results overview american tower generated the following operating results for the quarter ended june 30, 2012 (unless otherwise indicated, all comparative information is presented against the quarter ended june 30, 2011). total revenue increased 16.8% to $697.7 million and total rental and management revenue increased 16.9% to $682.3 million. total rental and management gross margin increased 17.6% to $521.0 million. total selling, general, administrative and development expense was $76.8 million, including approximately $13.1 million of stock-based compensation expense. adjusted ebitda increased 19.7% to $465.6 million, and the adjusted ebitda margin was 67%. the company’s second quarter 2012 results include 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. total rental and management revenue core growth was approximately 22.7%, and core growth in adjusted ebitda was approximately 24.1%. please refer to the selected statement of operations detail on page 14, which highlights the items affecting the core growth percentages. operating income increased 19.8% to $270.5 million. during the quarter, the company recognized unrealized non-cash losses of $114.9 million associated with fluctuations in foreign currency exchange rates related to intercompany loans and similar unaffiliated balances. in addition, the company recorded $47.6 million related to a valuation allowance attributable to net operating losses generated by its international rental and management segment. as a result, net income attributable to american tower corporation decreased 58.2% to $48.2 million and net income attributable to american tower corporation per basic and diluted common share both decreased 58.6% to $0.12. adjusted funds from operations (affo) increased 14.3% to $300.5 million, and affo per share increased 13.6% to $0.75. core growth in affo was approximately 23.4%. cash provided by operating activities increased 31.0% to $360.9 million. segment results domestic rental and management segment – domestic rental and management segment revenue increased 11.4% to $473.4 million, which represented 68% of total revenues. in addition, domestic rental and management segment gross margin increased 14.2% to $385.3 million, while domestic rental and management segment operating profit increased 14.0% to $364.2 million. domestic rental and management segment operating profit margin was 77%. international rental and management segment – international rental and management segment revenue increased 31.4% to $208.9 million, which represented 30% of total revenues. international rental and management segment pass-through revenues increased 38.9% to $55.3 million. in addition, international rental and management segment gross margin increased 28.3% to $135.7 million, while international rental and management segment operating profit increased 37.9% to $116.2 million. international rental and management segment operating profit margin was 56% (76%, excluding the impact of $55.3 million of pass-through revenues). network development services segment – network development services segment revenue was $15.5 million, which represented 2% of total revenues. network development services segment gross margin was $8.4 million, and network development services segment operating profit was $6.5 million. network development services segment operating profit margin was 42%. first half 2012 operating results overview american tower generated the following operating results for the six months ended june 30, 2012 (unless otherwise indicated, all comparative information is presented against the six months ended june 30, 2011). total revenue increased 20.2% to $1,394.3 million and total rental and management revenue increased 20.9% to $1,366.3 million. total rental and management gross margin increased 20.8% to $1,045.0 million. total selling, general, administrative and development expense was $156.4 million, including approximately $25.7 million of stock-based compensation expense. adjusted ebitda increased 21.1% to $928.2 million, and the adjusted ebitda margin was 67%. total rental and management revenue core growth was approximately 23.6%, and core growth in adjusted ebitda was approximately 23.3%. please refer to the selected statement of operations detail on page 14, which highlights the items affecting the core growth percentages. operating income increased 22.7% to $544.9 million, net income attributable to american tower corporation increased 30.2% to $269.5 million, and net income attributable to american tower corporation per basic and diluted common share both increased 30.8% to $0.68. affo increased 19.8% to $624.4 million, and affo per share increased 20.8% to $1.57. core growth in affo was approximately 22.2%. cash provided by operating activities increased 36.4% to $762.9 million. segment results domestic rental and management segment – domestic rental and management segment revenue increased 14.0% to $960.5 million, which represented 69% of total revenues. in addition, domestic rental and management segment gross margin increased 16.0% to $779.4 million, while domestic rental and management segment operating profit increased 16.2% to $738.9 million. domestic rental and management segment operating profit margin was 77%. international rental and management segment – international rental and management segment revenue increased 40.9% to $405.8 million, which represented 29% of total revenues. international rental and management segment pass-through revenues increased 42.5% to $104.0 million. in addition, international rental and management segment gross margin increased 37.2% to $265.6 million, while international rental and management segment operating profit increased 43.7% to $222.3 million. international rental and management segment operating profit margin was 55% (74%, excluding the impact of $104.0 million of pass-through revenues). network development services segment – network development services segment revenue was $28.0 million, which represented 2% of total revenues. network development services segment gross margin was $13.9 million, and network development services segment operating profit was $11.6 million. network development services segment operating profit margin was 42%. please refer to non-gaap and defined financial measures on pages 6 and 7 for definitions of gross margin, operating profit, operating profit margin, adjusted ebitda, adjusted ebitda margin, funds from operations, adjusted funds from operations, adjusted funds from operations per share, core growth and net leverage ratio. for additional financial information, including reconciliations to gaap measures, please refer to the unaudited selected financial information on pages 12 through 16. investing and financing overview cash paid for capital expenditures – during the second quarter of 2012, total capital expenditures of $105.4 million included $49.5 million for capital projects, including the construction of 64 communications sites domestically and 500 towers internationally and the installation of 94 shared generators domestically; $12.5 million to purchase land under the company’s communications sites; $18.1 million for the redevelopment of existing communications sites to accommodate new tenant equipment; and $25.2 million for capital improvements and corporate capital expenditures. during the first half of 2012, total capital expenditures of $226.4 million included $113.3 million for capital projects, including the construction of 93 communications sites domestically and 1,097 towers internationally and the installation of 203 shared generators domestically; $27.2 million to purchase land under the company’s communications sites; $40.9 million for the redevelopment of existing communications sites to accommodate new tenant equipment; and $45.0 million for capital improvements and corporate capital expenditures. cash paid for acquisitions – during the second quarter of 2012, the company spent $373.5 million on acquisitions, which consisted of the purchase of 45 domestic towers and 1,120 international towers and amounts due for previously closed acquisitions. during the second quarter of 2012, the company closed and paid for the following international towers, pursuant to previously announced agreements: 29 towers in colombia, 129 towers in mexico and 962 towers in uganda. in addition, at the end of the quarter, the company acquired 700 towers in brazil, which were funded subsequent to the second quarter of 2012. during the first half of 2012, the company spent $532.9 million on acquisitions, which consisted of the purchase of 80 domestic towers, 1,920 international towers and amounts due for acquisitions that closed in december of 2011. stock repurchase program – during the second quarter of 2012, the company repurchased a total of approximately 0.1 million shares of its common stock for approximately $5.9 million pursuant to its stock repurchase program. between july 1, 2012 and july 20, 2012, the company repurchased approximately 17,900 additional shares of its common stock for an aggregate of approximately $1.3 million. during the first half of 2012, the company repurchased a total of approximately 0.2 million shares of its common stock for approximately $10.8 million pursuant to its stock repurchase program. distributions – on july 18, 2012, the company paid its second regular distribution to stockholders of record at the close of business on july 2, 2012 of $0.22 per share, or an aggregate of approximately $86.9 million. during the first half of 2012, the company declared an aggregate distribution of $0.43 per share, or approximately $169.8 million payable to its stockholders of record. 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. leverage – for the quarter ended june 30, 2012, the company’s net leverage ratio was approximately 3.7x net debt (total debt less cash and cash equivalents) to second quarter 2012 annualized adjusted ebitda. liquidity – as of june 30, 2012, the company had approximately $2.5 billion of total liquidity, comprised of approximately $481.9 million in cash and cash equivalents, plus the ability to borrow an aggregate of approximately $2.0 billion under its two revolving credit facilities, net of any outstanding letters of credit. full year 2012 outlook the following estimates are based on a number of assumptions that management believes to be reasonable and reflect the company’s expectations as of august 1, 2012. actual results may differ materially from these estimates as a result of various factors and the company refers you to the cautionary language regarding “forward-looking” statements included in this press release when considering this information. the company’s outlook is based on the following average foreign currency exchange rates to 1.00 u.s. dollar for the remainder of 2012: (a) 2.00 brazilian reais; (b) 500.00 chilean pesos; (c) 1,800.00 colombian pesos; (d) 1.90 ghanaian cedi; (e) 55.00 indian rupees; (f) 13.50 mexican pesos; (g) 2.70 peruvian soles; (h) 8.20 south african rand; and (i) 2,500.00 ugandan schillings. ($ in millions) (totals may not add due to rounding.) midpoint growth midpoint core growth the company’s outlook for total rental and management revenue reflects the following at the midpoint: (1) domestic rental and management segment revenue of $1,910 million; and (2) international rental and management segment revenue of $860 million, which includes approximately $220 million of pass-through revenue. the calculation of midpoint core growth is as follows: (totals may not add due to rounding.) total rental and management revenue adjusted ebitda outlook for capital expenditures: ($ in millions) (totals may not add due to rounding.) reconciliations of outlook for net income to adjusted ebitda: (totals may not add due to rounding.) other, including other operating expenses, interest income, loss on retirement of long-term obligations, (income) loss on equity method investments, other (income) expense and income tax provision (benefit) reconciliations of outlook for net income to adjusted funds from operations: (totals may not add due to rounding.) other, including other operating expenses, interest expense, amortization of deferred financing costs, debt discounts and capitalized interest, loss on retirement of long-term obligations and other (income) expense 111 - 111 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 ended june 30, 2012 and its outlook for the full year 2012. supplemental materials for the call will be available on the company’s website, www.americantower.com. the conference call dial-in numbers are as follows: u.s./canada dial-in: (866) 740-9153 international dial-in: (706) 645-9644 passcode: 11328188 when available, a replay of the call can be accessed until 11:59 p.m. et on august 15, 2012. the replay dial-in numbers are as follows: u.s./canada dial-in: (855) 859-2056 international dial-in: (404) 537-3406 passcode: 11328188 american tower will also sponsor a live simulcast and replay of the call on its website, www.americantower.com. about american tower american tower is a leading independent global owner, operator and developer of wireless communications sites. american tower currently owns and operates over 49,000 communications sites in the united states, brazil, chile, colombia, ghana, india, mexico, peru, south africa and uganda. for more information about american tower, please visit www.americantower.com. non-gaap and defined financial measures in addition to the results prepared in accordance with generally accepted accounting principles in the united states (gaap) provided throughout this press release, the company has presented the following non-gaap and defined financial measures: gross margin, operating profit, operating profit margin, adjusted ebitda, adjusted ebitda margin, funds from operations, adjusted funds from operations, adjusted funds from operations per share, core growth and net leverage ratio. as a result of significant non-cash changes to the carrying amount of our long-term deferred income tax assets, as reflected in the income tax provision, the company has adjusted its definition of adjusted funds from operations to reflect cash taxes paid. the company believes that this revised methodology more accurately reflects the ongoing cash obligation of the company’s current income tax liabilities. the company defines gross margin as revenues less operating expenses, excluding stock-based compensation expense. the company defines operating profit as gross margin less selling, general, administrative and development expense, excluding stock-based compensation expense and corporate expenses. for reporting purposes, the international rental and management segment operating profit and gross margin also include interest income, tv azteca, net. these measures of gross margin and operating profit are also before interest income, interest expense, loss on retirement of long-term obligations, other income (expense), net income attributable to non-controlling interest, income (loss) on equity method investments, income taxes and discontinued operations. the company defines operating profit margin as the percentage that results from dividing operating profit by revenue. the company defines adjusted ebitda as net income before income (loss) from discontinued operations, net, income (loss) from equity method investments, income tax provision (benefit), other (income) expense, loss on retirement of long-term obligations, interest expense, interest income, other operating expenses, depreciation, amortization and accretion and stock-based compensation expense. the company defines adjusted ebitda margin as the percentage that results from dividing adjusted ebitda by total revenue. the company defines funds from operations as net income before real estate related depreciation, amortization and accretion. the company defines adjusted funds from operations as funds from operations before straight-line revenue and expense, stock-based compensation expense, non-cash portion of tax provision, non-real estate related depreciation, amortization and accretion, amortization of deferred financing costs, debt discounts and capitalized interest, other (income) expense, loss on retirement of long-term obligations, other operating (income) expense, less cash payments related to capital improvements and cash payments related to corporate capital expenditures. the company defines adjusted funds from operations per share as adjusted funds from operations divided by the diluted weighted average common shares outstanding. funds from operations for the three and six months ended june 30, 2011 are presented on a pro forma basis and reflect adjustments for income tax provision as if the reit conversion had occurred on january 1, 2011. the company defines core growth in total rental and management revenue and adjusted ebitda as the increase or decrease, expressed as a percentage, resulting from a comparison of financial results for a current period with corresponding financial results for the corresponding period in a prior year, in each case, excluding the impact of straight-line revenue and expense recognition, foreign currency exchange rate fluctuations and significant one-time items. the company defines net leverage ratio as net debt (total debt, less cash and cash equivalents) divided by last quarter annualized adjusted ebitda. these measures are not intended to replace financial performance measures determined in accordance with gaap. rather, they are presented as additional information because management believes they are useful indicators of the current financial performance of the company’s core businesses. the company believes that these measures can assist in comparing company performances on a consistent basis irrespective of depreciation and amortization or capital structure. depreciation and amortization can vary significantly among companies depending on accounting methods, particularly where acquisitions or non-operating factors, including historical cost bases, are involved. notwithstanding the foregoing, the company’s measures of gross margin, operating profit, operating profit margin, adjusted ebitda, adjusted ebitda margin, funds from operations, adjusted funds from operations, adjusted funds from operations per share, core growth and net leverage ratio may not be comparable to similarly titled measures used by other companies. cautionary language regarding forward-looking statements this press release contains "forward-looking statements" concerning our goals, beliefs, expectations, strategies, objectives, plans, future operating results and underlying assumptions, and other statements that are not necessarily based on historical facts. examples of these statements include, but are not limited to statements regarding our full year 2012 outlook, foreign currency exchange rates and our expectation regarding the declaration of regular distributions. actual results may differ materially from those indicated in our forward-looking statements as a result of various important factors, including: (1) decrease in demand for our communications sites would materially and adversely affect our operating results and we cannot control that demand; (2) if our tenants consolidate, merge or share site infrastructure with each other to a significant degree, our growth, revenue and ability to generate positive cash flows could be materially and adversely affected; (3) new technologies or changes in a tenant’s business model could make our tower leasing business less desirable and result in decreasing revenues; (4) our expansion initiatives may disrupt our operations or expose us to additional risk if we are not able to successfully integrate operations, assets and personnel; (5) if we fail to qualify as a reit or fail to remain qualified as a reit, we would be subject to tax at corporate income tax rates, which would substantially reduce funds available; (6) we could suffer adverse tax and other financial consequences if taxing authorities do not agree with our tax positions; (7) failure to make required distributions would subject us to federal corporate income tax, which may limit our ability to fund these distributions using cash generated through our taxable reit subsidiaries (trss); (8) certain of our business activities will be subject to corporate level income tax and foreign taxes, which will reduce our cash flows, and we will have potential deferred and contingent tax liabilities; (9) complying with reit requirements may limit our flexibility or cause us to forego otherwise attractive opportunities; (10) our extensive use of trss, in particular for our international operations, may cause us to fail to qualify as a reit; (11) our foreign operations are subject to economic, political and other risks that could materially and adversely affect our revenues or financial position, including risks associated with fluctuations in foreign currency exchange rates; (12) our business is subject to government regulations and changes in current or future laws or regulations could restrict our ability to operate our business as we currently do; (13) a substantial portion of our revenue is derived from a small number of tenants; (14) due to the long-term expectations of revenue growth from tenant leases, we are sensitive to changes in the creditworthiness and financial strength of our tenants; (15) if we are unable to protect our rights to the land under our towers, it could adversely affect our business and operating results; (16) we may need additional financing to fund capital expenditures, future growth and expansion initiatives and satisfy our reit distribution requirements; (17) our leverage and debt service obligations may materially and adversely affect us; (18) restrictive covenants in the loan agreements related to our securitization, the loan agreements for the credit facilities and the indentures governing our debt securities could materially and adversely affect our business by limiting flexibility; (19) increasing competition in the tower industry may create pricing pressures that may materially and adversely affect us; (20) if we are unable or choose not to exercise our rights to purchase towers that are subject to lease and sublease agreements at the end of the applicable period, our cash flows derived from such towers would be eliminated; (21) we may incur goodwill and other intangible impairment charges which may require us to record a significant charge to earnings; (22) we have limited experience operating as a reit, which may adversely affect our financial condition, results of operations, cash flow, per share trading price of our common stock and ability to satisfy debt service obligations; (23) distributions payable by reits generally do not qualify for reduced tax rates; (24) we could have liability under environmental and occupational safety and health laws; (25) our towers or data centers may be affected by natural disasters and other unforeseen damage for which our insurance may not provide adequate coverage; and (26) our costs could increase and our revenues could decrease due to perceived health risks from radio emissions, especially if these perceived risks are substantiated. for additional information regarding factors that may cause actual results to differ materially from those indicated in our forward-looking statements, we refer you to the information contained in item 1a of our form 10-q for the three months ended march 31, 2012. we undertake no obligation to update the information contained in this press release to reflect subsequently occurring events or circumstances. total other expenses network development services network development services network development services network development services the unison notes are secured debt and were assumed as a result of the acquisition of certain legal entities holding a portfolio of property interests from unison holdings llc and unison site management ii, l.l.c. calculation of net leverage ratio ($ in thousands) total rental and management revenue total rental and management revenue
