PART I
Overview
We are one of the largest global real estate investment trusts and a leading independent owner, operator and developer of multitenant communications real estate. Our primary business is the leasing of space on communications sites to wireless service providers, radio and television broadcast companies, wireless data providers, government agencies and municipalities and tenants in a number of other industries. We refer to this business as our property operations, which accounted for
99%
of our total revenues for the year ended
December 31, 2016
. We also offer tower-related services in the United States, including site acquisition, zoning and permitting and structural analysis, which primarily support our site leasing business, including the addition of new tenants and equipment on our sites. We refer to this business as our services operations.
Our portfolio primarily consists of towers that we own and towers that we operate pursuant to long-term lease arrangements, as well as distributed antenna system (“DAS”) networks, which provide seamless coverage solutions in certain in-building and outdoor wireless environments. In addition to the communications sites in our portfolio, we manage rooftop and tower sites for property owners under various contractual arrangements. We also hold other telecommunications infrastructure and property interests that we lease to communications service providers and third-party tower operators. Our communications real estate portfolio of
144,884
communications sites, as of
December 31, 2016
, included
40,414
communications sites in the U.S.,
57,945
communications sites in Asia,
12,861
communications sites in Europe, Middle East and Africa (“EMEA”) and
33,664
communications sites in Latin America.
American Tower Corporation was originally created as a subsidiary of American Radio Systems Corporation in 1995 and was spun off into a free-standing public company in 1998. We are a holding company and conduct our operations through our directly and indirectly owned subsidiaries and joint ventures. Our principal domestic operating subsidiaries are American Towers LLC and SpectraSite Communications, LLC. We conduct our international operations primarily through our subsidiary, American Tower International, Inc., which in turn conducts operations through its various international holding and operating subsidiaries and joint ventures.
Since inception, we have grown our communications real estate portfolio through acquisitions, long-term lease arrangements and site development. In 2016, we significantly expanded our Asia segment portfolio by acquiring a 51% controlling ownership interest in Viom Networks Limited (“Viom”), a telecommunications infrastructure company that owns and operates approximately 42,000 wireless communications towers and 200 indoor DAS networks in India (the “Viom Acquisition”). Subsequent to the closing, Viom was renamed ATC Telecom Infrastructure Private Limited (“ATC TIPL”). In 2016, we launched operations in Argentina, a new market for us. In December 2016, our newly formed joint venture in Europe entered into a definitive agreement to acquire a tower company in France, which is also a new market for us. This acquisition closed in February 2017.
We operate as a real estate investment trust for U.S. federal income tax purposes (“REIT”). Accordingly, we generally are not subject to U.S. federal income taxes on income generated by our REIT operations, including the income derived from leasing space on our towers, as we receive a dividends paid deduction for distributions to stockholders that generally offsets our income and gains. However, we remain obligated to pay U.S. federal income taxes on earnings from our domestic taxable REIT subsidiaries (“TRSs”). In addition, our international assets and operations, regardless of their designation for U.S. tax purposes, continue to be subject to taxation in the foreign jurisdictions where those assets are held or those operations are conducted.
The use of TRSs enables us to continue to engage in certain businesses while complying with REIT qualification requirements. We may, from time to time, change the election of previously designated TRSs to be included as part of the REIT. As of
December 31, 2016
, our REIT qualified businesses included our U.S. tower leasing business, most of our operations in Costa Rica, Germany and Mexico and a majority of our services segment and indoor DAS networks business.
We report our results in five segments – U.S. property (formerly referred to as “domestic rental and management”), Asia property, EMEA property, Latin America property (Asia property, EMEA property and Latin America property were formerly referred to as “international rental and management”) and services (formerly referred to as “network development services”).
For more information about our business segments, as well as financial information about the geographic areas in which we operate, see Item 7 of this Annual Report under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and note 20 to our consolidated financial statements included in this Annual Report.
Products and Services
Property Operations
Our property operations accounted for
99%
, 98% and 98% of our total revenues for each of the years ended
December 31, 2016
,
2015
and
2014
, respectively. Our revenue is primarily generated from tenant leases. Our tenants lease space on our communications real estate, where they install and maintain their equipment. Rental payments vary considerably depending upon numerous factors, including, but not limited to, tower location, amount, type and position of tenant equipment on the tower, ground space required by the tenant and remaining tower capacity. Our costs typically include ground rent (which is primarily fixed, with annual cost escalations) and power and fuel costs, some or all of which may be passed through to our tenants, as well as property taxes and repairs and maintenance expenses. Our property operations have generated consistent incremental growth in revenue and typically have low cash flow volatility due to the following characteristics:
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Long-term tenant leases with contractual rent escalations.
In general, a tenant lease has an initial non-cancellable term of ten years with multiple renewal terms, with provisions that periodically increase the rent due under the lease, typically annually, based on a fixed escalation percentage (averaging approximately
3%
in the United States) or an inflationary index in our international markets, or a combination of both. Based upon foreign currency exchange rates and the tenant leases in place as of
December 31, 2016
, we expect to generate over
$31 billion
of non-cancellable tenant lease revenue over future periods, absent the impact of straight-line lease accounting.
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Consistent demand for our sites.
As a result of rapidly growing usage of wireless services and the corresponding wireless industry capital spending trends in the markets we serve, we anticipate consistent demand for our communications sites. We believe that our global asset base positions us well to benefit from the increasing proliferation of advanced wireless devices and the increasing usage of high bandwidth applications on those devices. We have the ability to add new tenants and new equipment for existing tenants on our sites, which typically results in incremental revenue and modest incremental costs. Our site portfolio and our established tenant base provide us with a solid platform for new business opportunities, which has historically resulted in consistent and predictable organic revenue growth.
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High lease renewal rates.
Our tenants tend to renew leases because suitable alternative sites may not exist or be available and repositioning a site in their network may be expensive and may adversely affect the quality of their network. Historically, churn has been approximately 1% to 2% of total property revenue per year. We define churn as revenue lost when a tenant cancels or does not renew its lease or, in limited circumstances, when the lease rates on existing leases are reduced. We derive our churn rate for a given year by dividing our revenue lost on this basis by our prior year property segment revenue.
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High operating margins.
Incremental operating costs associated with adding new tenants to an existing communications site are relatively minimal. Therefore, as tenants are added, the substantial majority of incremental revenue flows through to gross margin and operating profit. In addition, in many of our international markets certain expenses, such as ground rent or power and fuel costs, are reimbursed or shared by our tenant base.
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Low maintenance capital expenditures.
On average, we require relatively low amounts of annual capital expenditures to maintain our communications sites.
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Our property business includes the operation of communications sites, managed networks, the leasing of property interests, fiber and the provision of backup power through shared generators. Our presence in a number of markets at different relative stages of wireless development provides us with significant diversification and long-term growth potential. Our property segments accounted for the following percentage of total revenue for the years ended December 31,:
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2016
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2015
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2014
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U.S.
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59
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%
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66
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%
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64
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%
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Asia
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14
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%
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5
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%
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6
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%
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EMEA
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9
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%
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8
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%
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8
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%
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Latin America
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17
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%
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19
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%
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20
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%
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Communications Sites.
Approximately 95% of revenue in our property segments was attributable to our communications sites for each of the years ended
December 31, 2016
,
2015
and
2014
.
We lease space on our communications sites to tenants providing a diverse range of communications services, including cellular voice and data, broadcasting, mobile video and a number of other applications. In addition, in many of our international markets, we receive additional pass-through revenue from our tenants to cover certain costs, including power and fuel costs and ground rent. Our top tenants by revenue for each region are as follows for the year ended
December 31, 2016
:
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U.S.:
AT&T, Verizon Wireless, Sprint and T-Mobile US accounted for an aggregate of 88% of U.S. property segment revenue.
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Asia:
TATA
,
Idea Cellular, Vodafone and Bharti Airtel Limited (“Airtel”) accounted for an aggregate of 66% of Asia property segment revenue.
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EMEA:
Airtel and MTN Group Limited accounted for an aggregate of 70% of EMEA property segment revenue.
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Latin America:
Telefónica, AT&T, Telecom Italia and Nextel International accounted for an aggregate of 71% of Latin America property segment revenue.
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Accordingly, we are subject to certain risks, as set forth in Item 1A of this Annual Report under the caption “Risk Factors—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.” In addition, we are subject to risks related to our international operations, as set forth under the caption “Risk Factors—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.”
Managed Networks, Property Interests, Fiber and Shared Generators.
In addition to our communications sites, we also own and operate several types of managed network solutions, provide communications site management services to third parties, manage and lease property interests under carrier or other third-party communications sites, lease fiber and provide back-up power sources to tenants at our sites.
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Managed Networks.
We own and operate DAS networks in the United States and certain international markets. We obtain rights from property owners to install and operate in-building DAS networks, and we grant rights to wireless service providers to attach their equipment to our installations. We also offer outdoor DAS networks as a complementary shared infrastructure solution for our tenants in the United States and in certain international markets. Typically, we design, build and operate our outdoor DAS networks in areas in which zoning restrictions or other barriers may prevent or delay deployment of more traditional wireless communications sites. We also hold lease rights and easement interests on rooftops capable of hosting communications equipment in locations where towers are generally not a viable solution based on area characteristics. In addition, we provide management services to property owners in the United States who elect to retain full rights to their property while simultaneously marketing the rooftop for wireless communications equipment installation. As the demand for advanced wireless devices in urban markets evolves, we continue to evaluate a variety of infrastructure solutions, including small cells, that may support our tenants’ networks in these areas.
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Property Interests
.
We own a portfolio of property interests in the United States under carrier or other third-party communications sites, which provides recurring cash flow under complementary leasing arrangements.
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Fiber.
We own and operate fiber in Argentina, which we currently lease to operators to support their urban telecommunications infrastructure and expect to lease to operators in the future for additional fourth generation (4G) and fifth generation (5G) deployments.
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Shared Generators
.
We have contracts with certain of our tenants in the United States pursuant to which we provide access to shared backup power generators.
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Services Operations
We offer tower-related services, including site acquisition, zoning and permitting and structural analysis services. Our services operations primarily support our site leasing business, including through the addition of new tenants and equipment on our sites. This segment accounted for
1%
, 2% and 2% of our total revenue for each of the years ended
December 31, 2016
,
2015
and
2014
, respectively.
Site Acquisition, Zoning and Permitting
. We engage in site acquisition services on our own behalf in connection with our tower development projects, as well as on behalf of our tenants. We typically work with our tenants’ engineers to determine the geographic areas where new communications sites will best address the tenants’ needs and meet their coverage objectives. Once a new site is identified, we acquire the rights to the land or structure on which the site will be constructed, and we manage the permitting process to ensure all necessary approvals are obtained to construct and operate the communications site.
Structural Analysis.
We offer structural analysis services to wireless carriers in connection with the installation of their communications equipment on our towers. Our team of engineers can evaluate whether a tower structure can support the additional burden of the new equipment or if an upgrade is needed, which enables our tenants to better assess potential sites before making an installation decision. Our structural analysis capabilities enable us to provide higher quality service to our existing tenants by, among other things, reducing the time required to achieve on-air readiness, while also providing opportunities to offer structural analysis services to third parties.
Strategy
Operational Strategy
Our operational strategy is to capitalize on the global growth in the use of wireless services and the evolution of advanced wireless handsets, tablets and other mobile devices, and the corresponding expansion of communications infrastructure required to deploy current and future generations of wireless communications technologies. To achieve this, our primary focus is to (i) increase the occupancy of our existing communications real estate portfolio, (ii) invest in and selectively grow our communications real estate portfolio, (iii) further improve upon our operational performance and (iv) maintain a strong balance sheet. We believe these efforts will further support and enhance our ability to capitalize on the growth in demand for wireless infrastructure. In addition, we expect to explore new and broader opportunities to enhance or extend our shared communications infrastructure businesses, including those that may make our assets incrementally more attractive to new tenants, or to existing tenants for additional uses, and those that increase our operational efficiency.
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Increase the occupancy of our existing communications real estate portfolio.
We believe that our highest returns will be achieved by leasing additional space on our existing communications sites. Increasing demand for wireless services in our served markets has resulted in significant capital spending by major wireless carriers. As a result, we anticipate consistent demand for our communications sites because they are attractively located for wireless service providers and typically have capacity available for additional tenants. In the United States, incremental carrier network activity is being driven primarily by the build-out and densification of 4G networks, while in our international markets, carriers are deploying a combination of second generation (2G), third generation (3G) and 4G networks, depending on the specific market. As of
December 31, 2016
, we had a global average of approximately 1.9 tenants per tower. We believe that the majority of our towers have capacity for additional tenants and that substantially all of our towers that are currently at or near full structural capacity can be upgraded or augmented to meet future tenant demand with relatively modest capital investment. Therefore, we will continue to target our sales and marketing activities to increase the utilization and return on investment of our existing communications sites.
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Invest in and selectively grow our communications real estate portfolio.
We seek opportunities to invest in and grow our operations through our capital expenditure program, new site construction and acquisitions. We believe we can achieve attractive risk-adjusted returns by pursuing such investments. In addition, we seek to secure property interests under our communications sites to improve operating margins as we reduce our cash operating expense related to ground leases. A significant portion of our inorganic growth has been focused on properties with lower initial tenancy because we believe that over time, we can significantly increase tenancy levels, and therefore, drive strong returns on those assets.
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Further improve upon our operational performance and efficiency.
We continue to seek opportunities to improve our operational performance throughout the organization. This includes investing in our systems and people as we strive to improve efficiency and provide superior service to our tenants. To achieve this, we intend to continue to focus on customer service, such as reducing cycle times for key functions, including lease processing and tower structural analysis.
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Maintain a strong balance sheet.
We remain committed to disciplined financial policies, which we believe result in our ability to maintain a strong balance sheet and will support our overall strategy and focus on asset growth and operational excellence. As a result of these policies, we currently have investment grade credit ratings. We continue to focus on maintaining a robust liquidity position and, as of
December 31, 2016
, had
$3.6 billion
of available liquidity. We believe that our investment grade credit ratings provide us consistent access to the capital markets and our liquidity provides us the ability to selectively invest in our portfolio.
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Capital Allocation Strategy
The objective of our capital allocation strategy is to simultaneously increase adjusted funds from operations and our return on invested capital over the long term. To maintain our qualification for taxation as a REIT, we are required to distribute to our stockholders annually an amount equal to at least 90% of our REIT taxable income (determined before the deduction for
distributed earnings and excluding any net capital gain). After complying with our REIT distribution requirements and paying dividends on our preferred stock, we plan to continue to allocate our available capital among investment alternatives that meet or exceed our return on investment criteria.
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Capital expenditure program.
We will continue to invest in and expand our existing communications real estate portfolio through our annual capital expenditure program. This includes capital expenditures associated with maintenance, increasing the capacity of our existing sites, and projects such as new site construction, land interest acquisitions and shared generator installations.
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Acquisitions.
We intend to pursue acquisitions of communications sites in our existing or new markets where we can meet or exceed our risk-adjusted return on investment criteria. Our risk-adjusted hurdle rates consider additional risks such as the country and counterparties involved, investment and economic climate, legal and regulatory conditions and industry risk.
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Return excess capital to stockholders.
If we have excess capital available after funding (i) our required distributions, (ii) capital expenditures and (iii) anticipated future investments, including acquisition opportunities, we will seek to return such excess capital to stockholders, including through our stock repurchase program.
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International Growth Strategy
We believe that, in certain international markets, we can create substantial value by either establishing a new, or expanding our existing, communications real estate leasing business. Therefore, we expect we will continue to seek international growth opportunities where we believe our risk-adjusted return objectives can be achieved. We strive to maintain a diversified approach to our international growth strategy by operating in a geographically diverse array of markets in a variety of stages of wireless network development. Our international growth strategy includes a disciplined, individualized market evaluation, in which we conduct the following analyses, among others:
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Country analysis.
Prior to entering a new market, we conduct an extensive review of the country’s historical and projected macroeconomic fundamentals, including inflation outlook and foreign currency exchange rate trends, capital markets, tax regime and investment alternatives, and the general business, political and legal environments, including property rights and regulatory regime.
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Wireless industry analysis.
To confirm the presence of sufficient demand to support an independent tower leasing model, we analyze the competitiveness of the country’s wireless market, such as the pricing environment, past and potential industry consolidation and the stage of its wireless network development. Characteristics that result in an attractive investment opportunity include (i) multiple competitive wireless service providers who are actively seeking to invest in deploying voice and data networks and (ii) ongoing or expected deployment of incremental spectrum from recent or anticipated auctions.
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Opportunity and counterparty analysis.
Once an investment opportunity is identified within a geographic area with an attractive wireless industry, we conduct a multifaceted opportunity and counterparty analysis. This includes evaluating (i) the type of transaction, (ii) its ability to meet our risk-adjusted return criteria given the country and the counterparties involved, including the anticipated anchor tenant and (iii) how the transaction fits within our long-term strategic objectives, including future potential investment and expansion within the region.
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Recent Transactions
Acquisitions and Joint Venture
We increased our communications site portfolio by
45,309
sites in 2016, including
1,869
build-to-suits. We believe these assets will be an important component of our long-term growth. In
2016
, we completed the Viom Acquisition, which included approximately 42,000 wireless communications towers and 200 indoor DAS networks in India. We also launched operations in Argentina through the acquisition of Comunicaciones y Consumos, S.A. (“CyCSA”), which owned or operated urban telecommunications assets, fiber and the rights to utilize certain existing utility infrastructure for future telecommunications equipment installation. In addition, we acquired an aggregate of
891
communications sites in the United States, Brazil, Chile, Germany, Mexico, Nigeria and South Africa in 2016.
In December 2016, we entered into a joint venture (“ATC Europe”) to which we contributed our German business in exchange for an investment from our partner, PGGM. ATC Europe will focus on pursuing telecommunications real estate investment opportunities in select countries in Europe. In December 2016, ATC Europe entered into a definitive agreement to purchase FPS Towers (“FPS”), which owns and operates approximately 2,400 wireless tower sites in France. This transaction closed on February 15, 2017.
We continue to evaluate opportunities to acquire communications real estate portfolios that we believe we can effectively integrate into our existing business and generate returns that meet or exceed our criteria. For more information about our acquisitions, see note 6 to our consolidated financial statements included in this Annual Report.
Financing Transactions
During
2016
, to complement our operational strategy to selectively invest in and grow our communications real estate portfolio while maintaining our long-term financial policies, we completed a number of key financing initiatives, which, among others, included the following:
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Completing registered public offerings of an aggregate of $3.25 billion of senior unsecured notes, the proceeds of which were used primarily to repay indebtedness under our existing revolving credit facilities and term loan. Borrowings under our revolving credit facilities were primarily used to fund acquisitions and for general corporate purposes.
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Amending our existing revolving credit facilities and term loan to, among other things, extend each of the maturity dates by one year.
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For more information about our financing transactions, see Item 7 of this Annual Report under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” and note 8 to our consolidated financial statements included in this Annual Report.
Regulatory Matters
Towers and Antennas.
Our U.S. and international tower leasing business is subject to national, state and local regulatory requirements with respect to the registration, siting, construction, lighting, marking and maintenance of our towers. In the United States, which accounted for
59%
of our total property segment revenue for the year ended
December 31, 2016
, the construction of new towers or modifications to existing towers may require pre-approval by the Federal Communications Commission (“FCC”) and the Federal Aviation Administration (“FAA”), depending on factors such as tower height and proximity to public airfields. Towers requiring pre-approval must be registered with the FCC and maintained in accordance with FAA standards. Similar requirements regarding pre-approval of the construction and modification of towers are imposed by regulators in other countries. Non-compliance with applicable tower-related requirements may lead to monetary penalties or site deconstruction orders.
Certain of our international operations are subject to regulatory requirements with respect to licensing, registration and permitting. In India, each of our operating subsidiaries holds an Infrastructure Provider Category-I (“IP-I”) Registration Certificate issued by the Indian Ministry of Communications and Information Technology, which permits us to provide tower space to companies licensed as telecommunications service providers under the Indian Telegraph Act of 1885. As a condition to the IP-I, the Indian government has the right to take over telecommunications infrastructure in the case of emergency or war. In Ghana, our subsidiary holds a Communications Infrastructure License, issued by the National Communications Authority (“NCA”), which permits us to establish and maintain passive telecommunications infrastructure services and DAS networks for communications service providers licensed by the NCA. In Uganda, our subsidiary holds a Public Infrastructure Service License, issued by the Uganda Communications Commission (“UCC”), which permits us to establish and maintain passive telecommunications infrastructure and DAS networks for communication service providers licensed by the UCC. In Nigeria, our subsidiary holds a license for Infrastructure Sharing and Collocation Services, issued by the Nigerian Communications Authority (“NCC”), which permits us to establish and maintain passive telecommunications infrastructure for communication service providers licensed by the NCC. In Chile, our subsidiary is classified as a Telecom Intermediate Service Provider. We have received a number of site specific concessions and are working with the Chilean Subsecretaria de Telecommunicaciones to receive concessions on our remaining sites in Chile. CyCSA holds a telecom license for a number of services it provides and is regulated by the Ente Nacional de Comunicaciones (ENACOM) in Argentina. In many of the markets in which we operate we are required to provide tower space to service providers on a non-discriminatory basis, subject to negotiation of mutually agreeable terms.
Our international business operations may be subject to increased licensing fees or ownership restrictions. For example, in South Africa, the Broad-Based Black Economic Empowerment Act, 2003 (the “BBBEE Act”) has established a legislative framework for the promotion of economic empowerment of South African citizens disadvantaged by Apartheid. Accordingly, the BBBEE Act and related codes measure BBBEE Act compliance and good corporate practice by the inclusion of certain ownership, management control, employment equity and other metrics for companies that do business there. In addition,
certain municipalities have sought to impose permit fees based upon structural or operational requirements of towers. Our foreign operations may be affected if a country’s regulatory authority restricts or revokes spectrum licenses of certain wireless service providers or implements limitations on foreign ownership.
In all countries where we operate, we are subject to zoning restrictions and restrictive covenants imposed by local authorities or community organizations. While these regulations vary, they typically require tower owners or tenants to obtain approval from local authorities or community standards organizations prior to tower construction or the addition of a new antenna to an existing tower. Local zoning authorities and community residents often oppose construction in their communities, which can delay or prevent new tower construction, new antenna installation or site upgrade projects, thereby limiting our ability to respond to tenant demand. This opposition and existing or new zoning regulations can increase costs associated with new tower construction, tower modifications and additions of new antennas to a site or site upgrades, as well as adversely affect the associated timing or cost of such projects. Further, additional regulations may be adopted that cause delays or result in additional costs to us. These factors could materially and adversely affect our operations. In the United States, the Telecommunications Act of 1996 prohibits any action by state and local authorities that would discriminate between different providers of wireless services or ban altogether the construction, modification or placement of communications sites. It also prohibits state or local restrictions based on the environmental effects of radio frequency emissions to the extent the facilities comply with FCC regulations. Further, in February 2012, the United States government adopted regulations requiring that local and state governments approve modifications or colocations that qualify as eligible facilities under the regulations.
Portions of our business are subject to additional regulations, for example, in a number of states throughout the United States, certain of our subsidiaries hold Competitive Local Exchange Carrier (CLEC) or other status, in connection with the operation of our outdoor DAS networks business. In addition, we, or our tenants, may be subject to new regulatory policies in certain jurisdictions from time to time that may materially and adversely affect our business or the demand for our communications sites. For example, there are pending tower marking regulations in the United States, compliance with which may result in a substantial increase in our costs.
Environmental Matters.
Our U.S. and international operations are subject to various national, state and local environmental laws and regulations, including those relating to the management, use, storage, disposal, emission and remediation of, and exposure to, hazardous and non-hazardous substances, materials and wastes and the siting of our towers. We may be required to obtain permits, pay additional property taxes, comply with regulatory requirements and make certain informational filings related to hazardous substances or devices used to provide power such as batteries, generators and fuel at our sites. Violations of these types of regulations could subject us to fines or criminal sanctions.
Additionally, in the United States and other international markets where we do business, before constructing a new tower or adding an antenna to an existing site, we must review and evaluate the impact of the action to determine whether it may significantly affect the environment and whether we must disclose any significant impacts in an environmental assessment. If a tower or new antenna might have a material adverse impact on the environment, FCC or other governmental approval of the tower or antenna could be significantly delayed.
Health and Safety.
In the United States and in other countries where we operate, we are subject to various national, state and local laws regarding employee health and safety, including protection from radio frequency exposure.
Competition
We compete, both for new business and for the acquisition of assets, with other public tower companies, such as Crown Castle International Corp., SBA Communications Corporation, Telesites S.A.B. de C.V. and Cellnex Telecom, S.A., wireless carrier tower consortia such as Indus Towers Limited and private tower companies, private equity sponsored firms, carrier-affiliated tower companies, independent wireless carriers, tower owners, broadcasters and owners of non-communications sites, including rooftops, utility towers, water towers and other alternative structures. We believe that site location and capacity, network density, price, quality and speed of service have been, and will continue to be, significant competitive factors affecting owners, operators and managers of communications sites.
Our services business competes with a variety of companies offering individual, or combinations of, competing services. The field of competitors includes site acquisition consultants, zoning consultants, real estate firms, right-of-way consultants, structural engineering firms, tower owners/managers, telecommunications equipment vendors who can provide turnkey site development services through multiple subcontractors and our tenants’ personnel. We believe that our tenants base their decisions for services on various criteria, including a company’s experience, local reputation, price and time for completion of a project.
Customer Demand
Our strategy is predicated on the belief that wireless service providers will continue to invest in the coverage, quality and capacity of their networks in both our U.S. and international markets, while also investing in next generation data networks, which will drive demand for our communications sites. To meet these network objectives, we believe wireless carriers will continue to outsource their communications site infrastructure needs as a means to accelerate network development and more efficiently use their capital, rather than construct and operate their own communications sites and maintain their own communications site operation and development capabilities. In addition, because our services operations are complementary to our property business, we believe demand for our services will continue, consistent with industry trends.
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U.S. wireless network investments.
According to industry data, aggregate annual wireless capital spending in the United States has averaged $30 billion, resulting in consistent demand for our sites. Demand for our U.S. communications sites is driven by:
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Increasing wireless data usage, which continues to incentivize wireless service providers to focus on network quality and make incremental investments in the coverage and capacity of their networks;
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Subscriber adoption of advanced wireless data applications, particularly mobile video, increasingly advanced devices and the corresponding deployments and densification of advanced networks by wireless service providers to satisfy this incremental demand for high-bandwidth wireless data;
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Deployment of newly acquired spectrum; and
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Deployment of wireless and backhaul networks by new market entrants.
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As consumer demand for and use of advanced wireless services in the United States grow, wireless service providers may be compelled to deploy new technology and equipment, further increase the cell density of their existing networks and expand their network coverage.
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International (Asia, EMEA and Latin America) wireless network investments.
The wireless networks in most of our international markets are typically less advanced than those in our U.S. market with respect to the density of voice networks and the current technologies generally deployed for wireless services. Accordingly, demand for our international communications sites is primarily driven by:
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Incumbent wireless service providers investing in existing voice networks to improve or expand their coverage and increase capacity;
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In certain of our international markets, increasing subscriber adoption of wireless data applications, such as email, Internet and video;
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Spectrum auctions, which result in new market entrants, as well as initial and incremental data network deployments; and
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The increasing availability of lower cost smartphones.
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Demand for our communications sites could be negatively impacted by a number of factors, including an increase in network sharing or consolidation among our tenants, as set forth in Item 1A of this Annual Report under the caption “Risk Factors—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.” In addition, the emergence and growth of new technologies could reduce demand for our sites, as set forth under the caption “Risk Factors—New technologies or changes in a tenant’s business model could make our tower leasing business less desirable and result in decreasing revenues.” Further, our tenants may be subject to new regulatory policies from time to time that materially and adversely affect the demand for our communications sites.
Employees
As of
December 31, 2016
, we employed 4,507 full-time individuals and consider our employee relations to be satisfactory.
Available Information
Our Internet website address is
www.americantower.com
. Information contained on our website is not incorporated by reference into this Annual Report, and you should not consider information contained on our website as part of this Annual
Report. You may access, free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, plus amendments to such reports as filed or furnished pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), through the “Investor Relations” portion of our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (“SEC”).
We have adopted a written Code of Ethics and Business Conduct Policy (the “Code of Conduct”) that applies to all of our employees and directors, including, but not limited to, our principal executive officer, principal financial officer and principal accounting officer or controller or persons performing similar functions. The Code of Conduct is available on the “Corporate Responsibility” portion of our website and our Corporate Governance Guidelines and the charters of the audit, compensation and nominating and corporate governance committees of our Board of Directors are available on the “Investor Relations” portion of our website. In the event we amend the Code of Conduct, or provide any waivers of the Code of Conduct to our directors or executive officers, we will disclose these events on our website as required by the regulations of the New York Stock Exchange (the “NYSE”) and applicable law.
In addition, paper copies of these documents may be obtained free of charge by writing us at the following address: 116 Huntington Avenue, Boston, Massachusetts 02116, Attention: Investor Relations; or by calling us at (617) 375-7500.
Decrease in demand for our communications infrastructure would materially and adversely affect our operating results, and we cannot control that demand.
A significant reduction in leasing demand for our communications infrastructure could materially and adversely affect our business, results of operations or financial condition. Factors that may affect such demand include:
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increased use of network sharing or mergers or consolidations among wireless service providers;
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zoning, environmental, health, tax or other government regulations or changes in the application and enforcement thereof;
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governmental licensing of spectrum or restricting or revoking our tenants’ spectrum licenses;
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a decrease in consumer demand for wireless services, including due to general economic conditions or disruption in the financial and credit markets;
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the ability and willingness of wireless service providers to maintain or increase capital expenditures on network infrastructure;
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the financial condition of wireless service providers;
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delays or changes in the deployment of next generation wireless technologies; and
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Increasing competition for tenants in the tower industry may materially and adversely affect our revenue.
Our industry is highly competitive and our tenants have numerous alternatives in leasing antenna space. Competitive pricing from competitors could materially and adversely affect our lease rates. We may not be able to renew existing tenant leases or enter into new tenant leases, or if we are able to renew or enter into new leases, they may be at rates lower than our current rates, resulting in a material adverse impact on our results of operations and growth rate. In addition, should inflation rates exceed our fixed escalator percentages in markets where our leases include fixed escalators, our income could be adversely
affected.
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.
Extensive sharing of site infrastructure, roaming or resale arrangements among wireless service providers as an alternative to leasing our communications sites, without compensation to us, may cause new lease activity to slow if carriers utilize shared equipment rather than deploy new equipment, or may result in the decommissioning of equipment on certain existing sites because portions of the tenants’ networks may become redundant. In addition, significant consolidation among our tenants may materially and adversely affect our growth and revenues. Certain combined companies have rationalized duplicative parts of their networks or modernized their networks, and these and other tenants could determine not to renew, or attempt to cancel, avoid or limit leases with us or related payments. In the event a tenant terminates its business or separately sells its spectrum, we may experience increased churn as a result. Our ongoing contractual revenues and our future results may be negatively impacted if a significant number of these leases are not renewed.
Our business is subject to government and tax regulations and changes in current or future laws or regulations could restrict our ability to operate our business as we currently do.
Our business and that of our tenants are subject to federal, state, local and foreign regulations. In certain jurisdictions, these regulations could be applied or enforced retroactively, which could require that we modify or dismantle existing towers at significant costs. Zoning authorities and community organizations are often opposed to the construction of communications sites in their communities, which can delay, prevent or increase the cost of new tower construction, modifications, additions of new antennas to a site or site upgrades, thereby limiting our ability to respond to tenant demands. Existing regulatory policies may materially and adversely affect the timing or cost of construction projects associated with our communications sites and new regulations may be adopted that increase delays or result in additional costs to us, or that prevent such projects in certain locations, and noncompliance could result in the imposition of fines or an award of damages to private litigants. In certain jurisdictions, there may be changes to zoning regulations or construction laws based on site location, which may result in increased costs to modify certain of our existing towers or decreased revenue due to the removal of certain towers to ensure compliance with such changes. In addition, in certain jurisdictions, we are required to pay annual license fees, which may be subject to substantial increases by the government, or new fees may be enacted and apply retroactively. Furthermore, the tax laws, regulations and interpretations governing our business in jurisdictions where we operate may change at any time, perhaps with retroactive effect. This includes potential changes in tax laws or the interpretation of tax laws arising out of the “base erosion profit shifting” or “BEPS” project initiated by the Organization for Economic Co-operation and Development (OECD). In addition, some of these changes could have a more significant impact on us as a REIT relative to other REITs due to the nature of our business and our use of TRSs. These factors could materially and adversely affect our business, results of operations or financial condition.
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.
Our international business operations and our expansion into new markets in the future exposes us to potential adverse financial and operational problems not typically experienced in the United States. We anticipate that revenues from our international operations will continue to grow. Accordingly, our business is subject to risks associated with doing business internationally, including:
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changes to existing laws or new laws or methodologies impacting our existing and anticipated international operations, fees directed specifically at the ownership and operation of communications sites or our international acquisitions, any of which laws or fees may be applied retroactively, or failure to obtain an expected tax status for which we have applied;
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expropriation or governmental regulation restricting foreign ownership or requiring reversion or divestiture;
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laws or regulations that tax or otherwise restrict repatriation of earnings or other funds or otherwise limit distributions of capital;
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changes in a specific country’s or region’s political or economic conditions, including inflation or currency devaluation;
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changes to zoning regulations or construction laws, which could be applied retroactively to our existing communications sites;
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actions restricting or revoking our tenants’ spectrum licenses or suspending or terminating business under prior licenses;
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failure to comply with anti-bribery laws such as the Foreign Corrupt Practices Act or similar local anti-bribery laws, or the Office of Foreign Assets Control requirements;
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material site issues related to security, fuel availability and reliability of electrical grids;
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significant increases in, or implementation of new, license surcharges on our revenue;
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price setting or other similar laws or regulations for the sharing of passive infrastructure; and
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uncertain or inconsistent laws, regulations, rulings or results from legal or judicial systems, which may be applied retroactively, and delays in the judicial process.
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We also face risks associated with changes in foreign currency exchange rates, including those arising from our operations, investments and financing transactions related to our international business. Volatility in foreign currency exchange rates can also affect our ability to plan, forecast and budget for our international operations and expansion efforts. Our revenues earned from our international operations are primarily denominated in their respective local currencies. We have not historically engaged in significant currency hedging activities relating to our non-U.S. Dollar operations, and a weakening of these foreign currencies against the U.S. Dollar would negatively impact our reported revenues, operating profits and income.
In addition, as we continue to invest in joint venture opportunities internationally, our partners may have business or economic goals that are inconsistent with ours, be in positions to take action contrary to our interests, policies or objectives, have competing interests in our, or other, markets that could create conflict of interest issues, withhold consents contrary to our requests or become unable or unwilling to fulfill their commitments, any of which could expose us to additional liabilities or costs, including requiring us to assume and fulfill the obligations of that joint venture.
Our expansion initiatives involve a number of risks and uncertainties, including those related to integrating acquired or leased assets, that could adversely affect our operating results, disrupt our operations or expose us to additional risk.
As we continue to acquire communications sites in our existing markets and expand into new markets, we are subject to a number of risks and uncertainties, including not meeting our return on investment criteria and financial objectives, increased costs, assumed liabilities and the diversion of managerial attention due to acquisitions. Achieving the benefits of acquisitions depends in part on timely and efficiently integrating operations, communications tower portfolios and personnel. Integration may be difficult and unpredictable for many reasons, including, among other things, portfolios without requisite permits, differing systems, cultural differences, and conflicting policies, procedures and operations. Significant acquisition-related integration costs, including certain nonrecurring charges, could materially and adversely affect our results of operations in the period in which such charges are recorded or our cash flow in the period in which any related costs are actually paid. For example, the integration of Viom into our operations is a significant undertaking, and we anticipate that we will continue to incur certain nonrecurring charges associated with that integration, including costs associated with onboarding employees and visiting and upgrading tower sites. In addition, integration may significantly burden management and internal resources, including through the potential loss or unavailability of key personnel. If we fail to successfully integrate the assets we acquire or fail to utilize such assets to their full capacity, we may not realize the benefits we expect from our acquired portfolios, and our business, financial condition and results of operations will be adversely affected. Our international expansion initiatives are subject to additional risks such as those described in the preceding risk factor.
As a result of acquisitions, we have a substantial amount of intangible assets and goodwill. In accordance with accounting principles generally accepted in the United States (“GAAP”), we are required to assess our goodwill and other intangible assets annually or more frequently in the event of circumstances indicating potential impairment to determine if they are impaired. If the testing performed indicates that an asset may not be recoverable, we are required to record a non-cash impairment charge for the difference between the carrying value of the goodwill or other intangible assets and the implied fair value of the goodwill or the estimated fair value of other intangible assets in the period the determination is made.
Our expansion initiatives may not be successful or we may be required to record impairment charges for our goodwill or for other intangible assets, which could have a material adverse effect on our business, results of operations or financial condition.
Competition for assets could adversely affect our ability to achieve our return on investment criteria.
We may experience increased competition for the acquisition of assets or contracts to build new communications sites for tenants, which could make the acquisition of high quality assets significantly more costly or prohibitive or cause us to lose contracts to build new sites. Some of our competitors are larger and may have greater financial resources than we do, while other competitors may apply less stringent investment criteria than we do. In addition, we may not anticipate increased competition entering a particular market or competing for the same assets. Higher prices for assets or the failure to add new assets to our portfolio could make it more difficult to achieve our anticipated returns on investment or future growth, which could materially and adversely affect our business, results of operations or financial condition.
New technologies or changes in a tenant’s business model could make our tower leasing business less desirable and result in decreasing revenues.
The development and implementation of new technologies designed to enhance the efficiency of wireless networks or changes in a tenant’s business model could reduce the need for tower-based wireless services, decrease demand for tower space or reduce previously obtainable lease rates. In addition, tenants may allocate less of their budgets to leasing space on our towers, as the industry is trending towards deploying increased capital to the development and implementation of new technologies. Examples of these technologies include spectrally efficient technologies, which could relieve a portion of our tenants’ network capacity needs and, as a result, could reduce the demand for tower-based antenna space. Additionally, certain small cell complementary network technologies could shift a portion of our tenants’ network investments away from the traditional tower-based networks, which may reduce the need for carriers to add more equipment at certain communications sites. Moreover, the emergence of alternative technologies could reduce the need for tower-based broadcast services transmission and reception. Further, a tenant may decide to no longer outsource tower infrastructure or otherwise change its business model, which would result in a decrease in our revenue. Our failure to innovate in response to the development and
implementation of these or similar technologies to any significant degree or changes in a tenant’s business model could have a material adverse effect on our business, results of operations or financial condition.
Our leverage and debt service obligations may materially and adversely affect our ability to raise additional financing to fund capital expenditures, future growth and expansion initiatives and to satisfy our distribution requirements.
Our leverage and debt service obligations could have significant negative consequences to our business, results of operations or financial condition, including:
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requiring the dedication of a substantial portion of our cash flow from operations to service our debt, thereby reducing the amount of our cash flow available for other purposes, including capital expenditures, REIT distributions
an
d preferred stock dividends;
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impairing our ability to meet one or more of the financial ratio covenants contained in our debt agreements or to generate cash sufficient to pay interest or principal due under those agreements, which could result in an acceleration of some or all of our outstanding debt and the loss of the towers securing such debt if a default remains uncured;
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limiting our ability to obtain additional debt or equity financing, thereby placing us at a possible competitive disadvantage to less leveraged competitors and competitors that may have better access to capital resources, including with respect to acquiring assets; and
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limiting our flexibility in planning for, or reacting to, changes in our business and the markets in which we compete.
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We may need to raise additional capital through debt financing activities, asset sales or equity issuances, even if the then-prevailing market conditions are not favorable, to fund capital expenditures, future growth and expansion initiatives and to satisfy our distribution requirements and debt service obligations. An increase in our total leverage could lead to a downgrade of our credit rating below investment grade, which could negatively impact our ability to access credit markets or preclude us from obtaining funds on investment grade terms and conditions. Further, certain of our current debt instruments limit the amount of indebtedness we and our subsidiaries may incur. Additional financing, therefore, may be unavailable, more expensive or restricted by the terms of our outstanding indebtedness.
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.
A substantial portion of our total operating revenues is derived from a small number of tenants. If any of these tenants is unwilling or unable to perform its obligations under our agreements with it, our revenues, results of operations, financial condition and liquidity could be materially and adversely affected. In the ordinary course of our business, we do occasionally experience disputes with our tenants, generally regarding the interpretation of terms in our leases. Historically, we have resolved these disputes in a manner that did not have a material adverse effect on us or our tenant relationships. However, it is possible that such disputes could lead to a termination of our leases with tenants, a material modification of the terms of those leases or a failure to obtain new business from existing tenants, any of which could have a material adverse effect on our business, results of operations or financial condition. If we are forced to resolve any of these disputes through litigation, our relationship with the applicable tenant could be terminated or damaged, which could lead to decreased revenue or increased costs, resulting in a corresponding adverse effect on our business, results of operations or financial condition.
Due to the long-term nature of our tenant leases, we depend on the continued financial strength of our tenants. Many wireless service providers operate with substantial leverage. Sometimes our tenants, or their parent companies, face financial difficulty or file for bankruptcy.
In our international operations, many of our tenants are subsidiaries of global telecommunications companies. These subsidiaries may not have the explicit or implied financial support of their parent entities.
In addition, many of our tenants and potential tenants rely on capital raising activities to fund their operations and capital expenditures, which may be more difficult or expensive in the event of downturns in the economy or disruptions in the financial and credit markets. If our tenants or potential tenants are unable to raise adequate capital to fund their business plans, they may reduce their spending, which could materially and adversely affect demand for our communications sites and our services business. If, as a result of a prolonged economic downturn or otherwise, one or more of our significant tenants experiences financial difficulties or files for bankruptcy, it could result in uncollectible accounts receivable and an impairment of our deferred rent asset, tower asset, network location intangible asset or tenant-related intangible asset. The loss of significant tenants, or the loss of all or a portion of our anticipated lease revenues from certain tenants, could have a material adverse effect on our business, results of operations or financial condition.
If we fail to remain qualified for taxation as a REIT, we will be subject to tax at corporate income tax rates, which may substantially reduce funds otherwise available, and even if we qualify for taxation as a REIT, we may face tax liabilities that impact earnings and available cash flow.
Commencing with the taxable year beginning January 1, 2012, we have operated as a REIT for federal income tax purposes.
Qualification for taxation as a REIT requires the application of certain highly technical and complex provisions of the Internal Revenue Code of 1986, as amended (the “Code”), which provisions may change from time to time, to our operations as well as various factual determinations concerning matters and circumstances not entirely within our control. Further, tax reform proposals, if enacted, may adversely affect our ability to remain qualified for taxation as a REIT or the benefits or desirability of remaining so qualified. There are few judicial or administrative interpretations of the relevant provisions of the Code.
If, in any taxable year, we fail to qualify for taxation as a REIT and are not entitled to relief under the Code:
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we will not be allowed a deduction for distributions to stockholders in computing our taxable income;
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we will be subject to federal and state income tax, including any applicable alternative minimum tax, on our taxable income at regular corporate tax rates; and
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we will be disqualified from REIT tax treatment for the four taxable years immediately following the year during which we were so disqualified.
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We are subject to certain federal, state, local and foreign taxes on our income and assets, including alternative minimum taxes, taxes on any undistributed income and state, local or foreign income, franchise, property and transfer taxes. While state and local income tax regimes often parallel the U.S. federal income tax regime for REITs, many of these jurisdictions do not completely follow U.S. federal rules and some may not follow them at all. For example, some state and local jurisdictions currently or in the future may limit or eliminate a REIT’s deduction for dividends paid, which could increase our income tax expense. We are also subject to the continual examination of our income tax returns by the U.S. Internal Revenue Service and state, local and foreign tax authorities. The results of an audit and examination of previously filed tax returns and continuing assessments of our tax exposures may have an adverse effect on our provision for income taxes and cash tax liability.
Our domestic TRS assets and operations are subject, as applicable, to federal and state corporation income taxes. Our foreign operations, whether in the REIT or TRSs, are subject to foreign taxes in jurisdictions in which those assets and operations are located.
Any corporate tax liability could be substantial and would reduce the amount of cash available for other purposes. If we fail to qualify for taxation as a REIT, we may need to borrow additional funds or liquidate some investments to pay any additional tax liability. Accordingly, funds available for investment, operations and distribution would be reduced.
Furthermore, as a result of our acquisition of MIP Tower Holdings LLC (“MIPT”), we owned an interest in a subsidiary REIT. Effective July 25, 2015, we filed a tax election, pursuant to which MIPT no longer operates as a separate REIT. The statute of limitations is still open for certain years and MIPT’s qualification as a REIT could still be challenged. As such, for all open years, we must demonstrate that the subsidiary REIT complied with the same REIT requirements that we must satisfy in order to qualify as a REIT, together with all other rules applicable to REITs. If the subsidiary REIT is determined to have failed to qualify as a REIT for any of the open years, and certain relief provisions do not apply, then (i) the subsidiary REIT would have been subject to federal income tax for such year, which tax we would inherit along with applicable penalties and interest; (ii) the subsidiary REIT would be disqualified from treatment as a REIT for the remaining taxable years following the year during which qualification was lost; (iii) for those years in which the subsidiary REIT failed to qualify as a REIT, our ownership of shares in such subsidiary REIT would have failed to be a qualifying asset for purposes of the asset tests applicable to REITs and any dividend income or gains derived by us from such subsidiary REIT may cease to be treated as income that qualifies for purposes of the 75% gross income test; and (iv) we may have failed certain of the asset tests applicable to REITs, in which event we would fail to qualify as a REIT for those periods unless we are able to avail ourselves of specified relief provisions.
Complying with REIT requirements may limit our flexibility or cause us to forego otherwise attractive opportunities.
Our use of TRSs enables us to engage in non-REIT qualifying business activities. Under the Code, no more than 25% of the value of the assets of a REIT may be represented by securities of one or more TRSs and other non-qualifying assets. Effective January 1, 2018, this limitation is reduced to 20%. This limitation may hinder our ability to make certain attractive investments, including the purchase of non-qualifying assets, the expansion of non-real estate activities and investments in the
businesses to be conducted by our TRSs, and to that extent limit our opportunities and our flexibility to change our business strategy.
Specifically, this limitation may affect our ability to make additional investments in our managed networks business or services segment as currently structured and operated, in other non-REIT qualifying operations or assets, or in international operations conducted through TRSs that we do not elect to bring into the REIT structure. Further, acquisition opportunities in the United States and international markets may be adversely affected if we need or require the target company to comply with certain REIT requirements prior to closing.
Further, as a REIT, we must distribute to our stockholders an amount equal to at least 90% of the REIT taxable income (determined before the deduction for distributed earnings and excluding any net capital gain). To meet our annual distribution requirements, we may be required to distribute amounts that may otherwise be used for our operations, including amounts that may otherwise be invested in future acquisitions, capital expenditures or repayment of debt. As no more than 25% of our gross income may consist of dividend income from our TRSs and other non-qualifying types of income, our ability to receive distributions from our TRSs may be limited, which may impact our ability to fund distributions to our stockholders or to use income of our TRSs to fund other investments.
In addition, the majority of our income and cash flows from our TRSs are generated from our international operations. In many cases, there are local withholding taxes and currency controls that may impact our ability or willingness to repatriate funds to the United States to help satisfy REIT distribution requirements.
Restrictive covenants in the agreements related to our securitization transactions, our credit facilities and our debt securities and the terms of our preferred stock could materially and adversely affect our business by limiting flexibility, and we may be prohibited from paying dividends on our common stock, which may jeopardize our qualification for taxation as a REIT.
The agreements related to our securitization transactions include operating covenants and other restrictions customary for loans subject to rated securitizations. Among other things, the borrowers under the agreements are prohibited from incurring other indebtedness for borrowed money or further encumbering their assets. A failure to comply with the covenants in the agreements could prevent the borrowers from taking certain actions with respect to the secured assets and could prevent the borrowers from distributing any excess cash from the operation of such assets to us. If the borrowers were to default on any of the loans, the servicer on such loan could seek to foreclose upon or otherwise convert the ownership of the secured assets, in which case we could lose such assets and the cash flow associated with such assets.
The agreements for our credit facilities also contain restrictive covenants and leverage and other financial maintenance tests that could limit our ability to take various actions, including incurring additional debt, guaranteeing indebtedness or making distributions to stockholders, including our required REIT distributions, and engaging in various types of transactions, including mergers, acquisitions and sales of assets. Additionally, our debt agreements restrict our and our subsidiaries’ ability to incur liens securing our or their indebtedness. These covenants could have an adverse effect on our business by limiting our ability to take advantage of financing, new tower development, mergers and acquisitions or other opportunities. Further, reporting and information covenants in our credit agreements and indentures require that we provide financial and operating information within certain time periods. If we are unable to provide the required information on a timely basis, we would be in breach of these covenants. For more information regarding the covenants and requirements discussed above, please see Item 7 of this Annual Report under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Factors Affecting Sources of Liquidity” and note 8 to our consolidated financial statements included in this Annual Report.
The terms of our preferred stock provide that, unless full cumulative dividends have been paid or set aside for payment on all outstanding preferred stock for all prior dividend periods, no dividends may be declared or paid on our common stock. A failure to pay dividends on both our preferred and our common stock might jeopardize our qualification for taxation as a REIT for federal income tax purposes. Even if these limits do not jeopardize our qualification for taxation as a REIT, they may prevent us from distributing 100% of our REIT taxable income, making us subject to federal corporate income tax, and potentially a nondeductible excise tax, on the retained amounts.
If we are unable to protect our rights to the land under our towers, it could adversely affect our business and operating results.
Our real property interests relating to our towers consist primarily of leasehold and sub-leasehold interests, fee interests, easements, licenses and rights-of-way. A loss of these interests at a particular tower site may interfere with our ability to operate that tower site and generate revenues. For various reasons, we may not always have the ability to access, analyze and verify all
information regarding titles and other issues prior to completing an acquisition of communications sites, which can affect our rights to access and operate a site. From time to time we also experience disputes with landowners regarding the terms of ground agreements for land under towers, which can affect our ability to access and operate tower sites. Further, for various reasons, landowners may not want to renew their ground agreements with us, they may lose their rights to the land, or they may transfer their land interests to third parties, including ground lease aggregators, which could affect our ability to renew ground agreements on commercially viable terms. A significant number of the communications sites in our portfolio are located on land we lease pursuant to long-term operating leases. Further, for various reasons, title to property interests in some of the foreign jurisdictions in which we operate may not be as certain as title to our property interests in the United States. Our inability to protect our rights to the land under our towers may have a material adverse effect on our business, results of operations or financial condition.
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.
Our communications real estate portfolio includes towers that we operate pursuant to lease and sublease agreements that include a purchase option at the end of each lease period. We may not have the required available capital to exercise our right to purchase leased or subleased towers at the end of the applicable period, or we may choose, for business or other reasons, not to exercise our right to purchase such towers. In the event that we do not exercise these purchase rights, or are otherwise unable to acquire an interest that would allow us to continue to operate these towers after the applicable period, we will lose the cash flows derived from such towers. In the event that we decide to exercise these purchase rights, the benefits of acquiring a significant number of towers may not exceed the associated acquisition, compliance and integration costs, which could have a material adverse effect on our business, results of operations or financial condition.
Our costs could increase and our revenues could decrease due to perceived health risks from radio emissions, especially if these perceived risks are substantiated.
Public perception of possible health risks associated with cellular and other wireless communications technology could slow the growth of wireless companies, which could in turn slow our growth. In particular, negative public perception of, and regulations regarding, these perceived health risks could undermine the market acceptance of wireless communications services and increase opposition to the development and expansion of tower sites. If a scientific study or court decision resulted in a finding that radio frequency emissions pose health risks to consumers, it could negatively impact our tenants and the market for wireless services, which could materially and adversely affect our business, results of operations or financial condition. We do not maintain any significant insurance with respect to these matters.
We could have liability under environmental and occupational safety and health laws.
Our operations are subject to the requirements of various federal, state, local and foreign environmental and occupational safety and health laws and regulations, including those relating to the management, use, storage, disposal, emission and remediation of, and exposure to, hazardous and non-hazardous substances, materials and wastes. As the owner, lessee or operator of real property and facilities, including generators, we may be liable for substantial costs of investigation, removal or remediation of soil and groundwater contaminated by hazardous materials, and for damages and costs relating to off-site migration of hazardous materials, without regard to whether we, as the owner, lessee or operator, knew of, or were responsible for, the contamination. We may also be liable for certain costs of remediating contamination at third-party sites to which we sent waste for disposal, even if the original disposal may have complied with all legal requirements at the time. Many of these laws and regulations contain information reporting and record keeping requirements. We may not be at all times in compliance with all environmental requirements. We may be subject to potentially significant fines or penalties if we fail to comply with any of these requirements. The requirements of these laws and regulations are complex, change frequently and could become more stringent in the future. In certain jurisdictions these laws and regulations could be applied retroactively. It is possible that these requirements will change or that liabilities will arise in the future in a manner that could have a material adverse effect on our business, results of operations or financial condition. While we maintain environmental insurance, we may not have adequate insurance to cover all remediation costs, fines or penalties.
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.
Our towers are subject to risks associated with natural disasters, such as ice and wind storms, tornadoes, floods, hurricanes and earthquakes, as well as other unforeseen events, such as acts of terrorism. Any damage or destruction to, or inability to access, our towers or data centers may impact our ability to provide services to our tenants and lead to tenant loss, which could have a material adverse effect on our business, results of operations or financial condition.
As part of our normal business activities, we rely on information technology and other computer resources to carry out important operational, reporting and compliance activities and to maintain our business records. Our computer systems, or those of our cloud or Internet-based providers, could fail on their own accord and are subject to interruption or damage from power outages, computer and telecommunications failures, computer viruses, security breaches (including through cyber attack and data theft), usage errors, catastrophic events such as natural disasters and other events beyond our control. Although we and our vendors have disaster recovery programs and security measures in place, if our computer systems and our backup systems are compromised, degraded, damaged, or breached, or otherwise cease to function properly, we could suffer interruptions in our operations or unintentionally allow misappropriation of proprietary or confidential information (including information about our tenants or landlords), which could damage our reputation and require us to incur significant costs to remediate or otherwise resolve these issues.
While we maintain insurance coverage for natural disasters, business interruption and cybersecurity, we may not have adequate insurance to cover the associated costs of repair or reconstruction of sites for a major future event, lost revenue, including from new tenants that could have been added to our towers but for the event, or other costs to remediate the impact of a significant event. Further, we may be liable for damage caused by towers that collapse for any number of reasons including structural deficiencies, which could harm our reputation and require us to incur costs for which we may not have adequate insurance coverage.
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ITEM 1B.
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UNRESOLVED STAFF COMMENTS
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None.
Details of each of our principal offices as of
December 31, 2016
are provided below:
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Country
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Function
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Size (approximate
square feet)
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Property Interest
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U.S. Offices
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Boston, MA
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Corporate Headquarters
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39,800
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Leased
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Boca Raton, FL
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Managed Sites Headquarters
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22,400
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Leased
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Miami, FL
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Latin America Operations Center
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6,300
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Leased
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Atlanta, GA
|
|
Network Operations and Program Management Office Field Personnel
|
|
21,400
|
|
|
Leased
|
Marlborough, MA
|
|
Information Technology Headquarters
|
|
24,000
|
|
|
Leased
|
Woburn, MA
|
|
U.S. Tower Division Headquarters, Accounting, Lease Administration, Site Leasing Management and Broadcast Division Headquarters
|
|
163,200
|
|
|
Owned
|
Cary, NC
|
|
U.S. Tower Division, Network Operations Center and Engineering Services Headquarters
|
|
44,300
|
|
|
Owned(1)
|
Asia Offices
|
|
|
|
|
|
|
Delhi, India
|
|
India Headquarters
|
|
7,200
|
|
|
Leased
|
Gurgaon, India
|
|
India Operations Center
|
|
78,800
|
|
|
Leased
|
Singapore
|
|
Asia Finance and Administration
|
|
90
|
|
|
Leased
|
EMEA Offices
|
|
|
|
|
|
|
Ratingen, Germany
|
|
Germany Headquarters
|
|
12,500
|
|
|
Leased(2)
|
Accra, Ghana
|
|
Ghana Headquarters
|
|
18,500
|
|
|
Leased
|
Amsterdam, Netherlands
|
|
American Tower International Headquarters
|
|
2,400
|
|
|
Leased
|
Lagos, Nigeria
|
|
Nigeria Headquarters
|
|
8,900
|
|
|
Leased
|
Johannesburg, South Africa
|
|
South Africa Headquarters
|
|
18,800
|
|
|
Leased(3)
|
Kampala, Uganda
|
|
Uganda Headquarters
|
|
8,800
|
|
|
Leased
|
Latin America Offices
|
|
|
|
|
|
|
Buenos Aires, Argentina
|
|
Argentina Headquarters
|
|
4,200
|
|
|
Leased
|
Sao Paulo, Brazil
|
|
Brazil Headquarters
|
|
38,400
|
|
|
Leased
|
Santiago, Chile
|
|
Chile Headquarters
|
|
6,900
|
|
|
Leased
|
Bogota, Colombia
|
|
Colombia Headquarters
|
|
13,800
|
|
|
Leased
|
San Jose, Costa Rica
|
|
Costa Rica Headquarters
|
|
2,400
|
|
|
Leased
|
Mexico City, Mexico
|
|
Mexico Headquarters
|
|
32,700
|
|
|
Leased
|
Lima, Peru
|
|
Peru Headquarters
|
|
3,700
|
|
|
Leased
|
_______________
(1) The Cary facility is approximately 48,300 square feet. Currently, our offices occupy approximately 44,300 square feet. We lease the remaining space to an unaffiliated tenant.
(2) We lease two office spaces that together occupy an aggregate of approximately 12,500 square feet.
(3) We lease two office spaces that together occupy an aggregate of approximately 18,800 square feet.
In addition to the principal offices set forth above, we maintain offices in the geographic areas we serve through which we operate our tower leasing and services businesses. We believe that our owned and leased facilities are suitable and adequate to meet our anticipated needs.
As of
December 31, 2016
, we owned and operated a portfolio of
144,884
communications sites. See the table in Item 7 of this Annual Report, under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Executive Overview” for more detailed information on the geographic locations of our communications sites. In addition, we own property interests that we lease to communications service providers and third-party tower operators in the United States, which are included in our U.S. property segment.
Our interests in our communications sites are comprised of a variety of ownership interests, including leases created by long-term ground lease agreements, easements, licenses or rights-of-way granted by government entities.
A typical tower site consists of a compound enclosing the tower site, a tower structure and one or more equipment shelters that house a variety of transmitting, receiving and switching equipment. In addition, our international sites typically include backup or auxiliary power generators and batteries. The principal types of our towers are guyed, self-supporting lattice and monopole, and rooftops in our international markets.
|
|
•
|
A guyed tower includes a series of cables attaching separate levels of the tower to anchor foundations in the ground and can reach heights of up to 2,000 feet. A guyed tower site for a typical broadcast tower can consist of a tract of land of up to 20 acres.
|
|
|
•
|
A self-supporting lattice tower typically tapers from the bottom up and usually has three or four legs. A lattice tower can reach heights of up to 1,000 feet. Depending on the height of the tower, a lattice tower site for a typical wireless communications tower can consist of a tract of land of 10,000 square feet for a rural site or fewer than 2,500 square feet for a metropolitan site.
|
|
|
•
|
A monopole tower is a tubular structure that is used primarily to address space constraints or aesthetic concerns. Monopoles typically have heights ranging from 50 to 200 feet. A monopole tower site used in metropolitan areas for a typical wireless communications tower can consist of a tract of land of fewer than 2,500 square feet.
|
|
|
•
|
Rooftop towers are primarily used in metropolitan areas in our Asia, EMEA and Latin America markets, where locations for traditional tower structures are unavailable. Rooftop towers typically have heights ranging from 10 to 100 feet.
|
U.S. Property Segment Encumbered Sites
. As of
December 31, 2016
, the loan underlying the securitization transaction completed in March 2013 (the “2013 Securitization”) is secured by mortgages, deeds of trust and deeds to secure the loan on substantially all of the 5,181 towers owned by the borrowers (the “2013 Secured Towers”) and the secured revenue notes issued in a private transaction completed in May 2015 (the “2015 Securitization”) are secured by mortgages, deeds of trust and deeds to secure debt on substantially all of the 3,596 communications sites owned by subsidiaries of the issuer (the “2015 Secured Sites”). 264 towers and 433 property interests and other related assets secure three separate classes of Secured Cellular Site Revenue Notes, Series 2012-2 Class A, Series 2012-2 Class B and Series 2012-2 Class C (the “2012 GTP Notes”), issued by GTP Cellular Sites, LLC in securitization transactions that we assumed in connection with our acquisition of MIPT. In addition, 1,417 property interests are subject to mortgages and deeds of trust to secure two separate classes of Secured Cellular Site Revenue Notes, Series 2010-2, Class C and Series 2010-2, Class F (the “Unison Notes”) issued by Unison Ground Lease Funding, LLC and assumed in connection with the acquisition of certain legal entities from Unison Holdings LLC and Unison Site Management II, L.L.C. (the “Unison Acquisition”). On February 15, 2017, we repaid all amounts outstanding under the 2012 GTP Notes and the Unison Notes and released the security interests on the encumbered assets.
Asia Property Segment Encumbered Sites.
Certain of the outstanding indebtedness assumed in the Viom Acquisition is secured by ATC TIPL’s short-term and long-term assets, including an aggregate of 41,786 towers.
EMEA Property Segment Encumbered Sites.
Our outstanding indebtedness in South Africa is secured by an aggregate of 1,899 towers.
Latin America Property Segment Encumbered Sites
. In Brazil, the debentures issued by BR Towers S.A. (“BR Towers”) are secured by an aggregate of 1,912 towers and the Brazil credit facility is secured by an aggregate of 145 towers. Our outstanding indebtedness in Colombia is secured by an aggregate of 3,563 towers.
Ground Leases.
Of the
144,119
towers in our portfolio as of
December 31, 2016
, 91% were located on land we lease. Typically, we seek to enter ground leases with terms of twenty to twenty-five years, which have initial terms of approximately five to ten years with one or more automatic or exercisable renewal periods. As a result, 51% of the ground agreements for our sites have a final expiration date of 2026 and beyond.
Tenants
. Our tenants are primarily wireless service providers, broadcasters and other companies in a variety of industries. As of
December 31, 2016
, our top four tenants by total revenue were AT&T (
21%
), Verizon Wireless (
15%
), Sprint (
11%
) and T-Mobile (
9%
). In general, our tenant leases have an initial non-cancellable term of ten years, with multiple renewal terms. As a result, 50% of our current tenant leases have a renewal date of 2022 or beyond.
|
|
|
ITEM 3.
|
LEGAL PROCEEDINGS
|
We periodically become involved in various claims and lawsuits that are incidental to our business. In the opinion of management, after consultation with counsel, there are no matters currently pending that would, in the event of an adverse outcome, have a material impact on our consolidated financial position, results of operations or liquidity.
|
|
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
N/A.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
December 31, 2015
|
ASSETS
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
787,161
|
|
|
$
|
320,686
|
|
Restricted cash
|
|
149,281
|
|
|
142,193
|
|
Short-term investments
|
|
4,026
|
|
|
—
|
|
Accounts receivable, net
|
|
308,369
|
|
|
227,354
|
|
Prepaid and other current assets
|
|
441,033
|
|
|
306,235
|
|
Total current assets
|
|
1,689,870
|
|
|
996,468
|
|
PROPERTY AND EQUIPMENT, net
|
|
10,517,258
|
|
|
9,866,424
|
|
GOODWILL
|
|
5,070,680
|
|
|
4,091,805
|
|
OTHER INTANGIBLE ASSETS, net
|
|
11,274,611
|
|
|
9,837,876
|
|
DEFERRED TAX ASSET
|
|
195,678
|
|
|
212,041
|
|
DEFERRED RENT ASSET
|
|
1,289,530
|
|
|
1,166,755
|
|
NOTES RECEIVABLE AND OTHER NON-CURRENT ASSETS
|
|
841,523
|
|
|
732,903
|
|
TOTAL
|
|
$
|
30,879,150
|
|
|
$
|
26,904,272
|
|
LIABILITIES
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
Accounts payable
|
|
$
|
118,666
|
|
|
$
|
96,714
|
|
Accrued expenses
|
|
620,563
|
|
|
516,413
|
|
Distributions payable
|
|
250,550
|
|
|
210,027
|
|
Accrued interest
|
|
157,297
|
|
|
115,672
|
|
Current portion of long-term obligations
|
|
238,806
|
|
|
50,202
|
|
Unearned revenue
|
|
245,387
|
|
|
211,001
|
|
Total current liabilities
|
|
1,631,269
|
|
|
1,200,029
|
|
LONG-TERM OBLIGATIONS
|
|
18,294,659
|
|
|
17,068,807
|
|
ASSET RETIREMENT OBLIGATIONS
|
|
965,507
|
|
|
856,936
|
|
DEFERRED TAX LIABILITY
|
|
777,572
|
|
|
106,333
|
|
OTHER NON-CURRENT LIABILITIES
|
|
1,142,723
|
|
|
959,349
|
|
Total liabilities
|
|
22,811,730
|
|
|
20,191,454
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
|
|
|
|
REDEEMABLE NONCONTROLLING INTERESTS
|
|
1,091,220
|
|
|
—
|
|
EQUITY:
|
|
|
|
|
Preferred stock: $.01 par value; 20,000,000 shares authorized;
|
|
|
|
|
5.25%, Series A, 6,000,000 shares issued and outstanding; aggregate liquidation value of $600,000
|
|
60
|
|
|
60
|
|
5.50%, Series B, 1,375,000 shares issued and outstanding; aggregate liquidation value of $1,375,000
|
|
14
|
|
|
14
|
|
Common stock: $.01 par value; 1,000,000,000 shares authorized; 429,912,536 and 426,695,279 shares issued; and 427,102,510 and 423,885,253 shares outstanding, respectively
|
|
4,299
|
|
|
4,267
|
|
Additional paid-in capital
|
|
10,043,559
|
|
|
9,690,609
|
|
Distributions in excess of earnings
|
|
(1,076,965
|
)
|
|
(998,535
|
)
|
Accumulated other comprehensive loss
|
|
(1,999,332
|
)
|
|
(1,836,996
|
)
|
Treasury stock (2,810,026 shares at cost)
|
|
(207,740
|
)
|
|
(207,740
|
)
|
Total American Tower Corporation equity
|
|
6,763,895
|
|
|
6,651,679
|
|
Noncontrolling interests
|
|
212,305
|
|
|
61,139
|
|
Total equity
|
|
6,976,200
|
|
|
6,712,818
|
|
TOTAL
|
|
$
|
30,879,150
|
|
|
$
|
26,904,272
|
|
See accompanying notes to consolidated financial statements.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
REVENUES:
|
|
|
|
|
|
Property
|
$
|
5,713,126
|
|
|
$
|
4,680,388
|
|
|
$
|
4,006,854
|
|
Services
|
72,542
|
|
|
91,128
|
|
|
93,194
|
|
Total operating revenues
|
5,785,668
|
|
|
4,771,516
|
|
|
4,100,048
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
Costs of operations (exclusive of items shown separately below):
|
|
|
|
|
|
Property (including stock-based compensation expense of $1,750, $1,614 and $1,397, respectively)
|
1,762,694
|
|
|
1,275,436
|
|
|
1,056,177
|
|
Services (including stock-based compensation expense of $688, $439 and $440, respectively)
|
27,695
|
|
|
33,432
|
|
|
38,088
|
|
Depreciation, amortization and accretion
|
1,525,635
|
|
|
1,285,328
|
|
|
1,003,802
|
|
Selling, general, administrative and development expense (including stock-based compensation expense of $87,460, $88,484 and $78,316, respectively)
|
543,395
|
|
|
497,835
|
|
|
446,542
|
|
Other operating expenses
|
73,220
|
|
|
66,696
|
|
|
68,517
|
|
Total operating expenses
|
3,932,639
|
|
|
3,158,727
|
|
|
2,613,126
|
|
OPERATING INCOME
|
1,853,029
|
|
|
1,612,789
|
|
|
1,486,922
|
|
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
Interest income, TV Azteca, net of interest expense of $1,163, $820 and $1,482, respectively
|
10,960
|
|
|
11,209
|
|
|
10,547
|
|
Interest income
|
25,618
|
|
|
16,479
|
|
|
14,002
|
|
Interest expense
|
(717,125
|
)
|
|
(595,949
|
)
|
|
(580,234
|
)
|
Gain (loss) on retirement of long-term obligations
|
1,168
|
|
|
(79,606
|
)
|
|
(3,473
|
)
|
Other expense (including unrealized foreign currency losses of $23,439, $71,473 and $49,319, respectively)
|
(47,790
|
)
|
|
(134,960
|
)
|
|
(62,060
|
)
|
Total other expense
|
(727,169
|
)
|
|
(782,827
|
)
|
|
(621,218
|
)
|
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
|
1,125,860
|
|
|
829,962
|
|
|
865,704
|
|
Income tax provision
|
(155,501
|
)
|
|
(157,955
|
)
|
|
(62,505
|
)
|
NET INCOME
|
970,359
|
|
|
672,007
|
|
|
803,199
|
|
Net (income) loss attributable to noncontrolling interests
|
(13,934
|
)
|
|
13,067
|
|
|
21,711
|
|
NET INCOME ATTRIBUTABLE TO AMERICAN TOWER CORPORATION STOCKHOLDERS
|
956,425
|
|
|
685,074
|
|
|
824,910
|
|
Dividends on preferred stock
|
(107,125
|
)
|
|
(90,163
|
)
|
|
(23,888
|
)
|
NET INCOME ATTRIBUTABLE TO AMERICAN TOWER CORPORATION COMMON STOCKHOLDERS
|
$
|
849,300
|
|
|
$
|
594,911
|
|
|
$
|
801,022
|
|
NET INCOME PER COMMON SHARE AMOUNTS:
|
|
|
|
|
|
Basic net income attributable to American Tower Corporation common stockholders
|
$
|
2.00
|
|
|
$
|
1.42
|
|
|
$
|
2.02
|
|
Diluted net income attributable to American Tower Corporation common stockholders
|
$
|
1.98
|
|
|
$
|
1.41
|
|
|
$
|
2.00
|
|
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
|
|
|
|
|
|
BASIC
|
425,143
|
|
|
418,907
|
|
|
395,958
|
|
DILUTED
|
429,283
|
|
|
423,015
|
|
|
400,086
|
|
See accompanying notes to consolidated financial statements.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2016
|
|
2015
|
|
2014
|
Net income
|
|
$
|
970,359
|
|
|
$
|
672,007
|
|
|
$
|
803,199
|
|
Other comprehensive (loss) income:
|
|
|
|
|
|
|
Changes in fair value of cash flow hedges, net of tax expense (benefit) of $0, $73 and $(151), respectively
|
|
(449
|
)
|
|
948
|
|
|
(1,931
|
)
|
Reclassification of unrealized losses on cash flow hedges to net income, net of tax expense (benefit) of $0, $84 and $(158), respectively
|
|
(291
|
)
|
|
2,440
|
|
|
3,448
|
|
Foreign currency translation adjustments, net of tax expense (benefit) of $3,782, $(24,857) and $(14,247), respectively
|
|
(202,819
|
)
|
|
(1,078,950
|
)
|
|
(526,890
|
)
|
Other comprehensive loss
|
|
(203,559
|
)
|
|
(1,075,562
|
)
|
|
(525,373
|
)
|
Comprehensive income (loss)
|
|
766,800
|
|
|
(403,555
|
)
|
|
277,826
|
|
Comprehensive loss attributable to noncontrolling interest
|
|
18,218
|
|
|
45,854
|
|
|
64,083
|
|
Comprehensive income (loss) attributable to American Tower Corporation stockholders
|
|
$
|
785,018
|
|
|
$
|
(357,701
|
)
|
|
$
|
341,909
|
|
See accompanying notes to consolidated financial statements.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock - Series A
|
|
Preferred Stock - Series B
|
|
Common Stock
|
|
Treasury Stock
|
|
Additional
Paid-in
Capital
|
|
Accumulated Other
Comprehensive
Loss
|
|
Distributions
in Excess of
Earnings
|
|
Noncontrolling
Interest
|
|
Total
Equity
|
|
Issued Shares
|
|
Amount
|
|
Issued Shares
|
|
Amount
|
|
Issued
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
BALANCE, JANUARY 1, 2014
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
397,674,350
|
|
|
$
|
3,976
|
|
|
(2,810,026
|
)
|
|
$
|
(207,740
|
)
|
|
$
|
5,130,616
|
|
|
$
|
(311,220
|
)
|
|
$
|
(1,081,467
|
)
|
|
$
|
55,875
|
|
|
$
|
3,590,040
|
|
Stock-based compensation related activity
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,753,286
|
|
|
18
|
|
|
|
|
|
—
|
|
|
119,716
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
119,734
|
|
Issuance of common stock—stock purchase plan
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
81,115
|
|
|
1
|
|
|
|
|
|
—
|
|
|
5,717
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,718
|
|
Issuance of preferred stock
|
6,000,000
|
|
|
60
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
|
582,599
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
582,659
|
|
Changes in fair value of cash flow hedges, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
|
—
|
|
|
(1,966
|
)
|
|
—
|
|
|
35
|
|
|
(1,931
|
)
|
Reclassification of unrealized losses on cash flow hedges to net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
|
—
|
|
|
3,288
|
|
|
—
|
|
|
160
|
|
|
3,448
|
|
Foreign currency translation adjustment, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
|
—
|
|
|
(484,323
|
)
|
|
—
|
|
|
(42,567
|
)
|
|
(526,890
|
)
|
Contributions from noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
123,526
|
|
|
123,526
|
|
Distributions to noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(566
|
)
|
|
(566
|
)
|
Purchase of noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
|
(49,862
|
)
|
|
—
|
|
|
—
|
|
|
(14,960
|
)
|
|
(64,822
|
)
|
Common stock distributions declared
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(556,875
|
)
|
|
—
|
|
|
(556,875
|
)
|
Preferred stock dividends declared
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(23,888
|
)
|
|
—
|
|
|
(23,888
|
)
|
Net income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
824,910
|
|
|
(21,711
|
)
|
|
803,199
|
|
BALANCE, DECEMBER 31, 2014
|
6,000,000
|
|
|
$
|
60
|
|
|
—
|
|
|
$
|
—
|
|
|
399,508,751
|
|
|
$
|
3,995
|
|
|
(2,810,026
|
)
|
|
$
|
(207,740
|
)
|
|
$
|
5,788,786
|
|
|
$
|
(794,221
|
)
|
|
$
|
(837,320
|
)
|
|
$
|
99,792
|
|
|
$
|
4,053,352
|
|
Stock-based compensation related activity
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,253,236
|
|
|
12
|
|
|
|
|
|
—
|
|
|
117,206
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
117,218
|
|
Issuance of common stock—stock purchase plan
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
83,292
|
|
|
1
|
|
|
|
|
|
—
|
|
|
6,617
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,618
|
|
Issuance of common stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
25,850,000
|
|
|
259
|
|
|
|
|
|
—
|
|
|
2,440,068
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,440,327
|
|
Issuance of preferred stock
|
—
|
|
|
—
|
|
|
1,375,000
|
|
|
14
|
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
|
1,337,932
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,337,946
|
|
Changes in fair value of cash flow hedges, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
|
—
|
|
|
901
|
|
|
—
|
|
|
47
|
|
|
948
|
|
Reclassification of unrealized losses on cash flow hedges to net income, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
|
—
|
|
|
2,494
|
|
|
—
|
|
|
(54
|
)
|
|
2,440
|
|
Foreign currency translation adjustment, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
|
—
|
|
|
(1,046,170
|
)
|
|
—
|
|
|
(32,780
|
)
|
|
(1,078,950
|
)
|
Contributions from noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,073
|
|
|
8,073
|
|
Distributions to noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(872
|
)
|
|
(872
|
)
|
Common stock distributions declared
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(769,517
|
)
|
|
—
|
|
|
(769,517
|
)
|
Preferred stock dividends declared
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(76,772
|
)
|
|
—
|
|
|
(76,772
|
)
|
Net income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
685,074
|
|
|
(13,067
|
)
|
|
672,007
|
|
BALANCE, DECEMBER 31, 2015
|
6,000,000
|
|
|
$
|
60
|
|
|
1,375,000
|
|
|
$
|
14
|
|
|
426,695,279
|
|
|
$
|
4,267
|
|
|
(2,810,026
|
)
|
|
$
|
(207,740
|
)
|
|
$
|
9,690,609
|
|
|
$
|
(1,836,996
|
)
|
|
$
|
(998,535
|
)
|
|
$
|
61,139
|
|
|
$
|
6,712,818
|
|
Stock-based compensation related activity
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,959,123
|
|
|
19
|
|
|
|
|
—
|
|
|
155,052
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
155,071
|
|
Issuance of common stock—stock purchase plan
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
86,947
|
|
|
1
|
|
|
|
|
—
|
|
|
7,516
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,517
|
|
Issuance of common stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,171,187
|
|
|
12
|
|
|
|
|
—
|
|
|
120,773
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
120,785
|
|
Changes in fair value of cash flow hedges, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
(449
|
)
|
|
—
|
|
|
—
|
|
|
(449
|
)
|
Reclassification of unrealized gains on cash flow hedges to net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
(291
|
)
|
|
—
|
|
|
—
|
|
|
(291
|
)
|
Foreign currency translation adjustment, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
(170,667
|
)
|
|
—
|
|
|
(8,717
|
)
|
|
(179,384
|
)
|
Contributions from noncontrolling interest holders
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
69,609
|
|
|
9,071
|
|
|
—
|
|
|
160,804
|
|
|
239,484
|
|
Distributions to noncontrolling interest holders
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,004
|
)
|
|
(1,004
|
)
|
Common stock distributions declared
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(927,730
|
)
|
|
—
|
|
|
(927,730
|
)
|
Preferred stock dividends declared
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(107,125
|
)
|
|
—
|
|
|
(107,125
|
)
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
956,425
|
|
|
83
|
|
|
956,508
|
|
BALANCE, DECEMBER 31, 2016
|
6,000,000
|
|
|
$
|
60
|
|
|
1,375,000
|
|
|
$
|
14
|
|
|
429,912,536
|
|
|
$
|
4,299
|
|
|
(2,810,026
|
)
|
|
$
|
(207,740
|
)
|
|
$
|
10,043,559
|
|
|
$
|
(1,999,332
|
)
|
|
$
|
(1,076,965
|
)
|
|
$
|
212,305
|
|
|
$
|
6,976,200
|
|
See accompanying notes to consolidated financial statements.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2016
|
|
2015
|
|
2014
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
Net income
|
|
$
|
970,359
|
|
|
$
|
672,007
|
|
|
$
|
803,199
|
|
Adjustments to reconcile net income to cash provided by operating activities:
|
|
|
|
|
|
|
Depreciation, amortization and accretion
|
|
1,525,635
|
|
|
1,285,328
|
|
|
1,003,802
|
|
Stock-based compensation expense
|
|
89,898
|
|
|
90,537
|
|
|
80,153
|
|
Decrease in restricted cash
|
|
5,256
|
|
|
16,112
|
|
|
7,522
|
|
Loss on investments, unrealized foreign currency loss and other non-cash expense
|
|
127,377
|
|
|
146,170
|
|
|
64,133
|
|
Impairments, net loss on sale of long-lived assets, non-cash restructuring and merger related expenses
|
|
50,653
|
|
|
29,852
|
|
|
26,143
|
|
(Gain) loss on early retirement of long-term obligations
|
|
(1,168
|
)
|
|
79,750
|
|
|
3,379
|
|
Amortization of deferred financing costs, debt discounts and premiums and other non-cash interest
|
|
17,702
|
|
|
6,932
|
|
|
(4,870
|
)
|
Deferred income taxes
|
|
26,957
|
|
|
7,764
|
|
|
1,384
|
|
Changes in assets and liabilities, net of acquisitions:
|
|
|
|
|
|
|
Accounts receivable
|
|
11,352
|
|
|
(56,312
|
)
|
|
(84,529
|
)
|
Prepaid and other assets
|
|
(83,229
|
)
|
|
(91,113
|
)
|
|
(1,437
|
)
|
Deferred rent asset
|
|
(131,660
|
)
|
|
(154,959
|
)
|
|
(122,230
|
)
|
Accounts payable and accrued expenses
|
|
(42,862
|
)
|
|
95,858
|
|
|
34,711
|
|
Accrued interest
|
|
34,386
|
|
|
(15,641
|
)
|
|
45,514
|
|
Unearned revenue
|
|
16,557
|
|
|
12,945
|
|
|
218,393
|
|
Deferred rent liability
|
|
67,764
|
|
|
56,076
|
|
|
38,378
|
|
Other non-current liabilities
|
|
18,627
|
|
|
1,746
|
|
|
20,944
|
|
Cash provided by operating activities
|
|
2,703,604
|
|
|
2,183,052
|
|
|
2,134,589
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
Payments for purchase of property and equipment and construction activities
|
|
(682,505
|
)
|
|
(728,753
|
)
|
|
(974,404
|
)
|
Payments for acquisitions, net of cash acquired
|
|
(1,416,373
|
)
|
|
(1,961,056
|
)
|
|
(1,010,637
|
)
|
Payment for Verizon transaction
|
|
(4,748
|
)
|
|
(5,059,462
|
)
|
|
—
|
|
Proceeds from sale of assets, net of cash
|
|
—
|
|
|
—
|
|
|
15,464
|
|
Proceeds from sales of short-term investments and other non-current assets
|
|
13,056
|
|
|
1,032,320
|
|
|
1,434,831
|
|
Payments for short-term investments
|
|
(750
|
)
|
|
(1,022,816
|
)
|
|
(1,395,316
|
)
|
Deposits, restricted cash and other
|
|
(16,126
|
)
|
|
(1,968
|
)
|
|
(19,486
|
)
|
Cash used for investing activities
|
|
(2,107,446
|
)
|
|
(7,741,735
|
)
|
|
(1,949,548
|
)
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
Proceeds from short-term borrowings, net
|
|
—
|
|
|
9,043
|
|
|
—
|
|
Borrowings under credit facilities
|
|
2,446,845
|
|
|
6,126,618
|
|
|
2,187,000
|
|
Proceeds from issuance of senior notes, net
|
|
3,236,383
|
|
|
1,492,298
|
|
|
1,415,844
|
|
Proceeds from term loan
|
|
—
|
|
|
500,000
|
|
|
—
|
|
Proceeds from other borrowings
|
|
—
|
|
|
54,549
|
|
|
102,070
|
|
Proceeds from issuance of securities in securitization transaction
|
|
—
|
|
|
875,000
|
|
|
—
|
|
Repayments of notes payable, credit facilities, term loan, senior notes and capital leases
|
|
(5,093,747
|
)
|
|
(6,393,405
|
)
|
|
(3,903,144
|
)
|
Contributions from noncontrolling interest holders, net
|
|
238,480
|
|
|
7,201
|
|
|
9,098
|
|
Proceeds from stock options and stock purchase plan
|
|
92,473
|
|
|
50,716
|
|
|
62,276
|
|
Distributions paid on common stock
|
|
(886,116
|
)
|
|
(710,852
|
)
|
|
(404,631
|
)
|
Distributions paid on preferred stock
|
|
(107,125
|
)
|
|
(84,647
|
)
|
|
(16,013
|
)
|
Proceeds from the issuance of common stock, net
|
|
—
|
|
|
2,440,327
|
|
|
—
|
|
Proceeds from the issuance of preferred stock, net
|
|
—
|
|
|
1,337,946
|
|
|
583,105
|
|
Purchase of preferred stock assumed in acquisition
|
|
—
|
|
|
—
|
|
|
(59,111
|
)
|
Payment for early retirement of long-term obligations
|
|
(86
|
)
|
|
(85,672
|
)
|
|
(11,593
|
)
|
Deferred financing costs and other financing activities
|
|
(26,401
|
)
|
|
(30,021
|
)
|
|
(34,670
|
)
|
Purchase of noncontrolling interest
|
|
—
|
|
|
—
|
|
|
(64,822
|
)
|
Cash (used for) provided by financing activities
|
|
(99,294
|
)
|
|
5,589,101
|
|
|
(134,591
|
)
|
Net effect of changes in foreign currency exchange rates on cash and cash equivalents
|
|
(30,389
|
)
|
|
(23,224
|
)
|
|
(30,534
|
)
|
NET INCREASE IN CASH AND CASH EQUIVALENTS
|
|
466,475
|
|
|
7,194
|
|
|
19,916
|
|
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
|
|
320,686
|
|
|
313,492
|
|
|
293,576
|
|
CASH AND CASH EQUIVALENTS, END OF YEAR
|
|
$
|
787,161
|
|
|
$
|
320,686
|
|
|
$
|
313,492
|
|
See accompanying notes to consolidated financial statements.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
—American Tower Corporation (together with its subsidiaries, “ATC” or the “Company”) is one of the largest global real estate investment trusts and a leading independent owner, operator and developer of multitenant communications real estate. The Company’s primary business is the leasing of space on communications sites to wireless service providers, radio and television broadcast companies, wireless data providers, government agencies and municipalities and tenants in a number of other industries, which the Company refers to as its property operations. Additionally, the Company offers tower-related services in the United States, including site acquisition, zoning and permitting and structural analysis, which primarily support its site leasing business, including the addition of new tenants and equipment on its sites, which the Company refers to as its services operations.
The Company’s portfolio primarily consists of towers it owns and towers it operates pursuant to long-term lease arrangements, as well as distributed antenna system (“DAS”) networks, which provide seamless coverage solutions in certain in-building and outdoor wireless environments. In addition to the communications sites in its portfolio, the Company manages rooftop and tower sites for property owners under various contractual arrangements. The Company also holds other telecommunications infrastructure and property interests that it leases to communications service providers and third-party tower operators.
ATC is a holding company that conducts its operations through its directly and indirectly owned subsidiaries and its joint ventures. ATC’s principal domestic operating subsidiaries are American Towers LLC and SpectraSite Communications, LLC. ATC conducts its international operations primarily through its subsidiary, American Tower International, Inc., which in turn conducts operations through its various international holding and operating subsidiaries and joint ventures.
The Company operates as a real estate investment trust for U.S. federal income tax purposes (“REIT”). Accordingly, the Company generally is not subject to U.S. federal income taxes on income generated by its REIT operations, including the income derived from leasing space on its towers, as the Company receives a dividends paid deduction for distributions to stockholders that generally offsets its income and gains. However, the Company remains obligated to pay U.S. federal income taxes on earnings from its domestic taxable REIT subsidiaries (“TRSs”). In addition, the Company’s international assets and operations, regardless of their designation for U.S. tax purposes, continue to be subject to taxation in the foreign jurisdictions where those assets are held or those operations are conducted.
The use of TRSs enables the Company to continue to engage in certain businesses while complying with REIT qualification requirements. The Company may, from time to time, change the election of previously designated TRSs to be included as part of the REIT. As of
December 31, 2016
, the Company’s REIT qualified businesses included its U.S. tower leasing business, most of its operations in Costa Rica, Germany and Mexico and a majority of its services segment and indoor DAS networks business.
Principles of Consolidation and Basis of Presentation
—The accompanying consolidated financial statements include the accounts of the Company and those entities in which it has a controlling interest. Investments in entities that the Company does not control are accounted for using the equity or cost method, depending upon the Company’s ability to exercise significant influence over operating and financial policies. All intercompany accounts and transactions have been eliminated. As of December 31, 2016, the Company has a controlling interest in
two
joint ventures in Ghana and Uganda with MTN Group Limited (“MTN Group”). The joint ventures are controlled by a holding company of which a wholly owned subsidiary of the Company holds a
51%
controlling interest and a wholly owned subsidiary of MTN Group holds a
49%
noncontrolling interest. In 2016, the Company established a joint venture (“ATC Europe”) with PGGM in which the Company holds a
51%
controlling interest and PGGM holds a
49%
noncontrolling interest. This transaction resulted in a reclassification of
$9.1 million
of foreign currency translation adjustment from Accumulated other comprehensive loss (“AOCI”) to additional paid-in capital. In addition, the Company holds an approximate
75%
controlling interest, and South African investors hold an approximate
25%
noncontrolling interest, in a subsidiary of the Company in South Africa. The Company holds a
51%
controlling interest in ATC Telecom Infrastructure Private Limited (“ATC TIPL”), formerly known as Viom Networks Limited (“Viom”), and the Remaining Shareholders (as defined in note 6) hold a
49%
noncontrolling interest.
Significant Accounting Policies and Use of Estimates
—The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results may differ from those estimates, and such differences could be material to the accompanying consolidated financial statements. The significant estimates in the accompanying consolidated financial statements include impairment of long-lived assets (including goodwill), asset retirement obligations, revenue recognition, rent expense, stock-based compensation, income taxes and accounting for
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
business combinations and acquisitions of assets. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued as additional evidence for certain estimates or to identify matters that require additional disclosure.
Accounts Receivable and Deferred Rent Asset
—The Company derives the largest portion of its revenues, corresponding accounts receivable and the related deferred rent asset from a relatively small number of tenants in the telecommunications industry, and
56%
of its current year revenues are derived from
four
tenants.
The Company’s deferred rent asset is associated with non-cancellable tenant leases that contain fixed escalation clauses over the terms of the applicable lease in which revenue is recognized on a straight-line basis over the lease term.
The Company mitigates its concentrations of credit risk with respect to notes and trade receivables and the related deferred rent assets by actively monitoring the creditworthiness of its borrowers and tenants. In recognizing tenant revenue, the Company assesses the collectibility of both the amounts billed and the portion recognized in advance of billing on a straight-line basis. This assessment takes tenant credit risk and business and industry conditions into consideration to ultimately determine the collectibility of the amounts billed. To the extent the amounts, based on management’s estimates, may not be collectible, recognition is deferred until such point as collectibility is determined to be reasonably assured. Any amounts that were previously recognized as revenue and subsequently determined to be uncollectible are charged to bad debt expense included in Selling, general, administrative and development expense in the accompanying consolidated statements of operations.
Accounts receivable is reported net of allowances for doubtful accounts related to estimated losses resulting from a tenant’s inability to make required payments and allowances for amounts invoiced whose collectibility is not reasonably assured. These allowances are generally estimated based on payment patterns, days past due and collection history, and incorporate changes in economic conditions that may not be reflected in historical trends, such as tenants in bankruptcy, liquidation or reorganization. Receivables are written-off against the allowances when they are determined to be uncollectible. Such determination includes analysis and consideration of the particular conditions of the account. Changes in the allowances were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
Balance as of January 1
|
$
|
23,096
|
|
|
$
|
17,306
|
|
|
$
|
19,895
|
|
Current year increases
|
49,966
|
|
|
19,878
|
|
|
8,243
|
|
Write-offs, recoveries and other (1)
|
(27,174
|
)
|
|
(14,088
|
)
|
|
(10,832
|
)
|
Balance as of December 31,
|
$
|
45,888
|
|
|
$
|
23,096
|
|
|
$
|
17,306
|
|
_______________
|
|
(1)
|
Recoveries includes recognition of revenue resulting from collections of previously reserved amounts.
|
Functional Currency
—The functional currency of each of the Company’s foreign operating subsidiaries is the respective local currency, except for Costa Rica, where the functional currency is the U.S. Dollar. All foreign currency assets and liabilities held by the subsidiaries are translated into U.S. Dollars at the exchange rate in effect at the end of the applicable fiscal reporting period and all foreign currency revenues and expenses are translated at the average monthly exchange rates. Translation adjustments are reflected in equity as a component of AOCI in the consolidated balance sheets and included as a component of Comprehensive income (loss) in the consolidated statements of comprehensive income (loss).
Transactional gains and losses on foreign currency transactions are reflected in Other expense in the consolidated statements of operations. However, the effect from fluctuations in foreign currency exchange rates on intercompany debt that is considered to be permanently reinvested is reflected in AOCI in the consolidated balance sheets and included as a component of comprehensive income (loss). During the year ended
December 31, 2016
, the Company recorded net foreign currency losses of
$153.9 million
, of which
$105.0 million
was recorded in AOCI and
$48.9 million
was recorded in Other expense.
Cash and Cash Equivalents
—Cash and cash equivalents include cash on hand, demand deposits and short-term investments with original maturities of three months or less. The Company maintains its deposits at high quality financial institutions and monitors the credit ratings of those institutions.
Restricted Cash—
Restricted cash includes cash pledged as collateral to secure obligations and all cash whose use is otherwise limited by contractual provisions.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Short-Term Investments—
Short-term investments consists of highly liquid investments with original maturities in excess of three months.
Property and Equipment
—Property and equipment is recorded at cost or, in the case of acquired properties at estimated fair value on the date acquired. Cost for self-constructed towers includes direct materials and labor, capitalized interest and certain indirect costs associated with construction of the tower, such as transportation costs, employee benefits and payroll taxes. The Company begins the capitalization of costs during the pre-construction period, which is the period during which costs are incurred to evaluate the site, and continues to capitalize costs until the tower is substantially completed and ready for occupancy by a tenant. Labor costs capitalized for the years ended
December 31, 2016
,
2015
and
2014
were
$47.7 million
,
$44.7 million
and
$48.5 million
, respectively. Interest costs capitalized for the years ended
December 31, 2016
,
2015
and
2014
were
$1.5 million
,
$1.8 million
and
$2.8 million
, respectively.
Expenditures for repairs and maintenance are expensed as incurred. Augmentation and improvements that extend an asset’s useful life or enhance capacity are capitalized.
Depreciation expense is recorded using the straight-line method over the assets’ estimated useful lives. Towers and related assets on leased land are depreciated over the shorter of the estimated useful life of the asset or the term of the corresponding ground lease, taking into consideration lease renewal options and residual value.
Towers or assets acquired through capital leases are recorded net at the present value of future minimum lease payments or the fair value of the leased asset at the inception of the lease. Property and equipment and assets held under capital leases are amortized over the shorter of the applicable lease term or the estimated useful life of the respective assets for periods generally not exceeding
twenty
years.
The Company reviews its tower portfolio for indicators of impairment on an individual tower basis. Impairments primarily result from a tower not having current tenant leases or from having expenses in excess of revenues. The Company reviews other long-lived assets for impairment whenever events, changes in circumstances or other evidence indicate that the carrying amount of the Company’s assets may not be recoverable. The Company records impairment charges in Other operating expenses in the consolidated statements of operations in the period in which the Company identifies such impairment.
Goodwill and Other Intangible Assets
—The Company reviews goodwill for impairment at least annually (as of December 31) or whenever events or circumstances indicate the carrying value of an asset may not be recoverable.
Goodwill is recorded in the applicable segment and assessed for impairment at the reporting unit level. The Company utilizes the two-step impairment test when testing goodwill for impairment and employs a discounted cash flow analysis. The key assumptions utilized in the discounted cash flow analysis include current operating performance, terminal sales growth rate, management’s expectations of future operating results and cash requirements, the current weighted average cost of capital and an expected tax rate. Under the first step of this test, the Company compares the fair value of the reporting unit, as calculated under an income approach using future discounted cash flows, to the carrying amount of the applicable reporting unit. If the carrying amount exceeds the fair value, the Company conducts the second step of this test, in which the implied fair value of the applicable reporting unit’s goodwill is compared to the carrying amount of that goodwill. If the carrying amount of goodwill exceeds its implied fair value, an impairment loss would be recognized for the amount of the excess.
During the years ended
December 31, 2016
,
2015
and
2014
, no potential impairment was identified under the first step of the test, as the fair value of each of the reporting units was in excess of its carrying amount.
Intangible assets that are separable from goodwill and are deemed to have a definite life are amortized over their useful lives, generally ranging from
three
to
twenty
years and are evaluated separately for impairment at least annually or whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable.
The Company reviews its network location intangible assets for indicators of impairment on an individual tower basis. Impairments primarily result from a tower not having current tenant leases or from having expenses in excess of revenues. The Company monitors its tenant-related intangible assets (formerly referred to as customer-related intangible assets) on a tenant by tenant basis for indicators of impairment, such as high levels of turnover or attrition, non-renewal of a significant number of contracts or the cancellation or termination of a relationship. The Company assesses recoverability by determining whether the carrying amount of the related assets will be recovered primarily through projected undiscounted future cash flows. If the Company determines that the carrying amount of an asset may not be recoverable, the Company measures any impairment loss based on the projected future discounted cash flows to be provided from the asset or available market information relative to the
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
asset’s fair value, as compared to the asset’s carrying amount. The Company records impairment charges in Other operating expenses in the consolidated statements of operations in the period in which the Company identifies such impairment.
Derivative Financial Instruments
—Derivatives are recorded on the consolidated balance sheet at fair value. If a derivative is designated as a cash flow hedge, the effective portions of changes in the fair value of the derivative are recorded in AOCI, as well as a component of comprehensive income (loss), and are recognized in the results of operations when the hedged item affects earnings. Changes in fair value of the ineffective portions of cash flow hedges are recognized in the results of operations. For derivative instruments that are designated and qualify as fair value hedges, changes in value of the derivatives are recorded in Other expense in the consolidated statements of operations in the current period, along with the offsetting gain or loss on the hedged item attributable to the hedged risk. For derivative instruments not designated as hedging instruments, changes in fair value are recognized in the results of operations in the period that the change occurs.
The primary risks managed through the use of derivative instruments is interest rate risk, exposure to changes in the fair value of debt attributable to interest rate risk and currency risk. From time to time, the Company enters into interest rate swap agreements or foreign currency contracts to manage exposure to these risks. Under these agreements, the Company is exposed to counterparty credit risk to the extent that a counterparty fails to meet the terms of a contract. The Company’s exposure is limited to the current value of the contract at the time the counterparty fails to perform. The Company assesses, both at the inception of the hedge and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows or fair values of hedged items. The Company does not hold derivatives for trading purposes.
Fair Value Measurements
—The Company determines the fair value of its financial instruments based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
Asset Retirement Obligations
—When required, the Company recognizes the fair value of obligations to remove its tower assets and remediate the leased land upon which certain of its tower assets are located. Generally, the associated retirement costs are capitalized as part of the carrying amount of the related tower assets and depreciated over their estimated useful lives and the liability is accreted through the obligation’s estimated settlement date. Fair value estimates of asset retirement obligations generally involve discounting of estimated future cash flows. Periodic accretion of such liabilities due to the passage of time is included in Depreciation, amortization and accretion expense in the consolidated statements of operations. Adjustments are also made to the asset retirement obligation liability to reflect changes in the estimates of timing and amount of expected cash flows, with an offsetting adjustment made to the related long-lived tangible asset. The significant assumptions used in estimating the Company’s aggregate asset retirement obligation are: timing of tower removals; cost of tower removals; timing and number of land lease renewals; expected inflation rates; and credit-adjusted, risk-free interest rates that approximate the Company’s incremental borrowing rate.
Income Taxes
—As a REIT, the Company generally is not subject to U.S. federal income taxes on income generated by its U.S. REIT operations. However, the Company remains obligated to pay U.S. federal income taxes on certain earnings and continues to be subject to taxation in its foreign jurisdictions. Accordingly, the consolidated financial statements reflect provisions for federal, state, local and foreign income taxes. The Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, as well as operating loss and tax credit carryforwards. The Company measures deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities as a result of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company periodically reviews its deferred tax assets, and provides valuation allowances if, based on the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. Valuation allowances would be reversed as a reduction to the provision for income taxes if related deferred tax assets are deemed realizable based on changes in facts and circumstances relevant to the assets’ recoverability.
The Company classifies uncertain tax positions as non-current income tax liabilities unless expected to be paid within one year. The Company reports penalties and tax-related interest expense as a component of the income tax provision and interest income from tax refunds as a component of Other expense in the consolidated statements of operations.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Other Comprehensive Income (Loss)
—Other comprehensive income (loss) refers to items excluded from net income that are recorded as an adjustment to equity, net of tax. The Company’s other comprehensive income (loss) primarily consisted of changes in fair value of effective derivative cash flow hedges, foreign currency translation adjustments and reclassification of unrealized losses on effective derivative cash flow hedges. The AOCI balance included foreign currency translation losses of
$2.0 billion
,
$1.8 billion
and
$0.8 billion
for the years ended December 31,
2016
,
2015
and
2014
, respectively.
Distributions
—As a REIT, the Company must annually distribute to its stockholders an amount equal to at least 90% of its REIT taxable income (determined before the deduction for distributed earnings and excluding any net capital gain). Generally, the Company has distributed, and expects to continue to distribute, all or substantially all of its REIT taxable income after taking into consideration its utilization of net operating losses (“NOLs”).
The amount, timing and frequency of future distributions will be at the sole discretion of the Board of Directors and will depend upon various factors, a number of which may be beyond the Company’s control, including the Company’s financial condition and operating cash flows, the amount required to maintain its qualification for taxation as a REIT and reduce any income and excise taxes that the Company otherwise would be required to pay, limitations on distributions in the Company’s existing and future debt and preferred equity instruments, the Company’s ability to utilize NOLs to offset the Company’s distribution requirements, limitations on its ability to fund distributions using cash generated through its TRSs and other factors that the Board of Directors may deem relevant.
Acquisitions
—For acquisitions that meet the definition of a business combination, the Company applies the acquisition method of accounting where assets acquired and liabilities assumed are recorded at fair value at the date of each acquisition, and the results of operations are included with those of the Company from the dates of the respective acquisitions. Any excess of the purchase price paid by the Company over the amounts recognized for assets acquired and liabilities assumed is recorded as goodwill. The Company continues to evaluate acquisitions for a period not to exceed one year after the applicable acquisition date of each transaction to determine whether any additional adjustments are needed to the allocation of the purchase price paid for the assets acquired and liabilities assumed. The fair value of the assets acquired and liabilities assumed is typically determined by using either estimates of replacement costs or discounted cash flow valuation methods. When determining the fair value of tangible assets acquired, the Company must estimate the cost to replace the asset with a new asset taking into consideration such factors as age, condition and the economic useful life of the asset. When determining the fair value of intangible assets acquired, the Company must estimate the applicable discount rate and the timing and amount of future tenant cash flows, including rate and terms of renewal and attrition.
Revenue Recognition
—The Company’s revenue from leasing arrangements, including fixed escalation clauses present in non-cancellable lease agreements, is reported on a straight-line basis over the term of the respective leases when collectibility is reasonably assured. Escalation clauses tied to the Consumer Price Index (“CPI”) or other inflation-based indices, and other incentives present in lease agreements with the Company’s tenants are excluded from the straight-line calculation. Total property straight-line revenues for the years ended
December 31, 2016
,
2015
and
2014
were
$131.7 million
,
$155.0 million
and
$123.7 million
, respectively. Amounts billed upfront in connection with the execution of lease agreements are initially deferred and reflected in Unearned revenue in the accompanying consolidated balance sheets and recognized as revenue over the terms of the applicable leases. Amounts billed or received for services prior to being earned are deferred and reflected in Unearned revenue in the accompanying consolidated balance sheets until the criteria for recognition have been met.
Services revenues are derived under contracts or arrangements with customers that provide for billings either on a fixed price basis or a variable price basis, which includes factors such as time and expenses. Revenues are recognized as services are performed, and include estimates for percentage completed. Amounts billed or received for services prior to being earned are deferred and reflected in Unearned revenue in the accompanying consolidated balance sheets until the criteria for recognition have been met.
Rent Expense
—Many of the leases underlying the Company’s tower sites have fixed rent escalations, which provide for periodic increases in the amount of ground rent payable by the Company over time. In addition, certain of the Company’s tenant leases require the Company to exercise available renewal options pursuant to the underlying ground lease if the tenant exercises its renewal option. The Company calculates straight-line ground rent expense for these leases based on the fixed non-cancellable term of the underlying ground lease plus all periods, if any, for which failure to renew the lease imposes an economic penalty to the Company such that renewal appears to be reasonably assured.
Total property straight-line ground rent expense for the years ended
December 31, 2016
,
2015
and
2014
was
$67.8 million
,
$56.1 million
and
$38.4 million
, respectively. The Company records a liability for straight-line ground rent expense in Other
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
non-current liabilities. The Company records prepaid ground rent in Prepaid and other current assets and Notes receivable and other non-current assets in the accompanying consolidated balance sheets according to the anticipated period of benefit.
Selling, General, Administrative and Development Expense
—Selling, general and administrative expense consists of overhead expenses related to the Company’s property and services operations and corporate overhead costs not specifically allocable to any of the Company’s individual business operations. Development expense consists of costs related to the Company’s acquisition efforts, costs associated with new business initiatives and project cancellation costs.
Stock-Based Compensation
—Stock-based compensation expense is measured at the accounting measurement date based on the fair value of the award and is generally recognized as an expense over the service period, which typically represents the vesting period. The Company provides for accelerated vesting and extended exercise periods of stock options and restricted stock units upon an employee’s death or permanent disability, or upon an employee’s qualified retirement, provided certain eligibility criteria are met. Accordingly, the Company recognizes compensation expense for stock options and time-based restricted stock units (“RSUs”) over the shorter of (i) the
four
-year vesting period or (ii) the period from the date of grant to the date the employee becomes eligible for such retirement benefits, which may occur upon grant. The expense recognized includes the impact of forfeitures as they occur.
In March 2015 and 2016, the Company granted performance-based restricted stock units (“PSUs”) to its executive officers. Threshold, target and maximum parameters were established for the metrics for each year in the
three
-year performance period for the March 2015 grants, and for a
three
-year performance period for the March 2016 grants. The metrics will be used to calculate the number of shares that will be issuable when the awards vest, which may range from
zero
to
200%
of the target amounts. The Company recognizes compensation expense for PSUs over the
three
-year vesting period, subject to adjustment based on the date the employee becomes eligible for retirement benefits as well as performance relative to grant parameters.
The fair value of stock options is determined using the Black-Scholes option-pricing model and the fair value of restricted stock units is based on the fair value of the Company’s common stock on the date of grant. The Company recognizes all stock-based compensation expense in either Selling, general, administrative and development expense, costs of operations or as part of the costs associated with the construction of the tower assets.
In connection with the vesting of RSUs, the Company withholds from issuance a number of shares of common stock to satisfy certain employee tax withholding obligations arising from such vesting. The shares withheld are considered constructively retired. The Company recognizes the fair value of the shares withheld in Additional paid-in capital on the consolidated balance sheets. As of December 31, 2016, the Company has withheld from issuance an aggregate of
1,219,755
shares, including
218,063
shares related to the vesting of RSUs during the year ended December 31, 2016.
Litigation Costs
—The Company periodically becomes involved in various claims and lawsuits that are incidental to its business. The Company regularly monitors the status of pending legal actions to evaluate both the magnitude and likelihood of any potential loss. The Company accrues for these potential losses when it is probable that a liability has been incurred and the amount of loss, or possible range of loss, can be reasonably estimated. Should the ultimate losses on contingencies or litigation vary from estimates, adjustments to those liabilities may be required. The Company also incurs legal costs in connection with these matters and records estimates of these expenses, which are reflected in Selling, general, administrative and development expense in the accompanying consolidated statements of operations.
Earnings Per Common Share
—
Basic and Diluted
—Basic net income per common share represents net income attributable to American Tower Corporation common stockholders divided by the weighted average number of common shares outstanding during the period. Diluted net income per common share represents net income attributable to American Tower Corporation common stockholders divided by the weighted average number of common shares outstanding during the period and any dilutive common share equivalents, including (A) shares issuable upon (i) the vesting of RSUs, (ii) exercise of stock options, and (iii) conversion of the Company’s mandatory convertible preferred stock and (B) shares earned upon the achievement of the parameters established for the PSUs, each to the extent not anti-dilutive. Dilutive common share equivalents also include the dilutive impact of the shares issuable in the Alltel transaction, which is described in notes 15 and 18. The Company uses the treasury stock method to calculate the effect of its outstanding RSUs, PSUs and stock options and uses the if-converted method to calculate the effect of its outstanding mandatory convertible preferred stock.
Retirement Plan
—The Company has a 401(k) plan covering substantially all employees who meet certain age and employment requirements. For the years ended
December 31, 2016
,
2015
and
2014
, the Company matched
75%
of the first
6%
of a participant’s contributions. For the years ended
December 31, 2016
,
2015
and
2014
, the Company contributed
$9.1 million
,
$7.4 million
and
$6.5 million
to the plan, respectively.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Accounting Standards Updates
—In May 2014, the Financial Accounting Standards Board (the “FASB”) issued new revenue recognition guidance, which requires an entity to recognize revenue in an amount that reflects the consideration to which the entity expects to be entitled in exchange for the transfer of promised goods or services to customers. The standard will replace most existing revenue recognition guidance and will become effective for the Company on January 1, 2018. Early adoption is permitted for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2016. The standard permits the use of either the retrospective or cumulative effect transition method. Leases are not included in the scope of this standard. The revenue to which the Company must apply this standard is generally limited to services revenue, certain power and fuel charges not covered by lease agreements and other fees charged to customers. As of December 31, 2016, this revenue was approximately
12%
of total revenue. Although the Company is still assessing the impact of this standard on its financial statements, it does not expect changes in the timing of revenue recognition to be material to its financial statements.
In January 2016, the FASB issued new guidance on the recognition and measurement of financial assets and financial liabilities. The guidance amends certain aspects of recognition, measurement, presentation and disclosure of financial instruments. This standard is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017. The Company does not expect the adoption of this guidance to have a material effect on its financial statements.
In February 2016, the FASB issued new guidance on the accounting for leases. The guidance amends the existing accounting standards for lease accounting, including the requirement that lessees recognize assets and liabilities for leases with terms greater than twelve months in the statement of financial position. Under the new guidance, lessor accounting is largely unchanged. This guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018. The standard is required to be applied using a modified retrospective approach for all leases existing at, or entered into after, the beginning of the earliest comparative period presented. The Company is evaluating the impact this standard will have on its financial statements.
In March 2016, the FASB issued new guidance on the accounting for share-based payment transactions. The guidance amends the accounting for taxes related to stock-based compensation, including how excess tax benefits and a company’s payments for tax withholdings should be classified. This guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2016. The Company early adopted this standard in the second quarter of 2016 and elected to account for forfeitures as they occur, effective January 1, 2016. The adoption of this guidance was not material to the Company’s consolidated financial statements. Additionally, the Company elected to apply the prospective transition method to the amendments related to the presentation of excess tax benefits in the statements of cash flows.
In August 2016, the FASB issued new guidance on certain classifications within the statement of cash flows. The guidance addresses, among other things, how cash receipts and cash payments are presented and classified in the statement of cash flows, including payments for costs related to debt prepayments or extinguishment, as well as payments of contingent consideration after an acquisition. The guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company has early adopted this guidance for the year ended December 31, 2016, and it did not have a material effect on the Company’s financial statements. Prior periods were not retrospectively adjusted.
In November 2016, the FASB issued new guidance on amounts described as restricted cash or restricted cash equivalents within the statement of cash flows. The guidance requires amounts generally described as restricted cash and restricted cash equivalents
be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period balances on the statement of cash flows. The guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017. The standard is required to be applied using a retrospective transition method to each period presented. The Company does not expect the adoption of this guidance to have a material effect on its financial statements.
In January 2017, the FASB issued new guidance that clarifies the definition of a business that an entity uses to determine whether a transaction should be accounted for as an asset acquisition (or disposal) or a business combination. The guidance is expected to cause fewer acquired sets of assets (and liabilities) to be identified as businesses. The guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted for transactions that meet certain requirements. The Company is evaluating the impact this standard will have on its financial statements.
In January 2017, the FASB issued new guidance that simplifies the accounting for goodwill impairments by eliminating Step 2 from the goodwill impairment test. The guidance requires, among other things, recognition of an impairment loss when the fair value of a reporting unit exceeds its carrying amount. The loss recognized is limited to the total amount of goodwill allocated to
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
that reporting unit. The guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect the adoption of this guidance to have a material effect on its financial statements.
2. PREPAID AND OTHER CURRENT ASSETS
Prepaid and other current assets consisted of the following as of December 31, (in thousands):
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Prepaid operating ground leases
|
$
|
134,167
|
|
|
128,542
|
|
Prepaid income tax
|
127,142
|
|
|
45,056
|
|
Unbilled receivables
|
57,661
|
|
|
34,173
|
|
Prepaid assets
|
36,300
|
|
|
32,892
|
|
Value added tax and other consumption tax receivables
|
31,570
|
|
|
30,239
|
|
Other miscellaneous current assets
|
54,193
|
|
|
35,333
|
|
Prepaids and other current assets
|
$
|
441,033
|
|
|
$
|
306,235
|
|
3. PROPERTY AND EQUIPMENT
Property and equipment (including assets held under capital leases) consisted of the following as of December 31, (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
Useful Lives (years) (1)
|
|
2016
|
|
2015
|
Towers
|
Up to 20
|
|
$
|
11,740,479
|
|
|
$
|
10,726,656
|
|
Equipment
|
2 - 15
|
|
1,176,260
|
|
|
1,095,906
|
|
Buildings and improvements
|
3 - 32
|
|
621,874
|
|
|
607,661
|
|
Land and improvements (2)
|
Up to 20
|
|
1,909,732
|
|
|
1,728,115
|
|
Construction-in-progress
|
|
|
203,411
|
|
|
238,960
|
|
Total
|
|
|
15,651,756
|
|
|
14,397,298
|
|
Less accumulated depreciation
|
|
|
(5,134,498
|
)
|
|
(4,530,874
|
)
|
Property and equipment, net
|
|
|
$
|
10,517,258
|
|
|
$
|
9,866,424
|
|
_______________
|
|
(1)
|
Assets on leased land are depreciated over the shorter of the estimated useful life of the asset or the term of the corresponding ground lease taking into consideration lease renewal options and residual value.
|
|
|
(2)
|
Estimated useful lives apply to improvements only.
|
Depreciation expense for the years ended
December 31, 2016
,
2015
and
2014
was
$758.9 million
,
$661.4 million
and
$551.8 million
, respectively.
As of
December 31, 2016
, property and equipment included
$4,735.3 million
and
$1,198.0 million
of capital lease assets and accumulated depreciation, respectively. As of December 31,
2015
, property and equipment included
$5,112.4 million
and
$1,414.6 million
of capital lease assets and accumulated depreciation, respectively. The decreases in capital lease assets and accumulated depreciation were primarily due to the Company exercising its option to purchase
1,523
communications towers that were previously subject to capital leases. See note 18 for further discussion of this transaction. As of December 31, 2016 and 2015, capital lease assets were primarily classified as towers and land and improvements.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. GOODWILL AND OTHER INTANGIBLE ASSETS
The changes in the carrying value of goodwill for the Company’s business segments were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
|
|
Services
|
|
Total
|
|
|
U.S.
|
|
Asia
|
|
EMEA
|
|
Latin America
|
|
Balance as of January 1, 2015
|
|
$
|
3,356,096
|
|
|
$
|
178,521
|
|
|
$
|
78,647
|
|
|
$
|
416,922
|
|
|
$
|
1,988
|
|
|
$
|
4,032,174
|
|
Additions
|
|
23,067
|
|
|
610
|
|
|
68,663
|
|
|
122,345
|
|
|
—
|
|
|
214,685
|
|
Effect of foreign currency translation
|
|
—
|
|
|
(8,412
|
)
|
|
(14,740
|
)
|
|
(131,902
|
)
|
|
—
|
|
|
(155,054
|
)
|
Balance as of December 31, 2015
|
|
$
|
3,379,163
|
|
|
$
|
170,719
|
|
|
$
|
132,570
|
|
|
$
|
407,365
|
|
|
$
|
1,988
|
|
|
$
|
4,091,805
|
|
Additions (1)
|
|
—
|
|
|
881,783
|
|
(2)
|
40,386
|
|
|
53,575
|
|
|
—
|
|
|
975,744
|
|
Effect of foreign currency translation
|
|
—
|
|
|
(23,189
|
)
|
|
(22,445
|
)
|
|
48,765
|
|
|
—
|
|
|
3,131
|
|
Balance as of December 31, 2016
|
|
$
|
3,379,163
|
|
|
$
|
1,029,313
|
|
|
$
|
150,511
|
|
|
$
|
509,705
|
|
|
$
|
1,988
|
|
|
$
|
5,070,680
|
|
_______________
|
|
(1)
|
Additions consist of
$975.6 million
resulting from 2016 acquisitions and
$0.1 million
from revisions to prior year acquisitions resulting from measurement period adjustments.
|
|
|
(2)
|
Assumed in the acquisition of Viom (see note 6).
|
The Company’s other intangible assets subject to amortization consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2016
|
|
As of December 31, 2015
|
|
Estimated Useful
Lives
|
|
Gross
Carrying
Value
|
|
Accumulated
Amortization
|
|
Net Book
Value
|
|
Gross
Carrying
Value
|
|
Accumulated
Amortization
|
|
Net Book
Value
|
|
(years)
|
|
(in thousands)
|
Acquired network location intangibles (1)
|
Up to 20
|
|
|
$
|
4,622,316
|
|
|
$
|
(1,280,284
|
)
|
|
$
|
3,342,032
|
|
|
$
|
3,980,281
|
|
|
$
|
(1,052,393
|
)
|
|
$
|
2,927,888
|
|
Acquired tenant-related intangibles
|
15-20
|
|
|
10,130,466
|
|
|
(2,224,119
|
)
|
|
7,906,347
|
|
|
8,640,554
|
|
|
(1,763,853
|
)
|
|
6,876,701
|
|
Acquired licenses and other intangibles
|
3-20
|
|
|
28,140
|
|
|
(4,827
|
)
|
|
23,313
|
|
|
28,293
|
|
|
(5,486
|
)
|
|
22,807
|
|
Economic Rights, TV Azteca
|
70
|
|
|
13,893
|
|
|
(10,974
|
)
|
|
2,919
|
|
|
21,688
|
|
|
(11,208
|
)
|
|
10,480
|
|
Total other intangible assets
|
|
|
$
|
14,794,815
|
|
|
$
|
(3,520,204
|
)
|
|
$
|
11,274,611
|
|
|
$
|
12,670,816
|
|
|
$
|
(2,832,940
|
)
|
|
$
|
9,837,876
|
|
_______________
|
|
(1)
|
Acquired network location intangibles are amortized over the shorter of the term of the corresponding ground lease taking into consideration lease renewal options and residual value or up to
20
years, as the Company considers these intangibles to be directly related to the tower assets.
|
The acquired network location intangibles represent the value to the Company of the incremental revenue growth that could potentially be obtained from leasing the excess capacity on acquired communications sites. The acquired tenant-related intangibles typically represent the value to the Company of tenant contracts and relationships in place at the time of an acquisition or similar transaction, including assumptions regarding estimated renewals. This item was previously referred to as customer-related intangibles.
The Company amortizes its acquired network location intangibles and tenant-related intangibles on a straight-line basis over the estimated useful lives. As of December 31,
2016
, the remaining weighted average amortization period of the Company’s intangible assets, excluding the TV Azteca Economic Rights detailed in note 5, was
16
years. Amortization of intangible assets for the years ended December 31,
2016
,
2015
and
2014
was
$699.8 million
,
$568.3 million
and
$411.7 million
, respectively. Based on current exchange rates, the Company expects to record amortization expense as follows over the next five years (in millions):
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
Year Ending December 31,
|
|
2017
|
$
|
710.5
|
|
2018
|
707.8
|
|
2019
|
705.1
|
|
2020
|
686.3
|
|
2021
|
676.8
|
|
5. NOTES RECEIVABLE AND OTHER NON-CURRENT ASSETS
Notes receivable and other non-current assets consisted of the following as of December 31, (in thousands):
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Long-term prepaid ground rent
|
$
|
467,781
|
|
|
$
|
388,790
|
|
Notes receivable
|
83,736
|
|
|
83,658
|
|
Other miscellaneous assets
|
290,006
|
|
|
260,455
|
|
Notes receivable and other non-current assets
|
$
|
841,523
|
|
|
$
|
732,903
|
|
TV Azteca Note Receivable
—In 2000, the Company loaned TV Azteca, S.A. de C.V. (“TV Azteca”), the owner of a major national television network in Mexico,
$119.8 million
. The loan has an interest rate of
13.11%
, payable quarterly, which at the time of issuance was determined to be below market and therefore a corresponding discount was recorded. The term of the loan is
70 years
; however, the loan may be prepaid by TV Azteca without penalty during the last
50 years
of the agreement. The discount on the loan is being amortized to Interest income, TV Azteca, net of interest expense on the Company’s consolidated statements of operations, using the effective interest method over the
70
-year term of the loan.
Since inception, TV Azteca has repaid
$28.0 million
of principal on the loan. As of
December 31, 2016
and
2015
, the outstanding balance on the loan was
$91.8 million
, or
$82.9 million
, net of discount.
TV Azteca Economic Rights
—Simultaneous with the signing of the loan agreement, the Company also entered into a
70
-year Economic Rights Agreement with TV Azteca regarding space not used by TV Azteca on approximately
190
of its broadcast towers. In exchange for the issuance of the below market interest rate loan and the annual payment of
$1.5 million
to TV Azteca (under the Economic Rights Agreement), the Company has the right to market and lease the unused tower space on the broadcast towers (the “Economic Rights”). TV Azteca retains title to these towers and is responsible for their operation and maintenance. The Company is entitled to
100%
of the revenues generated from leases with tenants on the unused space and is responsible for any incremental operating expenses associated with those tenants.
The term of the Economic Rights Agreement is
70 years
; however, TV Azteca has the right to purchase, at fair market value, the Economic Rights from the Company at any time during the last
50 years
of the agreement. Should TV Azteca elect to purchase the Economic Rights, in whole or in part, it would also be obligated to repay a proportional amount of the loan discussed above at the time of such election. The Company’s obligation to pay TV Azteca
$1.5 million
annually would also be reduced proportionally.
The Company accounted for the annual payment of
$1.5 million
as a capital lease by initially recording an asset and a corresponding liability of
$18.6 million
. The capital lease asset also included the original discount on the note. The capital lease asset and original discount on the note aggregated
$30.2 million
at the time of the transaction and represents the cost to acquire the Economic Rights. The Economic Rights asset was recorded as an intangible asset and is being amortized over the
70
-year life of the Economic Rights Agreement.
6. ACQUISITIONS
The estimates of the fair value of the assets or rights acquired and liabilities assumed at the date of the applicable acquisition are subject to adjustment during the measurement period (up to one year from the particular acquisition date). The primary areas of the accounting for the acquisitions that are not yet finalized relate to the fair value of certain tangible and intangible assets acquired and liabilities assumed, which may include contingent consideration, residual goodwill and any related tax impact. The fair value of these net assets acquired are based on management’s estimates and assumptions, as well as other
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
information compiled by management, including valuations that utilize customary valuation procedures and techniques. While the Company believes that such preliminary estimates provide a reasonable basis for estimating the fair value of assets acquired and liabilities assumed, it evaluates any necessary information prior to finalization of the fair value. During the measurement period, the Company will adjust assets or liabilities if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the revised estimated values of those assets or liabilities as of that date.
Impact of current year acquisitions
—The Company typically acquires communications sites from wireless carriers or other tower operators and subsequently integrates those sites into its existing portfolio of communications sites. The financial results of the Company’s acquisitions have been included in the Company’s consolidated statement of operations for the year ended
December 31, 2016
from the date of the respective acquisition. The date of acquisition, and by extension the point at which the Company begins to recognize the results of an acquisition, may depend upon, among other things, the receipt of contractual consents, the commencement and extent of leasing arrangements and the timing of the transfer of title or rights to the assets, which may be accomplished in phases. Sites acquired from communications service providers may never have been operated as a business and may have been utilized solely by the seller as a component of its network infrastructure. An acquisition may or may not involve the transfer of business operations or employees.
The estimated aggregate impact of the
2016
acquisitions on the Company’s revenues and gross margin for the year ended
December 31, 2016
was approximately
$567.9 million
and
$241.1 million
, respectively. The revenues and gross margin amounts also reflect incremental revenues from the addition of new tenants to such sites subsequent to the transaction date. Incremental amounts of segment selling, general, administrative and development expense subsequent to the transaction date have not been reflected.
For those acquisitions accounted for as business combinations, the Company recognizes acquisition and merger related expenses in the period in which they are incurred and services are received. Acquisition and merger related expenses may include finder’s fees, advisory, legal, accounting, valuation and other professional or consulting fees, fair value adjustments to contingent consideration and general administrative costs directly related to the transaction. Integration costs include incremental and nonrecurring costs necessary to convert data, retain employees and otherwise enable the Company to operate new businesses efficiently. The Company records acquisition and merger related expenses, as well as integration costs in Other operating expenses in the consolidated statements of operations.
During the years ended
December 31, 2016
,
2015
and
2014
, the Company recorded the following acquisition and merger related expenses and integration costs (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2016
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
Acquisition and merger related expenses
|
|
$
|
15,875
|
|
|
$
|
18,799
|
|
|
$
|
26,969
|
|
Integration costs
|
|
$
|
9,901
|
|
|
$
|
18,097
|
|
|
$
|
13,057
|
|
2016
Transactions
Viom Acquisition—
On April 21, 2016, the Company, through its wholly owned subsidiary, ATC Asia Pacific Pte. Ltd. (“ATC Asia”), acquired a
51%
controlling ownership interest in Viom, a telecommunications infrastructure company that owns and operates approximately
42,000
wireless communications towers and
200
indoor DAS networks in India, from certain Viom shareholders, including the managing shareholder, SREI Infrastructure Finance Limited, several other minority shareholders and Tata Teleservices Limited, pursuant to its previously announced share purchase agreement (the “Viom Acquisition”). Consideration for the acquisition included
76.4 billion
INR in cash (
$1.1 billion
at the date of the Viom Acquisition), as well as the assumption of approximately
52.3 billion
INR (
$0.8 billion
at the date of the Viom Acquisition) of existing debt, which included
1.7 billion
INR (
$25.1 million
at the date of the Viom Acquisition) of mandatorily redeemable preference shares issued by Viom.
On April 21, 2016, the closing date of the Viom Acquisition, ATC Asia’s shareholders agreement (the “Shareholders Agreement”) with Viom and the following remaining Viom shareholders - Tata Sons Limited, Tata Teleservices Limited, IDFC Private Equity Fund III, Macquarie SBI Investments Pte Limited and SBI Macquarie Infrastructure Trust (collectively, the “Remaining Shareholders”) - became effective. The Shareholders Agreement provides that, among other things, the Remaining Shareholders will have certain governance, anti-dilution and contractual rights. The Remaining Shareholders have put options, and ATC Asia has a call option, subject to the time periods and conditions outlined in the Shareholders Agreement.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Other Acquisitions—
During the year ended December 31, 2016, the Company acquired a total of
891
communications sites in the United States, Brazil, Chile, Germany, Mexico, Nigeria and South Africa, and a company holding urban telecommunications assets and fiber in Argentina, for an aggregate purchase price of
$304.4 million
(including contingent consideration of
$8.8 million
). Of the total purchase price,
$12.1 million
is reflected in Accounts payable in the consolidated balance sheet as of
December 31, 2016
. The purchase prices of certain transactions are subject to post-closing adjustments.
The following table summarizes the preliminary allocation of the purchase prices for fiscal year 2016 acquisitions based upon their estimated fair value at the date of acquisition (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
Asia
|
|
Other
|
|
|
Viom
|
|
Current assets
|
|
$
|
276,560
|
|
|
$
|
25,477
|
|
Non-current assets
|
|
57,645
|
|
|
2,336
|
|
Property and equipment
|
|
701,988
|
|
|
81,521
|
|
Intangible assets (1):
|
|
|
|
|
Tenant-related intangible assets
|
|
1,369,580
|
|
|
105,557
|
|
Network location intangible assets
|
|
666,364
|
|
|
83,645
|
|
Current liabilities
|
|
(195,900
|
)
|
|
(14,782
|
)
|
Deferred tax liability
|
|
(619,070
|
)
|
|
(43,756
|
)
|
Other non-current liabilities
|
|
(102,751
|
)
|
|
(29,472
|
)
|
Net assets acquired
|
|
2,154,416
|
|
|
210,526
|
|
Goodwill (2)
|
|
881,783
|
|
|
93,856
|
|
Fair value of net assets acquired
|
|
3,036,199
|
|
|
304,382
|
|
Debt assumed
|
|
(786,889
|
)
|
|
—
|
|
Redeemable noncontrolling interests
|
|
(1,100,804
|
)
|
|
—
|
|
Purchase Price
|
|
$
|
1,148,506
|
|
|
$
|
304,382
|
|
_______________
|
|
(1)
|
Tenant-related intangible assets and network location intangible assets are amortized on a straight-line basis over periods of up to
20 years
.
|
|
|
(2)
|
Primarily results from purchase accounting adjustments, which are at least partially deductible for tax purposes in certain foreign jurisdictions.
|
2015 Transactions
Verizon Transaction—
On March 27, 2015, the Company completed its acquisition of the exclusive right to lease, acquire or otherwise operate and manage
11,449
wireless communications sites from Verizon Communications Inc. (“Verizon”) in the United States (the “Verizon Transaction”) pursuant to the Master Agreement entered into on February 5, 2015 and the related Master Prepaid Lease, Management Agreement, Sale Site Master Lease Agreement and MPL Site Master Lease Agreement.
The Company, through its wholly-owned subsidiary, leased or subleased from certain Verizon subsidiaries
11,286
communications sites, including the interest in the land, the tower and certain related improvements and tower related assets pursuant to the Master Prepaid Lease. Under the Master Prepaid Lease, the Company has the exclusive right to lease and operate the Verizon communications sites for a weighted average term of approximately
28 years
and the Company will have the option to purchase the communications sites in various tranches at the end of the respective lease or sublease terms at a fixed amount stated in the sublease for such tranche plus the fair market value of certain alterations made to the related towers. The Company accounted for the payment with respect to the leased sites as a capital lease and the respective lease and non-lease elements related to tower assets and intangible assets, as described below. In addition, the Company, through its wholly-owned subsidiary, acquired
163
communications sites. The Company accounted for these sites as a business combination and the purchase price is reflected below in “Other Acquisitions.”
Upon closing, the Company agreed to lease, sublease or otherwise make available collocation space at each of the communications sites to Verizon for an initial non-cancellable term of
ten years
, subject to automatic extension for
eight
additional
five
-year renewal terms. The initial collocation rent is
$1,900
per month for each communications site, with annual increases of
2%
.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The total consideration for the Verizon Transaction was
$5.066 billion
, which includes consideration for the sites under the Master Prepaid Lease as well as cash consideration for the
163
acquired sites. The allocation of the consideration transfered for the
11,286
communication sites under the Master Prepaid Lease was finalized during the year ended December 31, 2015.
Airtel Acquisition
—During the year ended December 31, 2015, the Company acquired
4,716
communications sites in Nigeria from certain subsidiaries of Bharti Airtel Limited (“Airtel”) for an aggregate total purchase price of
$1.112 billion
, including value added tax. During the year ended December 31, 2016 there were
no
changes to the preliminary allocation of the purchase price and the measurement period expired.
The estimates of the fair value of the assets or rights acquired and liabilities assumed at the date of the applicable acquisition are subject to adjustment during the measurement period (up to one year from the applicable acquisition date). During the year ended
December 31, 2016
, the Company adopted new guidance on the accounting for measurement-period adjustments related to business combinations. This guidance requires that an acquirer make adjustments to the provisional amounts recognized at the acquisition date with a corresponding adjustment to goodwill in the current period. Additionally, the effects on earnings of all measurement-period adjustments are included in current period earnings.
During the year ended
December 31, 2016
, post-closing adjustments impacted the following 2015 acquisitions:
TIM Acquisition—
On April 29, 2015, the Company acquired
4,176
communications sites from TIM Celular S.A. (“TIM”) for an initial aggregate purchase price of
$644.3 million
, which was subsequently reduced by
$0.8 million
during the year ended December 31, 2016. On September 30, 2015, the Company acquired an additional
1,125
communications sites from TIM for an initial aggregate purchase price of
$130.9 million
. On December 16, 2015, the Company acquired an additional
182
communications sites from TIM for an initial aggregate purchase price of
$21.7 million
.
Other Acquisitions
—During the year ended December 31, 2015, the Company acquired a total of
439
communications sites and related assets in Brazil, India, Mexico and Uganda for an aggregate purchase price of
$22.5 million
(including
$0.3 million
for the estimated fair value of contingent consideration), which was satisfied with cash consideration and by the issuance of credits to be applied against trade accounts receivable. The Company also acquired a total of
210
communications sites and equipment, as well as
four
property interests, in the United States for an aggregate purchase price of
$142.4 million
(including
$1.3 million
for the estimated fair value of contingent consideration), which included the
163
communications sites acquired as part of the Verizon Transaction, described above. The initial aggregate purchase price of other acquisitions was subsequently reduced by
$0.2 million
during the year ended December 31, 2016.
The following table summarizes the preliminary and final allocations of the purchase prices paid and the amounts of assets acquired and liabilities assumed for the fiscal year 2015 acquisitions based upon their estimated fair value at the date of acquisition (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preliminary Allocation
|
|
Final Allocation (1)
|
|
|
Latin America
|
|
Other
|
|
Latin America
|
|
Other
|
|
|
TIM
|
|
|
TIM
|
|
Current assets
|
|
$
|
—
|
|
|
$
|
1,113
|
|
|
$
|
—
|
|
|
$
|
1,113
|
|
Non-current assets
|
|
—
|
|
|
995
|
|
|
—
|
|
|
995
|
|
Property and equipment
|
|
275,630
|
|
|
42,716
|
|
|
274,530
|
|
|
42,716
|
|
Intangible assets (2):
|
|
|
|
|
|
|
|
|
Tenant-related intangible assets
|
|
361,822
|
|
|
63,001
|
|
|
361,765
|
|
|
62,832
|
|
Network location intangible assets
|
|
115,562
|
|
|
37,691
|
|
|
115,795
|
|
|
37,691
|
|
Current liabilities
|
|
(3,192
|
)
|
|
(624
|
)
|
|
(3,192
|
)
|
|
(624
|
)
|
Other non-current liabilities
|
|
(74,966
|
)
|
|
(4,028
|
)
|
|
(74,966
|
)
|
|
(4,028
|
)
|
Net assets acquired
|
|
674,856
|
|
|
140,864
|
|
|
673,932
|
|
|
140,695
|
|
Goodwill (3)
|
|
122,011
|
|
|
24,011
|
|
|
122,116
|
|
|
24,011
|
|
Fair value of net assets acquired
|
|
796,867
|
|
|
164,875
|
|
|
796,048
|
|
|
164,706
|
|
Debt assumed
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Purchase Price
|
|
$
|
796,867
|
|
|
$
|
164,875
|
|
|
$
|
796,048
|
|
|
$
|
164,706
|
|
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
_______________
|
|
(1)
|
The allocation of the purchase prices was finalized during the year ended December 31, 2016.
|
|
|
(2)
|
Tenant-related intangible assets and network location intangible assets are amortized on a straight-line basis over periods of up to
20 years
.
|
|
|
(3)
|
Goodwill was allocated to the Company’s property segments. The Company expects goodwill recorded in its U.S. and Asia property segments will be deductible for local tax purposes. The Company expects goodwill recorded in its Latin America property segment will be deductible in certain jurisdictions for local tax purposes.
|
Pro Forma Consolidated Results (Unaudited)
The following table presents the unaudited pro forma financial results as if the
2016
acquisitions had occurred on January 1,
2015
and the
2015
acquisitions had occurred on January 1,
2014
. The pro forma results do not include any anticipated cost synergies, costs or other integration impacts. Accordingly, such pro forma amounts are not necessarily indicative of the results that actually would have occurred had the transactions been completed on the dates indicated, nor are they indicative of the future operating results of the Company.
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2016
|
|
2015
|
Pro forma revenues
|
|
$
|
6,055,187
|
|
|
$
|
5,886,691
|
|
Pro forma net income attributable to American Tower Corporation common stockholders
|
|
$
|
847,738
|
|
|
$
|
544,641
|
|
Pro forma net income per common share amounts:
|
|
|
|
|
Basic net income attributable to American Tower Corporation common stockholders
|
|
$
|
1.99
|
|
|
$
|
1.29
|
|
Diluted net income attributable to American Tower Corporation common stockholders
|
|
$
|
1.97
|
|
|
$
|
1.27
|
|
Other Signed Acquisitions
Airtel Tanzania—
On March 17, 2016, the Company entered into a definitive agreement with Airtel, through its subsidiary company Airtel Tanzania Limited (“Airtel Tanzania”), pursuant to which the Company may acquire approximately
1,350
of Airtel Tanzania’s communications sites in Tanzania, for total consideration of approximately
$179.0 million
, subject to customary adjustments. Under the definitive agreement, the Company may pay additional consideration to acquire up to approximately
100
additional communications sites currently in development. The closing of this transaction is subject to customary closing conditions. In light of recent legislation in Tanzania, the Company is considering its options, including negotiating potential adjustments to the definitive agreement in the event a waiver of such legislation is not obtained.
FPS Towers France—
On
December 19, 2016, ATC Europe entered into a definitive agreement with Antin Infrastructure Partners and the individuals party thereto to acquire
100%
of the outstanding shares of FPS Towers (“FPS”). FPS owns and operates approximately
2,400
wireless tower sites in France. This transaction closed on February 15, 2017 for total consideration of
713.9 million
Euros (
$757.1 million
at the date of acquisition), a portion of which was funded by PGGM (see note 23).
Acquisition-Related Contingent Consideration
The Company may be required to pay additional consideration under certain agreements for the acquisition of communications sites if specific conditions are met or events occur. In Colombia and Ghana, the Company may be required to pay additional consideration upon the conversion of certain barter agreements with other wireless carriers to cash-paying lease agreements. In the United States, India and South Africa, the Company may be required to pay additional consideration if certain pre-designated tenant leases commence during a specified period of time.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A summary of the value of the Company’s contingent consideration is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2016
|
|
|
Maximum
potential value (1)
|
|
Estimated value at
December 31, 2016 (2)
|
|
Additions (3)
|
|
Settlements
|
|
Change in Fair Value
|
Colombia
|
|
$
|
23,557
|
|
|
$
|
5,342
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(4,964
|
)
|
Ghana
|
|
555
|
|
|
555
|
|
|
—
|
|
|
—
|
|
|
47
|
|
India
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(161
|
)
|
South Africa
|
|
22,291
|
|
|
9,154
|
|
|
8,692
|
|
|
—
|
|
|
—
|
|
United States
|
|
393
|
|
|
393
|
|
|
119
|
|
|
(306
|
)
|
|
(1,294
|
)
|
Total
|
|
$
|
46,796
|
|
|
$
|
15,444
|
|
|
$
|
8,811
|
|
|
$
|
(306
|
)
|
|
$
|
(6,372
|
)
|
_______________
|
|
(1)
|
The maximum potential value is based on exchange rates at
December 31, 2016
. The minimum value could be zero.
|
|
|
(2)
|
Estimate is determined using a probability weighted average of expected outcomes as of
December 31, 2016
.
|
|
|
(3)
|
Based on preliminary acquisition accounting upon closing of certain acquisitions during the year ended
December 31, 2016
.
|
For more information regarding contingent consideration, see note 11.
7. ACCRUED EXPENSES
Accrued expenses consisted of the following as of December 31, (in thousands):
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Accrued property and real estate taxes
|
$
|
138,361
|
|
|
$
|
75,827
|
|
Payroll and related withholdings
|
76,141
|
|
|
62,334
|
|
Accrued rent
|
50,951
|
|
|
54,732
|
|
Amounts payable to tenants
|
32,326
|
|
|
58,683
|
|
Accrued construction costs
|
28,587
|
|
|
19,857
|
|
Accrued income tax payable
|
11,551
|
|
|
11,704
|
|
Other accrued expenses
|
282,646
|
|
|
233,276
|
|
Accrued expenses
|
$
|
620,563
|
|
|
$
|
516,413
|
|
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. LONG-TERM OBLIGATIONS
Outstanding amounts under the Company’s long-term obligations, reflecting discounts, premiums, debt issuance costs and fair value adjustments due to interest rate swaps consisted of the following as of December 31, (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
Contractual Interest Rate (1)
|
|
Maturity Date (1)
|
Series 2013-1A Securities (2)
|
$
|
498,642
|
|
|
$
|
497,478
|
|
|
1.551
|
%
|
|
March 15, 2018
|
Series 2013-2A Securities (3)
|
1,290,267
|
|
|
1,288,689
|
|
|
3.070
|
%
|
|
March 15, 2023
|
Series 2015-1 Notes (4)
|
347,108
|
|
|
346,262
|
|
|
2.350
|
%
|
|
June 15, 2020
|
Series 2015-2 Notes (5)
|
519,437
|
|
|
518,776
|
|
|
3.482
|
%
|
|
June 16, 2025
|
2012 GTP Notes (6) (7)
|
179,459
|
|
|
281,902
|
|
|
4.336% - 7.358%
|
|
|
March 15, 2019
|
Unison Notes (7) (8)
|
132,960
|
|
|
201,930
|
|
|
6.392% - 9.522%
|
|
|
April 15, 2020
|
India indebtedness (9)
|
549,528
|
|
|
8,752
|
|
|
8.15% - 11.70%
|
|
|
Various
|
Viom preference shares (10)
|
24,537
|
|
|
—
|
|
|
13.500
|
%
|
|
Various
|
Shareholder loans (11)
|
151,045
|
|
|
145,540
|
|
|
Various
|
|
|
Various
|
Other subsidiary debt (12)
|
286,009
|
|
|
219,902
|
|
|
Various
|
|
|
Various
|
Total American Tower subsidiary debt
|
3,978,992
|
|
|
3,509,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013 Credit Facility (13)
|
539,975
|
|
|
1,225,000
|
|
|
1.963
|
%
|
|
June 28, 2020
|
Term Loan (13)
|
993,936
|
|
|
1,993,601
|
|
|
2.020
|
%
|
|
January 31, 2022
|
2014 Credit Facility (13)
|
1,385,000
|
|
|
1,980,000
|
|
|
2.432
|
%
|
|
January 31, 2022
|
4.500% senior notes
|
998,676
|
|
|
997,693
|
|
|
4.500
|
%
|
|
January 15, 2018
|
3.40% senior notes
|
999,716
|
|
|
999,769
|
|
|
3.400
|
%
|
|
February 15, 2019
|
7.25% senior notes (7)
|
297,032
|
|
|
296,242
|
|
|
7.250
|
%
|
|
May 15, 2019
|
2.800% senior notes
|
744,917
|
|
|
743,557
|
|
|
2.800
|
%
|
|
June 1, 2020
|
5.050% senior notes
|
697,352
|
|
|
697,216
|
|
|
5.050
|
%
|
|
September 1, 2020
|
3.300% senior notes
|
744,762
|
|
|
—
|
|
|
3.300
|
%
|
|
February 15, 2021
|
3.450% senior notes
|
643,848
|
|
|
642,786
|
|
|
3.450
|
%
|
|
September 15, 2021
|
5.900% senior notes
|
497,343
|
|
|
497,188
|
|
|
5.900
|
%
|
|
November 1, 2021
|
2.250% senior notes
|
572,764
|
|
|
—
|
|
|
2.250
|
%
|
|
January 15, 2022
|
4.70% senior notes
|
696,013
|
|
|
695,374
|
|
|
4.700
|
%
|
|
March 15, 2022
|
3.50% senior notes
|
989,269
|
|
|
987,966
|
|
|
3.500
|
%
|
|
January 31, 2023
|
5.00% senior notes
|
1,002,742
|
|
|
1,003,453
|
|
|
5.000
|
%
|
|
February 15, 2024
|
4.000% senior notes
|
739,985
|
|
|
739,057
|
|
|
4.000
|
%
|
|
June 1, 2025
|
4.400% senior notes
|
495,212
|
|
|
—
|
|
|
4.400
|
%
|
|
February 15, 2026
|
3.375% senior notes
|
983,369
|
|
|
—
|
|
|
3.375
|
%
|
|
October 15, 2026
|
3.125% senior notes
|
396,713
|
|
|
—
|
|
|
3.125
|
%
|
|
January 15, 2027
|
Total American Tower Corporation debt
|
14,418,624
|
|
|
13,498,902
|
|
|
|
|
|
Other debt, including capital lease obligations
|
135,849
|
|
|
110,876
|
|
|
|
|
|
Total
|
18,533,465
|
|
|
17,119,009
|
|
|
|
|
|
Less current portion long-term obligations
|
(238,806
|
)
|
|
(50,202
|
)
|
|
|
|
|
Long-term obligations
|
$
|
18,294,659
|
|
|
$
|
17,068,807
|
|
|
|
|
|
_______________
|
|
(1)
|
Represents the interest rate or maturity date as of December 31, 2016; interest rate does not reflect the impact of interest rate swap agreements.
|
|
|
(2)
|
Maturity date reflects the anticipated repayment date; final legal maturity is March 15, 2043.
|
|
|
(3)
|
Maturity date reflects the anticipated repayment date; final legal maturity is March 15, 2048.
|
|
|
(4)
|
Maturity date reflects the anticipated repayment date; final legal maturity is June 15, 2045.
|
|
|
(5)
|
Maturity date reflects the anticipated repayment date; final legal maturity is June 15, 2050.
|
|
|
(6)
|
Secured debt assumed by the Company in connection with its acquisition of MIP Tower Holdings LLC (“MIPT”). Maturity date represents anticipated repayment date; final legal maturity is March 15, 2042.
|
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
(7)
|
Debt was repaid in full subsequent to December 31, 2016. For more information see note 23.
|
|
|
(8)
|
Secured debt assumed in connection with the acquisition of certain legal entities holding a portfolio of property interests from Unison Holdings, LLC and Unison Site Management II, L.L.C. (together, “Unison”). Maturity date reflects the anticipated repayment date; final legal maturity is April 15, 2040.
|
|
|
(9)
|
Denominated in Indian Rupees (“INR”). Debt includes India working capital facility, remaining debt assumed by the Company in connection with the Viom Acquisition and debt that has been entered into by ATC TIPL.
|
|
|
(10)
|
Mandatorily redeemable preference shares (the “Preference Shares”) classified as debt, assumed by the Company in connection with the Viom Acquisition. The shares are to be redeemed in equal parts on March 26, 2017 and March 26, 2018.
|
|
|
(11)
|
Reflects balances owed to the Company’s joint venture partners in Ghana and Uganda. The Ghana loan is denominated in Ghanaian Cedi (“GHS”) and the Uganda loan was denominated in U.S. Dollars (“USD”). The Uganda loan accrued interest at a variable rate. Effective January 1, 2017, this loan, which had an outstanding balance of
$80.0 million
, was converted by the holder to a new shareholder note for
$31.8 million
, bearing interest at
16.6%
per annum. The remaining balance of the Uganda loan was converted into equity.
|
|
|
(12)
|
Includes the BR Towers Debentures (as defined below), which are denominated in Brazilian Reais (“BRL”) and amortize through October 15, 2023, the South African Credit Facility (as defined below), which is denominated in South African Rand (“ZAR”) and amortizes through December 17, 2020, the Colombian Credit Facility (as defined below), which is denominated in Colombian Pesos (“COP”) and amortizes through April 24, 2021 and the Brazil Credit Facility (as defined below), which is denominated in BRL and matures on January 15, 2022.
|
|
|
(13)
|
Debt accrues interest at a variable rate.
|
American Tower Subsidiary Debt
Subsidiary Debt
The Company has several securitizations in place. Cash flows generated by the sites that secure the securitized debt are only available for payment of such debt and are not available to pay the Company’s other obligations or the claims of its creditors. However, subject to certain restrictions, the Company holds the right to the excess cash flows not needed to pay the securitized debt and other obligations arising out of the securitizations. The securitized debt is the obligation of the issuers thereof or borrowers thereunder, as applicable, and their subsidiaries, and not of the Company or its other subsidiaries.
Secured Tower Revenue Securities, Series 2013-1A and Series 2013-2A
—In March 2013, the Company completed a private issuance (the “2013 Securitization”) of
$1.8 billion
of Secured Tower Revenue Securities, Series 2013-1A and Series 2013-2A (the “2013 Securities”) issued by American Tower Trust I (the “Trust”), a trust established by American Tower Depositor Sub, LLC, a wholly owned special purpose subsidiary of the Company. The net proceeds of the transaction were
$1.78 billion
. The assets of the Trust consist of a nonrecourse loan (the “Loan”) to American Tower Asset Sub, LLC and American Tower Asset Sub II, LLC (the “AMT Asset Subs”), pursuant to a First Amended and Restated Loan and Security Agreement dated as of March 15, 2013 (the “Loan Agreement”).
The Loan is secured by (i) mortgages, deeds of trust and deeds to secure debt on substantially all of the
5,181
wireless and broadcast communications towers owned by the AMT Asset Subs (the “2013 Secured Towers”), (ii) a pledge of the AMT Asset Subs’ operating cash flows from the 2013 Secured Towers, (iii) a security interest in substantially all of the AMT Asset Subs’ personal property and fixtures and (iv) the AMT Asset Subs’ rights under the tenant leases and the management agreement entered into in connection with the 2013 Securitization. American Tower Holding Sub, LLC, whose only material assets are its equity interests in each of the AMT Asset Subs, and American Tower Guarantor Sub, LLC, whose only material asset are its equity interests in American Tower Holding Sub, LLC, each have guaranteed repayment of the Loan and pledged their equity interests in their respective subsidiary or subsidiaries as security for such payment obligations.
The 2013 Securities were issued in two separate series of the same class pursuant to a First Amended and Restated Trust and Servicing Agreement, with terms identical to the Loan. The effective weighted average life and interest rate of the 2013 Securities was
8.6 years
and
2.648%
, respectively, as of the date of issuance.
American Tower Secured Revenue Notes, Series 2015-1, Class A and Series 2015-2, Class A
—In May 2015, GTP Acquisition Partners I, LLC (“GTP Acquisition Partners”), one of the Company’s wholly owned subsidiaries, refinanced existing debt with cash on hand and proceeds from a private issuance (the “2015 Securitization”) of
$350.0 million
of American Tower Secured Revenue Notes, Series 2015-1, Class A (the “Series 2015-1 Notes”) and
$525.0 million
of American Tower Secured Revenue Notes, Series 2015-2, Class A (the “Series 2015-2 Notes,” and together with the Series 2015-1 Notes, the “2015 Notes”).
The 2015 Notes are secured by (i) mortgages, deeds of trust and deeds to secure debt on substantially all of the
3,596
communications sites (the “2015 Secured Sites”) owned by GTP Acquisition Partners and its subsidiaries (the “GTP Entities”) and their operating cash flows, (ii) a security interest in substantially all of the personal property and fixtures of the GTP Entities, including GTP Acquisition Partners’ equity interests in its subsidiaries and (iii) the rights of the GTP Entities under a management agreement. American Tower Holding Sub II, LLC, whose only material assets are its equity interests in GTP Acquisition Partners, has guaranteed repayment of the 2015 Notes and pledged its equity interests in GTP Acquisition Partners as security for such payment obligations.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The 2015 Notes were issued by GTP Acquisition Partners pursuant to a Third Amended and Restated Indenture and related series supplements, each dated as of May 29, 2015 (collectively, the “2015 Indenture”), between the GTP Entities and The Bank of New York Mellon, as trustee. The effective weighted average life and interest rate of the 2015 Notes was
8.1 years
and
3.029%
, respectively, as of the date of issuance.
Under the terms of the Loan Agreement and 2015 Indenture, amounts due will be paid from the cash flows generated by the 2013 Secured Towers or the 2015 Secured Sites, respectively, which must be deposited into certain reserve accounts, and thereafter distributed solely pursuant to the terms of the Loan Agreement or 2015 Indenture, as applicable. On a monthly basis, after payment of all required amounts under the Loan Agreement or 2015 Indenture, as applicable, including interest payments, subject to the conditions described below, the excess cash flows generated from the operation of such assets are released to the AMT Asset Subs or GTP Acquisition Partners, as applicable, and can then be distributed to, and used by, the Company.
In order to distribute any excess cash flow to the Company, the AMT Asset Subs and GTP Acquisition Partners must each maintain a specified debt service coverage ratio (the “DSCR”), generally defined as the net cash flow divided by the amount of interest, servicing fees and trustee fees required to be paid over the succeeding
12
months on the principal amount of the Loan or the 2015 Notes, as applicable, that will be outstanding on the payment date following such date of determination. If the DSCR were equal to or below
1.30
x (the “Cash Trap DSCR”) for any quarter, then all cash flow in excess of amounts required to make debt service payments, to fund required reserves, to pay management fees and budgeted operating expenses and to make other payments required under the applicable transaction documents, referred to as excess cash flow, will be deposited into a reserve account (the “Cash Trap Reserve Account”) instead of being released to the AMT Asset Subs or GTP Acquisition Partners, as applicable. The funds in the Cash Trap Reserve Account will not be released to the AMT Asset Subs or GTP Acquisition Partners unless the DSCR, as applicable, exceeds the Cash Trap DSCR for
two
consecutive calendar quarters.
Additionally, an “amortization period” commences if, as of the end of any calendar quarter, the DSCR falls below
1.15
x (the “Minimum DSCR”) and will continue to exist until the DSCR exceeds the Minimum DSCR for two consecutive calendar quarters. With respect to the 2013 Securities, an “amortization period” also commences if, on the anticipated repayment date the component of the Loan corresponding to the applicable subclass of the 2013 Securities has not been repaid in full, provided that such amortization period shall apply with respect to such component that has not been repaid in full. If either series of the 2015 Notes have not been repaid in full on the applicable anticipated repayment date, additional interest will accrue on the unpaid principal balance of the applicable series of the 2015 Notes, and such series will begin to amortize on a monthly basis from excess cash flow. During an amortization period, all excess cash flow and any amounts then in the applicable Cash Trap Reserve Account would be applied to payment of the principal on the Loan or the 2015 Notes, as applicable.
The Loan and the 2015 Notes may be prepaid in whole or in part at any time, provided such payment is accompanied by the applicable prepayment consideration. If the prepayment occurs within
12
months of the anticipated repayment date with respect to the Series 2013-1A Securities or the Series 2015-1 Notes, or
18
months of the anticipated repayment date with respect to the Series 2013-2A Securities or the Series 2015-2 Notes, no prepayment consideration is due. The Loan may be defeased in whole at any time prior to the anticipated repayment date for any component of the Loan then outstanding.
The Loan Agreement and the 2015 Indenture include operating covenants and other restrictions customary for transactions subject to rated securitizations. Among other things, the AMT Asset Subs and the GTP Entities, as applicable, are prohibited from incurring other indebtedness for borrowed money or further encumbering their assets subject to customary carve-outs for ordinary course trade payables and permitted encumbrances (as defined in the Loan Agreement or the 2015 Indenture, as applicable). The organizational documents of the AMT Asset Subs and the GTP Entities contain provisions consistent with rating agency securitization criteria for special purpose entities, including the requirement that they maintain independent directors. The Loan Agreement and the 2015 Indenture also contain certain covenants that require the AMT Asset Subs or GTP Acquisition Partners, as applicable, to provide the respective trustee with regular financial reports and operating budgets, promptly notify such trustee of events of default and material breaches under the Loan Agreement and other agreements related to the 2013 Secured Towers or the 2015 Indenture and other agreements related to the 2015 Secured Sites, as applicable, and allow the applicable trustee reasonable access to the sites, including the right to conduct site investigations.
A failure to comply with the covenants in the Loan Agreement or the 2015 Indenture could prevent the AMT Asset Subs or GTP Acquisition Partners from distributing excess cash flow to the Company. Furthermore, if the AMT Asset Subs or GTP Acquisition Partners were to default on the Loan or a series of the 2015 Notes, the applicable trustee may seek to foreclose upon or otherwise convert the ownership of all or any portion of the 2013 Secured Towers or the 2015 Secured Sites, respectively, in which case the Company could lose the revenue associated with those assets. With respect to the 2015 Notes, upon occurrence and during an event of default, the trustee may, in its discretion or at direction of holders of more than
50%
of the aggregate outstanding
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
principal of any series of the 2015 Notes, declare such series of 2015 Notes immediately due and payable, in which case any excess cash flow would need to be used to pay holders of such notes.
Further, under the Loan Agreement and the 2015 Indenture, the AMT Asset Subs or GTP Acquisition Partners, respectively, are required to maintain reserve accounts, including for amounts received or due from tenants related to future periods, property taxes, insurance, ground rents, certain expenses and debt service. Based on the terms of the Loan Agreement and the 2015 Indenture, all rental cash receipts received for each month are reserved for the succeeding month and held in an account controlled by the applicable trustee and then released. The
$82.7 million
held in the reserve accounts with respect to the 2013 Securitization and the
$16.8 million
held in the reserve accounts with respect to the 2015 Securitization as of
December 31, 2016
are classified as Restricted cash on the Company’s accompanying consolidated balance sheets.
2012 GTP Notes
—In connection with the acquisition of MIPT, the Company assumed existing indebtedness issued by certain subsidiaries of Global Tower Partners in several securitization transactions. During the year ended December 31, 2016, the Company repaid
$94.1 million
of these notes and released
472
sites in connection with this repayment. As of
December 31, 2016
, the aggregate amount outstanding was
$173.7 million
plus
$5.7 million
of unamortized premium. As discussed in note 23, all amounts outstanding under these notes were repaid subsequent to December 31, 2016.
Unison Notes
—In connection with the acquisition of Unison, the Company assumed
$196.0 million
of existing securitized indebtedness. In October 2016, the Company repaid
$67.0 million
of these notes.
As of
December 31, 2016
, the aggregate amount outstanding was
$129.0 million
plus
$4.0 million
of unamortized premium. As discussed in note 23, all amounts outstanding under these notes were repaid subsequent to December 31, 2016.
India indebtedness—
Amounts outstanding and key terms of the India indebtedness consisted of the following as of
December 31, 2016
(in millions, except percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount Outstanding (INR)
|
|
Amount Outstanding (USD)
|
|
Interest Rate (Range)
|
|
Maturity Date (Range)
|
Term loans
|
|
31,326
|
|
|
$
|
461.2
|
|
|
8.15% - 11.15%
|
|
|
March 31, 2017 - November 30, 2024
|
Debenture
|
|
6,000
|
|
|
$
|
88.3
|
|
|
9.90
|
%
|
|
April 28, 2020
|
Working capital facilities
|
|
0
|
|
|
$
|
0
|
|
|
8.70% - 11.70%
|
|
|
January 31, 2017 - October 23, 2017
|
The India indebtedness includes several term loans, ranging from
one
to
ten
years, which are generally secured by the borrower’s short-term and long-term assets. Each of the term loans bear interest at the applicable bank’s Marginal Cost of Funds based Lending Rate (as defined in the applicable agreement) or base rate, plus a spread. Interest rates on the term loans are fixed until certain reset dates. Generally, the term loans can be repaid without penalty on the reset dates; repayments at dates other than the reset dates are subject to prepayment penalties, typically of
1%
to
2%
. Scheduled repayment terms include either ratable or staggered amortization with repayments typically commencing between
six
and
36
months after the initial disbursement of funds.
The debenture
is secured by the borrower’s long-term assets, including property and equipment and intangible assets. The debenture bears interest at a base rate plus a spread of
0.6%
. The base rate is set in advance for each quarterly coupon period. Should the actual base rate be between
9.75%
and
10.25%
, the revised base rate is assumed to be
10.00%
for purposes of the reset. Additionally, the spread is subject to reset
36
and
48
months from the issuance date of April 27, 2015. The holders of the debenture must reach a consensus on the revised spread and the borrower must redeem all of the debentures held by holders from whom consensus is not achieved. Additionally, the debenture is required to be redeemed by the borrower if it does not maintain a minimum credit rating.
The India indebtedness includes several working capital facilities, most of which are subject to annual renewal, and which are generally secured by the borrower’s short-term and long-term assets. The working capital facilities bear interest at rates that are comprised of the applicable bank’s Marginal Cost of Funds based Lending Rate (as defined in the applicable agreement) or base rate, plus a spread. Generally, the working capital facilities are payable on demand prior to maturity.
Viom preference shares—
As of
December 31, 2016
, ATC TIPL had
166,666,666
Preference Shares outstanding, which are required to be redeemed in cash. Accordingly, the Company recognized debt of
1.67 billion
INR (
$24.5 million
) related to the Preference Shares outstanding on the consolidated balance sheet.
Unless redeemed earlier, the Preference Shares will be redeemed in
two
equal installments on March 26, 2017 and March 26, 2018 in an amount equal to
ten
INR per share along with a redemption premium, as defined in the investment agreement, which
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
equates to a compounded return of
13.5%
per annum. ATC TIPL, at its option, may redeem the Preference Shares prior to the aforementioned dates, subject to an additional
2%
redemption premium.
Other Subsidiary Debt—
The Company’s other subsidiary debt includes (i) publicly issued simple debentures in Brazil (the “BR Towers Debentures”) issued by a subsidiary of BR Towers and assumed by the Company in its acquisition of BR Towers, (ii) a credit facility entered into by one of the Company’s South African subsidiaries in December 2015, as amended (the “South African Credit Facility”), (iii) a long-term credit facility entered into by one of the Company’s Colombian subsidiaries in October 2014 (the “Colombian Credit Facility”) and (iv) a credit facility entered into by one of the Company’s Brazilian subsidiaries in December 2014 (the “Brazil Credit Facility”) with Banco Nacional de Desenvolvimento Econômico e Social.
Amounts outstanding and key terms of other subsidiary debt consisted of the following as of
December 31, 2016
(in millions, except percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount Outstanding (Functional Currency)
|
|
Amount Outstanding (USD) (1)
|
|
Interest Rate
|
|
Maturity Date
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
BR Towers Debentures (2)
|
|
329.3
|
|
|
332.8
|
|
|
$
|
101.0
|
|
|
$
|
85.2
|
|
|
7.400
|
%
|
|
October 15, 2023
|
South African Credit Facility (3)
|
|
1,164.0
|
|
|
830.0
|
|
|
$
|
84.3
|
|
|
$
|
53.2
|
|
|
9.308
|
%
|
|
December 17, 2020
|
Colombian Credit Facility (4)
|
|
170,000.0
|
|
|
190,000.0
|
|
$
|
56.1
|
|
|
$
|
59.6
|
|
|
10.920
|
%
|
|
April 24, 2021
|
Brazil Credit Facility (5)
|
|
147.7
|
|
|
85.4
|
|
$
|
44.6
|
|
|
$
|
21.9
|
|
|
Various
|
|
|
January 15, 2022
|
_______________
|
|
(1)
|
Includes applicable deferred financing costs.
|
|
|
(2)
|
Denominated in BRL, with an original principal amount of
300.0 million
BRL. Debt accrues interest at a variable rate. The aggregate principal amount of the BR Towers Debentures may be adjusted periodically relative to changes in the National Extended Consumer Price Index.
|
|
|
(3)
|
Denominated in ZAR, with an original principal amount of
830.0 million
ZAR. On December 23, 2016, the borrower borrowed an additional
500.0 million
ZAR, with the ability to request an additional
330.0 million
ZAR. Debt accrues interest at a variable rate.
|
|
|
(4)
|
Denominated in COP, with an original principal amount of
200.0 billion
COP. Debt accrues interest at a variable rate. The loan agreement for the Colombian Credit Facility requires that the borrower manage exposure to variability in interest rates on certain of the amounts outstanding under the Colombian Credit Facility.
|
|
|
(5)
|
Denominated in BRL, with an original principal amount of
271.0 million
BRL. Debt accrues interest at a variable rate. As of December 30, 2016, the borrower no longer maintains the ability to draw on the Brazil Credit Facility.
|
Pursuant to the agreements governing the BR Towers Debentures, the South African Credit Facility and the Colombian Credit Facility, payments of principal and interest are payable quarterly in arrears. Outstanding principal and accrued but unpaid interest will be due and payable in full at maturity. The BR Towers Debentures may be redeemed beginning on October 15, 2018 at the then outstanding principal amount plus a surcharge and all accrued and unpaid interest thereon. The South African Credit Facility may be prepaid in whole or in part without prepayment consideration. The Colombian Credit Facility may be prepaid in whole or in part at any time, subject to certain limitations and prepayment consideration.
The South African Credit Facility, the Colombian Credit Facility and the Brazil Credit Facility are secured by, among other things, liens on towers owned by the applicable borrower. The BR Towers Debentures are secured by (i)
100%
of the shares of the issuer thereof and (ii) all proceeds and rights from the issuance of the BR Towers Debentures, including amounts in a Resource Account, as defined in the applicable agreement.
Each of the agreements governing the other subsidiary debt contains contractual covenants and other restrictions. Failure to comply with certain of the financial and operating covenants could constitute a default under the applicable debt agreement, which could result in, among other things, the amounts outstanding, including all accrued interest and unpaid fees, becoming immediately due and payable.
Shareholder Loans
—In connection with the establishment of certain of the Company’s joint ventures and related acquisitions of communications sites in Ghana and Uganda, the Company’s majority owned subsidiaries entered into shareholder loan agreements, as borrowers, with wholly owned subsidiaries of the Company and of the Company’s joint venture partners, as lenders. The portions of the loans made by the Company’s wholly owned subsidiaries are eliminated in consolidation and the portions of the loans made by each of the Company’s joint venture partner’s wholly owned subsidiaries are reported as outstanding debt of the Company. Outstanding amounts under each of the Company’s shareholder loans consisted of the following as of December 31, (in thousands):
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
Contractual Interest Rate
|
|
Maturity Date
|
Ghana loan (1)
|
$
|
71,047
|
|
|
$
|
70,314
|
|
|
21.87
|
%
|
|
December 31, 2019
|
Uganda loan (2)(3)
|
79,998
|
|
|
75,226
|
|
|
6.52
|
%
|
|
June 29, 2019
|
_______________
|
|
(1)
|
Denominated in GHS. As of December 31, 2016, the aggregate principal amount outstanding under the Ghana loan was
300.9
million GHS.
|
|
|
(2)
|
Interest accrues at a variable rate.
|
|
|
(3)
|
Includes
$4.8 million
of interest which was capitalized during the year ended December 31, 2016.
|
American Tower Corporation Debt
Bank Facilities
—In November 2016, the Company entered into amendment agreements (the “Credit Facility Amendments”) with respect to (i) its multicurrency senior unsecured revolving credit facility entered into in June 2013, as amended (the “2013 Credit Facility”), (ii) its senior unsecured revolving credit facility entered into in January 2012, as amended and restated in September 2014, as further amended (the “2014 Credit Facility”) and (iii) its unsecured term loan entered into in October 2013, as amended (the “Term Loan”), which, among other things, (i) extend the maturity dates by one year to June 28, 2020, January 31, 2022 and January 31, 2022, respectively, (ii) increase the maximum Revolving Loan Commitments, after giving effect to any Incremental Commitments (each as defined in the loan agreements for each of the 2013 Credit Facility and the 2014 Credit Facility) to
$4.25 billion
and
$3.00 billion
under the 2013 Credit Facility and the 2014 Credit Facility, respectively, (iii) amend the limitation on indebtedness of, and guaranteed by, the Company’s subsidiaries to the greater of (x)
$2.25 billion
and (y)
50%
of Adjusted EBITDA (as defined in the agreements for each of the 2013 Credit Facility, the 2014 Credit Facility and the Term Loan) of the Company and its subsidiaries on a consolidated basis and (iv) amend the limitation of the Company's permitted ratio of Total Debt to Adjusted EBITDA (each as defined in the agreements for each of the 2013 Credit Facility, the 2014 Credit Facility and the Term Loan) to be no greater than (x)
6.00
to
1.00
as of the end of each fiscal quarter or (y)
7.00
to
1.00
as of the specified time periods after the occurrence of a Qualified Acquisition (as defined in each of the Credit Facility Amendments).
2013 Credit Facility—
The Company has the ability to borrow up to
$2.75 billion
under the 2013 Credit Facility, which includes a
$1.0 billion
sublimit for multicurrency borrowings, a
$200.0 million
sublimit for letters of credit and a
$50.0 million
sublimit for swingline loans. During the
year ended December 31, 2016
, the Company borrowed an aggregate of
$1.9 billion
and repaid an aggregate of
$2.6 billion
of revolving indebtedness under the 2013 Credit Facility. The Company primarily used the borrowings to fund the Viom Acquisition and general corporate purposes.
2014 Credit Facility—
The Company has the ability to borrow up to
$2.0 billion
under the 2014 Credit Facility, which includes a
$200.0 million
sublimit for letters of credit and a
$50.0 million
sublimit for swingline loans. During the
year ended December 31, 2016
, the Company borrowed an aggregate of
$245.0 million
and repaid an aggregate of
$840.0 million
of revolving indebtedness under the 2014 Credit Facility.
Term Loan—
During the
year ended December 31, 2016
, the Company repaid
$1.0 billion
of indebtedness under the Term Loan.
The Term Loan, the 2013 Credit Facility and the 2014 Credit Facility do not require amortization of principal and may be paid prior to maturity in whole or in part at the Company’s option without penalty or premium. The Company has the option of choosing either a defined base rate or the London Interbank Offered Rate (“LIBOR”) as the applicable base rate for borrowings under the Term Loan, the 2013 Credit Facility and the 2014 Credit Facility. The interest rates range between
1.000%
to
2.000%
above LIBOR for LIBOR based borrowings or up to
1.000%
above the defined base rate for base rate borrowings, in each case based upon our debt ratings.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of
December 31, 2016
, the key terms under the 2013 Credit Facility, the 2014 Credit Facility and the Term Loan were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding Principal Balance (in millions)
|
|
Undrawn letters of credit (in millions)
|
|
Maturity Date
|
|
Current margin over LIBOR and base rate
|
Current commitment fee (1)
|
2013 Credit Facility
|
$
|
540.0
|
|
(2)
|
$
|
3.2
|
|
|
June 28, 2020
|
(3)
|
1.250% and 0.250%
|
0.150
|
%
|
2014 Credit Facility
|
$
|
1,385.0
|
|
(4)
|
$
|
7.3
|
|
|
January 31, 2022
|
(3)
|
1.250% and 0.250%
|
0.150
|
%
|
Term Loan
|
$
|
1,000.0
|
|
(2)
|
$
|
—
|
|
|
January 31, 2022
|
|
1.250% and 0.250%
|
N/A
|
|
_______________
(1) Fee on undrawn portion of each credit facility.
(2) Borrowed at LIBOR.
(3) Subject to
two
optional renewal periods.
(4) Includes
$1,095.0 million
borrowed at LIBOR and
$290.0 million
borrowed at the base rate.
Senior Notes
3.300%
Notes and
4.400%
Notes Offerings—
On January 12, 2016, the Company completed registered public offerings of
$750.0 million
aggregate principal amount of
3.300%
senior unsecured notes due 2021 (the “
3.300%
Notes”) and
$500.0 million
aggregate principal amount of
4.400%
senior unsecured notes due 2026 (the “
4.400%
Notes”). The net proceeds from these offerings were approximately
$1,237.2 million
, after deducting commissions and estimated expenses. The Company used the proceeds to repay existing indebtedness under the 2013 Credit Facility and for general corporate purposes.
3.375%
Notes Offering—
On May 13, 2016, the Company completed a registered public offering of
$1.0 billion
aggregate principal amount of
3.375%
senior unsecured notes due 2026 (the “
3.375%
Notes”). The net proceeds from this offering were approximately
$981.5 million
, after deducting commissions and estimated expenses. The Company used the proceeds to repay existing indebtedness under the 2013 Credit Facility.
2.250%
Notes and
3.125%
Notes Offerings—
On September 30, 2016, the Company completed registered public offerings of
$600.0 million
aggregate principal amount of
2.250%
senior unsecured notes due 2022 (the “
2.250%
Notes”) and
$400.0 million
aggregate principal amount of
3.125%
senior unsecured notes due 2027 (the “
3.125%
Notes”). The net proceeds from these offerings were approximately
$990.6 million
, after deducting commissions and estimated expenses. The Company used the proceeds to repay existing indebtedness under the Term Loan.
The Company entered into interest rate swap agreements, which were designated as fair value hedges at inception, to hedge against changes in fair value of the
2.250%
Notes resulting from changes in interest rates. As of
December 31, 2016
, the interest rate on the
2.250%
Notes, after giving effect to the interest rate swap agreements, was
1.97%
.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table outlines key terms related to the Company
’
s outstanding senior notes as of
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to Principal Amount (1)
|
|
|
|
|
|
|
Aggregate Principal Amount
|
|
2016
|
|
2015
|
|
Semi-annual interest
payments due
|
|
Issue Date
|
Par Call Date (2)
|
|
(in thousands)
|
|
|
|
|
|
4.500% Notes
|
$
|
1,000,000
|
|
|
$
|
(1,324
|
)
|
|
$
|
(2,307
|
)
|
|
January 15 and July 15
|
|
December 7, 2010
|
N/A
|
3.40% Notes (3)
|
1,000,000
|
|
|
(284
|
)
|
|
(231
|
)
|
|
February 15 and August 15
|
|
August 19, 2013
|
N/A
|
7.25% Notes
|
300,000
|
|
|
(2,968
|
)
|
|
(3,758
|
)
|
|
May 15 and November 15
|
|
June 10, 2009
|
N/A
|
2.800% Notes
|
750,000
|
|
|
(5,083
|
)
|
|
(6,443
|
)
|
|
June 1 and December 1
|
|
May 7, 2015
|
May 1, 2020
|
5.050% Notes
|
700,000
|
|
|
(2,648
|
)
|
|
(2,784
|
)
|
|
March 1 and September 1
|
|
August 16, 2010
|
N/A
|
3.300% Notes
|
750,000
|
|
|
(5,238
|
)
|
|
—
|
|
|
February 15 and August 15
|
|
January 12, 2016
|
January 15, 2021
|
3.450% Notes
|
650,000
|
|
|
(6,152
|
)
|
|
(7,214
|
)
|
|
March 15 and September 15
|
|
August 7, 2014
|
N/A
|
5.900% Notes
|
500,000
|
|
|
(2,657
|
)
|
|
(2,812
|
)
|
|
May 1 and November 1
|
|
October 6, 2011
|
N/A
|
2.250% Notes (4)
|
600,000
|
|
|
(27,236
|
)
|
|
—
|
|
|
January 15 and July 15
|
|
September 30, 2016
|
N/A
|
4.70% Notes
|
700,000
|
|
|
(3,987
|
)
|
|
(4,626
|
)
|
|
March 15 and September 15
|
|
March 12, 2012
|
N/A
|
3.50% Notes
|
1,000,000
|
|
|
(10,731
|
)
|
|
(12,034
|
)
|
|
January 31 and July 31
|
|
January 8, 2013
|
N/A
|
5.00% Notes (3)
|
1,000,000
|
|
|
2,742
|
|
|
3,453
|
|
|
February 15 and August 15
|
|
August 19, 2013
|
N/A
|
4.000% Notes
|
750,000
|
|
|
(10,015
|
)
|
|
(10,943
|
)
|
|
June 1 and December 1
|
|
May 7, 2015
|
March 1, 2025
|
4.400% Notes
|
500,000
|
|
|
(4,788
|
)
|
|
—
|
|
|
February 15 and August 15
|
|
January 12, 2016
|
November 15, 2025
|
3.375% Notes
|
1,000,000
|
|
|
(16,631
|
)
|
|
—
|
|
|
April 15 and October 15
|
|
May 13, 2016
|
July 15, 2026
|
3.125% Notes
|
400,000
|
|
|
(3,287
|
)
|
|
—
|
|
|
January 15 and July 15
|
|
September 30, 2016
|
October 15, 2026
|
_______________
|
|
(1)
|
Includes unamortized discounts, premiums and debt issuance costs and fair value adjustments due to interest rate swaps.
|
|
|
(2)
|
The Company will not be required to pay a make-whole premium if redeemed on or after the par call date.
|
|
|
(3)
|
The original issue date for the
3.40%
Notes and the
5.00%
Notes was August 19, 2013. The issue date for the reopened
3.40%
Notes and the reopened
5.00%
Notes was January 10, 2014.
|
|
|
(4)
|
Includes
$22.3 million
fair value adjustment due to interest rate swaps.
|
The Company may redeem each series of notes at any time, subject to the terms of the applicable supplemental indenture, in whole or in part, at a redemption price equal to
100%
of the principal amount of the notes plus a make-whole premium, together with accrued interest to the redemption date. In addition, if the Company undergoes a change of control and corresponding ratings decline, each as defined in the applicable supplemental indenture, it may be required to repurchase all of the applicable notes at a purchase price equal to
101%
of the principal amount of such notes, plus accrued and unpaid interest (including additional interest, if any), up to but not including the repurchase date. The notes rank equally with all of the Company’s other senior unsecured debt and are structurally subordinated to all existing and future indebtedness and other obligations of its subsidiaries.
Each applicable supplemental indenture for the notes contains certain covenants that restrict the Company’s ability to merge, consolidate or sell assets and its (together with its subsidiaries’) ability to incur liens. These covenants are subject to a number of exceptions, including that the Company, and its subsidiaries, may incur certain liens on assets, mortgages or other liens securing indebtedness if the aggregate amount of such liens does not exceed
3.5
x Adjusted EBITDA, as defined in the applicable supplemental indenture.
Capital Lease and Other Obligations
—The Company’s capital lease and other obligations approximated
$135.8 million
and
$110.9 million
as of
December 31, 2016
and
2015
, respectively. These obligations are secured by the related assets, bear interest at rates of
2.40%
to
9.50%
, and mature in periods ranging from less than
one year
to approximately
seventy years
.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Maturities
—Aggregate principal maturities of long-term debt, including capital leases, for the next five years and thereafter are expected to be (in thousands):
|
|
|
|
|
Year Ending December 31,
|
|
2017
|
$
|
238,806
|
|
2018
|
1,649,137
|
|
2019
|
1,759,808
|
|
2020
|
2,677,594
|
|
2021
|
1,976,976
|
|
Thereafter
|
10,350,583
|
|
|
|
Total cash obligations
|
18,652,904
|
|
Unamortized discounts, premiums and debt issuance costs and fair value adjustments, net
|
(119,439
|
)
|
|
|
Balance as of December 31, 2016
|
$
|
18,533,465
|
|
|
|
9. OTHER NON-CURRENT LIABILITIES
Other non-current liabilities consisted of the following as of December 31, (in thousands):
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Unearned revenue
|
$
|
457,272
|
|
|
$
|
451,844
|
|
Deferred rent liability
|
407,157
|
|
|
348,532
|
|
Other miscellaneous liabilities
|
278,294
|
|
|
158,973
|
|
Other non-current liabilities
|
$
|
1,142,723
|
|
|
$
|
959,349
|
|
10. ASSET RETIREMENT OBLIGATIONS
The changes in the carrying amount of the Company’s asset retirement obligations were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Beginning balance as of January 1,
|
$
|
856,936
|
|
|
$
|
609,035
|
|
Additions
|
64,092
|
|
|
277,982
|
|
Accretion expense
|
67,010
|
|
|
55,592
|
|
Revisions in estimates (1)
|
(21,130
|
)
|
|
(83,636
|
)
|
Settlements
|
(1,401
|
)
|
|
(2,037
|
)
|
Balance as of December 31,
|
$
|
965,507
|
|
|
$
|
856,936
|
|
_______________
|
|
(1)
|
Revisions in estimates include an increase in the liability of
$9.6 million
for the year ended December 31, 2016 and a decrease in the liability of
$81.7 million
for the year ended December 31, 2015 related to foreign currency translation.
|
As of December 31,
2016
, the estimated undiscounted future cash outlay for asset retirement obligations was
$2.5 billion
.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. FAIR VALUE MEASUREMENTS
The Company determines the fair value of its financial instruments based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Below are the three levels of inputs that may be used to measure fair value:
|
|
|
|
|
Level 1
|
Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
|
|
|
|
|
Level 2
|
Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
|
|
|
|
|
Level 3
|
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
|
Items Measured at Fair Value on a Recurring Basis
—The fair value of the Company’s financial assets and liabilities that are required to be measured on a recurring basis at fair value was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
December 31, 2015
|
|
|
Fair Value Measurements Using
|
|
Fair Value Measurements Using
|
|
|
Level 1
|
Level 2
|
|
Level 3
|
|
Level 1
|
Level 2
|
|
Level 3
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
Short-term investments (1)
|
|
$
|
4,026
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
Interest rate swap agreements
|
|
—
|
|
$
|
3
|
|
|
—
|
|
|
—
|
|
$
|
692
|
|
|
—
|
|
Embedded derivative in lease agreement
|
|
—
|
|
—
|
|
|
$
|
13,290
|
|
|
—
|
|
—
|
|
|
$
|
14,176
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap agreements
|
|
—
|
|
$
|
24,682
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
Acquisition-related contingent consideration
|
|
—
|
|
—
|
|
|
$
|
15,444
|
|
|
—
|
|
—
|
|
|
$
|
12,436
|
|
_______________
|
|
(1)
|
Consists of highly liquid investments with original maturities in excess of three months.
|
Interest Rate Swap Agreements
The fair value of the Company’s interest rate swap agreements is determined using pricing models with inputs that are observable in the market or can be derived principally from, or corroborated by, observable market data. For derivative instruments that are designated and qualify as fair value hedges, changes in value of the derivatives are recognized in the consolidated statement of operations in the current period, along with the offsetting gain or loss on the hedged item attributable to the hedged risk. For derivative instruments that are designated and qualify as a cash flow hedges, the Company records the change in fair value for the effective portion of the cash flow hedges in AOCI in the consolidated balance sheets and reclassifies a portion of the value from AOCI into Interest expense on a quarterly basis as the cash flows from the hedged item affects earnings. The Company records the settlement of interest rate swap agreements in Gain (loss) on retirement of long-term obligations in the consolidated statements of operations in the period in which the settlement occurs.
The Company entered into
three
interest rate swap agreements with an aggregate notional value of
$600.0 million
related to the
2.250%
Notes. These interest rate swaps, which were designated as fair value hedges at inception, were entered into to hedge against changes in fair value of the
2.250%
Notes resulting from changes in interest rates. The interest rate swap agreements require the Company to pay interest at a variable interest rate of one-month LIBOR plus applicable spreads and to receive fixed interest at a rate of
2.250%
through January 15, 2022. During the year ended December 31, 2016, the Company recorded a
$2.4 million
fair value adjustment which was recorded in Other expense in the consolidated statement of operations. As of December 31, 2016, the interest rate swap agreements in the U.S. were included in Other non-current liabilities on the consolidated balance sheet.
One of the Company’s Colombian subsidiaries entered into an interest rate swap agreement with an aggregate notional value of
100.0 billion
COP (
$33.3 million
) with certain of the lenders under the Colombian Credit Facility. The interest rate swap
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
agreement, which was designated as a cash flow hedge at inception, was entered into to manage exposure to variability in interest rates on debt. The interest rate swap agreement requires the payment of a fixed interest rate of
5.74%
and pays variable interest at the three-month Inter-bank Rate (IBR) through the earlier of termination of the underlying debt or April 24, 2021. The notional value is reduced in accordance with the repayment schedule under the Colombian Credit Facility.
The notional amount and fair value of the Colombian interest rate swap agreements were as follows as of December 31, (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
Local
|
USD
|
|
Local
|
USD
|
Colombia (COP) (1)
|
|
|
|
|
|
Notional
|
85,000,000
|
|
$
|
28,327
|
|
|
95,000,000
|
|
$
|
30,164
|
|
Fair Value
|
8,763
|
|
3
|
|
|
2,179,374
|
|
692
|
|
_______________
|
|
(1)
|
As of December 31, 2016 and 2015, the interest rate swap agreement in Colombia was included in Notes receivable and other non-current assets on the consolidated balance sheet.
|
Embedded Derivative in Lease Agreement
In connection with the acquisition of communications sites in Nigeria, the Company entered into a site lease agreement where a portion of the monthly rent to be received is escalated based on an index outside the lessor’s economic environment. The fair value of the portion of the lease tied to the U.S. CPI was
$14.6 million
at the date of acquisition and was recorded in Notes receivable and other non-current assets on the consolidated balance sheet. The fair value of the Company’s embedded derivative is determined using a discounted cash flow approach, which takes into consideration Level 3 unobservable inputs, including expected future cash flows over the period in which the associated payment is expected to be received and applies a discount factor that captures uncertainties in the future periods associated with the expected payment. During the year ended December 31, 2016, the Company recorded
$0.9 million
of a fair value adjustment, which was recorded in Other expense in the consolidated statement of operations.
Acquisition-Related Contingent Consideration
Acquisition-related contingent consideration is initially measured and recorded at fair value as an element of consideration paid in connection with an acquisition with subsequent adjustments recognized in Other operating expenses in the consolidated statements of operations. The fair value of acquisition-related contingent consideration, and any subsequent changes in fair value, is determined by using a discounted probability-weighted approach, which takes into consideration Level 3 unobservable inputs, including assessments of expected future cash flows over the period in which the obligation is expected to be settled, and applies a discount factor that captures the uncertainties associated with the obligation. Changes in the unobservable inputs of Level 3 assets or liabilities could significantly impact the fair value of these assets or liabilities recorded in the accompanying consolidated balance sheets, with the adjustments being recorded in the consolidated statements of operations.
As of
December 31, 2016
, the Company estimates that the value of all potential acquisition-related contingent consideration required payments to be between
zero
and
$46.8 million
. The changes in fair value of the contingent consideration were as follows during the years ended December 31, (in thousands):
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Balance as of January 1
|
$
|
12,436
|
|
|
$
|
28,524
|
|
Additions
|
8,811
|
|
|
1,626
|
|
Settlements
|
(306
|
)
|
|
(7,943
|
)
|
Change in fair value
|
(6,372
|
)
|
|
(4,781
|
)
|
Foreign currency translation adjustment
|
875
|
|
|
(4,990
|
)
|
Balance as of December 31
|
$
|
15,444
|
|
|
$
|
12,436
|
|
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Items Measured at Fair Value on a Nonrecurring Basis
Assets Held and Used
—The Company’s long-lived assets are recorded at amortized cost and, if impaired, are adjusted to fair value using Level 3 inputs. During the year ended
December 31, 2016
, certain long-lived assets held and used with a carrying value of
$12.7 billion
were written down to their net realizable value as a result of an asset impairment charge of $
28.5 million
. During the year ended
December 31, 2015
, certain long-lived assets held and used with a carrying value of
$12.6 billion
were written down to their net realizable value as a result of an asset impairment charge of
$15.1 million
. The asset impairment charges are recorded in Other operating expenses in the accompanying consolidated statements of operations. These adjustments were determined by comparing the estimated fair value utilizing projected future discounted cash flows to be provided from the long-lived assets to the asset’s carrying value.
There were no other items measured at fair value on a nonrecurring basis during the year ended
December 31, 2016
.
Fair Value of Financial Instruments
—The Company’s financial instruments for which the carrying value reasonably approximates fair value at
December 31, 2016
and
2015
include cash and cash equivalents, restricted cash, accounts receivable and accounts payable. The Company’s estimates of fair value of its long-term obligations, including the current portion, are based primarily upon reported market values. For long-term debt not actively traded, fair value is estimated using either indicative price quotes or a discounted cash flow analysis using rates for debt with similar terms and maturities. As of
December 31, 2016
, the carrying value and fair value of long-term obligations, including the current portion, were
$18.5 billion
and
$18.8 billion
, respectively, of which
$11.8 billion
was measured using Level 1 inputs and
$7.0 billion
was measured using Level 2 inputs. As of
December 31, 2015
, the carrying value and fair value of long-term obligations, including the current portion, were
$17.1 billion
and
$17.4 billion
, respectively, of which
$8.7 billion
was measured using Level 1 inputs and
$8.7 billion
was measured using Level 2 inputs.
12. INCOME TAXES
The Company has filed, for prior taxable years through its taxable year ended December 31, 2011, consolidated U.S. federal tax returns, which included all of its then wholly owned domestic subsidiaries. For its taxable year commencing January 1, 2012, the Company filed, and intends to continue to file, as a REIT, and its domestic TRSs filed, and intend to continue to file, separate tax returns as required. The Company also files tax returns in various states and countries. The Company’s state tax returns reflect different combinations of the Company’s subsidiaries and are dependent on the connection each subsidiary has with a particular state and form of organization. The following information pertains to the Company’s income taxes on a consolidated basis.
The income tax provision from continuing operations consisted of the following for the years ended December 31, (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Current:
|
|
|
|
|
|
Federal
|
$
|
(26,494
|
)
|
|
$
|
(73,930
|
)
|
|
$
|
(2,390
|
)
|
State
|
(1,976
|
)
|
|
(21,216
|
)
|
|
(797
|
)
|
Foreign
|
(100,074
|
)
|
|
(55,045
|
)
|
|
(57,934
|
)
|
Deferred:
|
|
|
|
|
|
Federal
|
(616
|
)
|
|
9,131
|
|
|
(4,180
|
)
|
State
|
(259
|
)
|
|
8
|
|
|
(973
|
)
|
Foreign
|
(26,082
|
)
|
|
(16,903
|
)
|
|
3,769
|
|
Income tax provision
|
$
|
(155,501
|
)
|
|
$
|
(157,955
|
)
|
|
$
|
(62,505
|
)
|
The effective tax rate (“ETR”) on income from continuing operations for the years ended December 31, 2016, 2015 and 2014 differs from the federal statutory rate primarily due to the Company’s qualification for taxation as a REIT, as well as adjustments for foreign items. As a REIT, the Company may deduct earnings distributed to stockholders against the income generated by its REIT operations. In addition, the Company is able to offset certain income by utilizing its NOLs, subject to specified limitations.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Reconciliation between the U.S. statutory rate and the effective rate from continuing operations is as follows for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Statutory tax rate
|
35
|
%
|
|
35
|
%
|
|
35
|
%
|
Adjustment to reflect REIT status (1)
|
(35
|
)
|
|
(35
|
)
|
|
(35
|
)
|
Foreign taxes
|
5
|
|
|
3
|
|
|
2
|
|
Foreign withholding taxes
|
4
|
|
|
3
|
|
|
3
|
|
Uncertain tax positions
|
5
|
|
|
—
|
|
|
—
|
|
Change in tax law
|
—
|
|
|
2
|
|
|
—
|
|
MIPT tax election (2)
|
—
|
|
|
11
|
|
|
—
|
|
Other
|
—
|
|
|
—
|
|
|
2
|
|
Effective tax rate
|
14
|
%
|
|
19
|
%
|
|
7
|
%
|
_______________
(1) Includes
29%
,
36%
and
24%
from dividend paid deductions in 2016, 2015 and 2014, respectively.
(2) Includes federal and state taxes, net of federal benefit.
The domestic and foreign components of income from continuing operations before income taxes are as follows for the years ended December 31, (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
United States
|
$
|
882,552
|
|
|
$
|
785,201
|
|
|
$
|
857,457
|
|
Foreign
|
243,308
|
|
|
44,761
|
|
|
8,247
|
|
Total
|
$
|
1,125,860
|
|
|
$
|
829,962
|
|
|
$
|
865,704
|
|
The components of the net deferred tax asset and liability and related valuation allowance were as follows as of December 31, (in thousands):
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Assets:
|
|
|
|
Net operating loss carryforwards
|
$
|
278,674
|
|
|
$
|
277,977
|
|
Accrued asset retirement obligations
|
130,014
|
|
|
92,295
|
|
Stock-based compensation
|
4,267
|
|
|
3,889
|
|
Unearned revenue
|
29,003
|
|
|
25,654
|
|
Unrealized loss on foreign currency
|
26,883
|
|
|
37,440
|
|
Other accruals and allowances
|
45,578
|
|
|
13,824
|
|
Items not currently deductible and other
|
26,886
|
|
|
17,608
|
|
Liabilities:
|
|
|
|
Depreciation and amortization
|
(942,409
|
)
|
|
(194,230
|
)
|
Deferred rent
|
(27,099
|
)
|
|
(20,720
|
)
|
Other
|
(9,294
|
)
|
|
(11,077
|
)
|
Subtotal
|
(437,497
|
)
|
|
242,660
|
|
Valuation allowance
|
(144,397
|
)
|
|
(136,952
|
)
|
Net deferred tax (liabilities) assets
|
$
|
(581,894
|
)
|
|
$
|
105,708
|
|
As described in note 1, effective January 1, 2016, the Company adopted new guidance on the accounting for share-based payment transactions. As part of this new guidance, excess windfall tax benefits and tax deficiencies related to the Company’s stock option exercises and restricted stock unit vestings are recognized as an income tax benefit or expense in the consolidated
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
statement of operations in the period in which the deduction occurs. Excess windfall tax benefits and tax deficiencies are therefore not anticipated when determining the annual ETR and are instead recognized in the interim period in which those items occur.
At
December 31, 2016
and 2015, the Company has provided a valuation allowance of
$144.4 million
and
$137.0 million
, respectively, which primarily relates to foreign items. During
2016
, the Company increased the amounts recorded as valuation allowances due to the uncertainty as to the timing of, and the Company’s ability to recover, net deferred tax assets in certain foreign operations in the foreseeable future. The increase in the valuation allowance for the year ending December 31, 2016, is offset by fluctuations in foreign currency exchange rates and by a removal of previously reserved deferred tax assets resulting from a restructuring in Germany. The amount of deferred tax assets considered realizable, however, could be adjusted if objective evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as the Company’s projections for growth.
A summary of the activity in the valuation allowance is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Balance as of January 1,
|
|
$
|
136,952
|
|
|
$
|
141,241
|
|
|
$
|
136,006
|
|
Additions (1)
|
|
14,118
|
|
|
19,512
|
|
|
40,124
|
|
Reversals
|
|
—
|
|
|
—
|
|
|
(10,769
|
)
|
Foreign currency translation
|
|
(6,673
|
)
|
|
(23,801
|
)
|
|
(24,120
|
)
|
Balance as of December 31,
|
|
$
|
144,397
|
|
|
$
|
136,952
|
|
|
$
|
141,241
|
|
_______________
(1) Includes net charges to expense and allowances established through goodwill at acquisition.
The recoverability of the Company’s deferred tax assets has been assessed utilizing projections based on its current operations. Accordingly, the recoverability of the deferred tax assets is not dependent on material asset sales or other non-routine transactions. Based on its current outlook of future taxable income during the carryforward period, the Company believes that deferred tax assets, other than those for which a valuation allowance has been recorded, will be realized.
The Company considers the earnings of certain non-U.S. subsidiaries to be indefinitely invested outside of the United States on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs. The Company has not recorded a deferred tax liability related to the U.S. federal and state income taxes and foreign withholding taxes on
$648.7 million
of undistributed earnings of foreign subsidiaries indefinitely invested outside of the United States. Should the Company decide to repatriate the foreign earnings, it may have to adjust the income tax provision in the period it determined that the earnings will no longer be indefinitely invested outside of the United States.
At
December 31, 2016
, the Company had net federal, state and foreign operating loss carryforwards available to reduce future taxable income. If not utilized, the Company’s NOLs expire as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
Federal
|
|
State
|
|
Foreign
|
2017 to 2021
|
$
|
—
|
|
|
$
|
59,213
|
|
|
$
|
8,950
|
|
2022 to 2026
|
—
|
|
|
388,695
|
|
|
184,611
|
|
2027 to 2031
|
146,763
|
|
|
98,538
|
|
|
—
|
|
2032 to 2036
|
16,604
|
|
|
32,345
|
|
|
—
|
|
Indefinite carryforward
|
—
|
|
|
—
|
|
|
831,185
|
|
Total
|
$
|
163,367
|
|
|
$
|
578,791
|
|
|
$
|
1,024,746
|
|
In addition, the Company has Mexican tax credits of
$0.9 million
, which if not utilized will expire in 2017.
As of
December 31, 2016
and
2015
, the total amount of unrecognized tax benefits that would impact the ETR, if recognized, is
$102.9 million
and
$28.1 million
, respectively. The amount of unrecognized tax benefits for the year ended December 31, 2016, includes additions to the Company’s existing tax positions of
$82.9 million
, which includes
$23.8 million
assumed through acquisition.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company expects the unrecognized tax benefits to change over the next 12 months if certain tax matters ultimately settle with the applicable taxing jurisdiction during this timeframe, or if the applicable statute of limitations lapses. The impact of the amount of such changes to previously recorded uncertain tax positions could range from
zero
to
$10.8 million
.
A reconciliation of the beginning and ending amount of unrecognized tax benefits are as follows for the years ended December 31, (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Balance at January 1
|
$
|
28,114
|
|
|
$
|
31,947
|
|
|
$
|
32,545
|
|
Additions based on tax positions related to the current year
|
82,912
|
|
|
5,042
|
|
|
4,187
|
|
Additions for tax positions of prior years
|
—
|
|
|
—
|
|
|
3,780
|
|
Foreign currency
|
(307
|
)
|
|
(5,371
|
)
|
|
(3,216
|
)
|
Reduction as a result of the lapse of statute of limitations and effective settlements
|
(3,168
|
)
|
|
(3,504
|
)
|
|
(5,349
|
)
|
Balance at December 31
|
$
|
107,551
|
|
|
$
|
28,114
|
|
|
$
|
31,947
|
|
During the years ended
December 31, 2016
,
2015
and
2014
, the statute of limitations on certain unrecognized tax benefits lapsed and certain positions were effectively settled, which resulted in a decrease of
$3.2 million
,
$3.5 million
and
$5.3 million
, respectively, in the liability for uncertain tax benefits, all of which reduced the income tax provision.
The Company recorded penalties and tax-related interest expense to the tax provision of
$9.2 million
,
$3.2 million
and
$6.5 million
for the years ended
December 31, 2016
,
2015
and
2014
, respectively. In addition, due to the expiration of the statute of limitations in certain jurisdictions, the Company reduced its liability for penalties and income tax-related interest expense related to uncertain tax positions during the years ended December 31, 2016, 2015 and 2014 by
$3.4 million
,
$3.1 million
and
$9.9 million
, respectively.
As of
December 31, 2016
and
2015
, the total amount of accrued income tax-related interest and penalties included in the consolidated balance sheets were
$24.3 million
and
$20.2 million
, respectively.
The Company has filed for prior taxable years, and for its taxable year ended
December 31, 2016
will file, numerous consolidated and separate income tax returns, including U.S. federal and state tax returns and foreign tax returns. The Company is subject to examination in the U.S. and various state and foreign jurisdictions for certain tax years. As a result of the Company’s ability to carryforward federal, state and foreign NOLs, the applicable tax years generally remain open to examination several years after the applicable loss carryforwards have been used or have expired. The Company regularly assesses the likelihood of additional assessments in each of the tax jurisdictions resulting from these examinations. The Company believes that adequate provisions have been made for income taxes for all periods through
December 31, 2016
.
13. STOCK-BASED COMPENSATION
Summary of Stock-Based Compensation Plans
—The Company maintains equity incentive plans that provide for the grant of stock-based awards to its directors, officers and employees. The 2007 Equity Incentive Plan (the “2007 Plan”) provides for the grant of non-qualified and incentive stock options, as well as restricted stock units, restricted stock and other stock-based awards. Exercise prices in the case of non-qualified and incentive stock options are not less than the fair value of the underlying common stock on the date of grant. Equity awards typically vest ratably, generally over
four years
for RSUs and stock options and
three years
for PSUs. Stock options generally expire
10 years
from the date of grant. As of
December 31, 2016
, the Company had the ability to grant stock-based awards with respect to an aggregate of
9.5 million
shares of common stock under the 2007 Plan. In addition, the Company maintains an employee stock purchase plan (the “ESPP”) pursuant to which eligible employees may purchase shares of the Company’s common stock on the last day of each bi-annual offering period at a discount of the lower of the closing market value on the first or last day of such offering period. The offering periods run from June 1 through November 30 and from December 1 through May 31 of each year.
During the years ended December 31, 2016, 2015 and 2014, the Company recorded and capitalized the following stock-based compensation expenses (in thousands):
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Stock-based compensation expense
|
$
|
89,898
|
|
|
$
|
90,537
|
|
|
$
|
80,153
|
|
Stock-based compensation expense capitalized as property and equipment
|
1,443
|
|
|
2,052
|
|
|
1,589
|
|
Stock Options
—The fair value of each option granted during the period was estimated on the date of grant using the Black-Scholes option pricing model based on the assumptions noted in the table below. The expected life of stock options (estimated period of time outstanding) was estimated using the vesting term and historical exercise behavior of the Company’s employees. The risk-free interest rate was based on the U.S. Treasury yield with a term that approximated the estimated life in effect at the accounting measurement date. The expected volatility of the underlying stock price was based on historical volatility for a period equal to the expected life of the stock options. The expected annual dividend yield was the Company’s best estimate of expected future dividend yield.
Key assumptions used to apply this pricing model were as follows:
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Range of risk-free interest rate
|
1.00% - 1.73%
|
|
1.32% - 1.62%
|
|
1.46% - 1.74%
|
Weighted average risk-free interest rate
|
1.44%
|
|
1.61%
|
|
1.64%
|
Range of expected life of stock options
|
4.5 - 5.2 years
|
|
4.5 years
|
|
4.5 years
|
Range of expected volatility of the underlying stock price
|
20.59% - 21.45%
|
|
21.09% - 21.24%
|
|
21.94% - 23.35%
|
Weighted average expected volatility of underlying stock price
|
21.43%
|
|
21.09%
|
|
23.08%
|
Range of expected annual dividend yield
|
1.85% - 2.40%
|
|
1.50% - 1.85%
|
|
1.50%
|
The weighted average grant date fair value per share during the years ended
December 31, 2016
,
2015
and
2014
was
$14.60
,
$15.06
and
$14.86
, respectively. The intrinsic value of stock options exercised during the years ended
December 31, 2016
,
2015
and
2014
was
$77.6 million
,
$32.1 million
and
$58.0 million
, respectively. As of
December 31, 2016
, total unrecognized compensation expense related to unvested stock options was
$25.6 million
and is expected to be recognized over a weighted average period of approximately
two
years. The amount of cash received from the exercise of stock options was
$84.9 million
during the year ended
December 31, 2016
.
The Company’s option activity for the year ended
December 31, 2016
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
Weighted
Average
Exercise Price
|
|
Weighted
Average
Remaining
Life (Years)
|
|
Aggregate
Intrinsic Value
(in millions)
|
Outstanding as of January 1, 2016
|
|
7,680,819
|
|
|
|
$71.10
|
|
|
|
|
|
Granted
|
|
1,161,370
|
|
|
95.16
|
|
|
|
|
|
Exercised
|
|
(1,520,541
|
)
|
|
55.86
|
|
|
|
|
|
Forfeited
|
|
(51,472
|
)
|
|
90.10
|
|
|
|
|
|
Expired
|
|
(800
|
)
|
|
33.96
|
|
|
|
|
|
Outstanding as of December 31, 2016
|
|
7,269,376
|
|
|
|
$78.00
|
|
|
6.73
|
|
|
$201.4
|
|
Exercisable as of December 31, 2016
|
|
3,519,976
|
|
|
|
$64.93
|
|
|
5.24
|
|
|
$143.4
|
|
Vested or expected to vest as of December 31, 2016
|
|
7,269,376
|
|
|
|
$78.00
|
|
|
6.73
|
|
|
$201.4
|
|
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table sets forth information regarding options outstanding at
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
Options Exercisable
|
Outstanding
Number of
Options
|
|
Range of Exercise
Price Per Share
|
|
Weighted
Average Exercise
Price Per Share
|
|
Weighted Average
Remaining Life
(Years)
|
|
Options
Exercisable
|
|
Weighted
Average Exercise
Price Per Share
|
733,732
|
|
|
$28.39 - $43.11
|
|
$
|
37.01
|
|
|
2.35
|
|
733,732
|
|
|
$
|
37.01
|
|
1,130,308
|
|
|
44.92 - 62.00
|
|
56.55
|
|
|
4.55
|
|
1,130,308
|
|
|
56.55
|
|
916,991
|
|
|
64.01 - 76.90
|
|
76.74
|
|
|
6.18
|
|
621,338
|
|
|
76.69
|
|
1,428,834
|
|
|
77.42- 81.18
|
|
81.12
|
|
|
7.14
|
|
589,547
|
|
|
81.13
|
|
1,900,077
|
|
|
81.46 - 94.57
|
|
94.35
|
|
|
8.15
|
|
441,405
|
|
|
94.34
|
|
1,159,434
|
|
|
94.71 - 113.60
|
|
95.21
|
|
|
9.19
|
|
3,646
|
|
|
99.14
|
|
7,269,376
|
|
|
$28.39 - $113.60
|
|
$
|
78.00
|
|
|
6.73
|
|
3,519,976
|
|
|
$
|
64.93
|
|
Restricted Stock Units and Performance-Based Restricted Stock Units
—The Company’s RSU and PSU activity for the year ended
December 31, 2016
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs
|
|
Weighted Average Grant Date Fair Value
|
|
PSUs
|
|
Weighted Average Grant Date Fair Value
|
Outstanding as of January 1, 2016 (1)
|
1,656,993
|
|
|
$
|
84.12
|
|
|
33,377
|
|
|
$
|
94.57
|
|
Granted (2)
|
784,178
|
|
|
95.15
|
|
|
209,380
|
|
|
93.81
|
|
Vested
|
(656,645
|
)
|
|
79.36
|
|
|
—
|
|
|
—
|
|
Forfeited
|
(120,783
|
)
|
|
90.18
|
|
|
—
|
|
|
—
|
|
Outstanding as of December 31, 2016
|
1,663,743
|
|
|
$
|
90.76
|
|
|
242,757
|
|
|
$
|
93.92
|
|
Expected to vest as of December 31, 2016
|
1,663,743
|
|
|
$
|
90.76
|
|
|
242,757
|
|
|
$
|
93.92
|
|
_______________
|
|
(1)
|
PSUs represent the shares issuable for the 2015 PSUs (as defined below) at the end of the
three
-year performance cycle based on exceeding the performance metric for the first year’s performance period.
|
|
|
(2)
|
PSUs represent the shares issuable for the 2015 PSUs at the end of the
three
-year performance cycle based on exceeding the performance metric for the second year’s performance period and the target number of shares issuable at the end of the three-year performance cycle for the 2016 PSUs (as defined below).
|
Restricted Stock Units—
The total fair value of RSUs that vested during the year ended
December 31, 2016
was
$63.8 million
.
As of
December 31, 2016
, total unrecognized compensation expense related to unvested RSUs granted under the 2007 Plan was
$86.1 million
and is expected to be recognized over a weighted average period of approximately
two years
.
Performance-Based Restricted Stock Units—
During the year ended
December 31, 2016
, the Company’s Compensation Committee granted an aggregate of
169,340
PSUs to its executive officers (the “2016 PSUs”) and established the performance metrics for this award. During the
year ended December 31, 2015
, the Company’s Compensation Committee granted an aggregate of
70,135
PSUs to its executive officers (the “2015 PSUs”) and established the performance metric for this award. Threshold, target and maximum parameters were established for the metrics for a
three
-year performance period with respect to the 2016 PSUs and for each year in the
three
-year performance period with respect to the 2015 PSUs and will be used to calculate the number of shares that will be issuable when the award vests, which may range from
0%
to
200%
of the target amounts. At the end of the
three
-year performance period, the number of shares that vest will depend on the degree of achievement against the pre-established performance goals. PSUs will be paid out in common stock at the end of the performance period, subject to the executive’s continued employment. In the event of the executive’s death, disability or qualifying retirement, PSUs will be paid out pro rata in accordance with the terms of the applicable award agreement. PSUs will accrue dividend equivalents prior to vesting, which will be paid out only in respect of shares actually vested.
The performance metric related to the 2015 PSUs is tied to year-over-year growth, and actual results for the metric cannot be determined until the end of each respective fiscal year. As a result, as of
December 31, 2016
, the Company was unable to determine the annual target for the third year of the performance period for this award. Accordingly, an aggregate of
23,377
PSUs was not included in the table above.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During the year ended
December 31, 2016
, the Company recorded
$8.4 million
in stock-based compensation expense for equity awards in which the performance goals have been established and were probable of being achieved. The remaining unrecognized compensation expense related to these awards at
December 31, 2016
, was
$12.0 million
based on the Company’s current assessment of the probability of achieving the performance goals. The weighted-average period over which the cost will be recognized is approximately
two years
.
14. REDEEMABLE NONCONTROLLING INTERESTS
Redeemable Noncontrolling Interests
—In connection with the Viom Acquisition, ATC Asia entered into the Shareholders Agreement with Viom and the Remaining Shareholders. The Shareholders Agreement provides for, among other things, put options held by certain of the Remaining Shareholders, which allow the Remaining Shareholders to sell outstanding shares of ATC TIPL, and a call option held by the Company, which allows the Company to buy the noncontrolling shares of ATC TIPL. The put options, which are not under the Company’s control, cannot be separated from the noncontrolling interests. As a result, the combination of the noncontrolling interests and the redemption feature require classification as redeemable noncontrolling interests in the consolidated balance sheet, separate from equity.
Given the provisions governing the put rights, the redeemable noncontrolling interests are recorded outside of permanent equity at their redemption value. The noncontrolling interests become redeemable after the passage of time, and therefore, the Company records the carrying amount of the noncontrolling interests at the greater of (i) the initial carrying amount, increased or decreased for the noncontrolling interests’ share of net income or loss and foreign currency translation adjustments, or (ii) the redemption value. If required, the Company will adjust the redeemable noncontrolling interests to redemption value on each balance sheet date with changes in redemption value recognized as an adjustment to Distributions in excess of earnings.
The put options may be exercised, requiring the Company to purchase the Remaining Shareholders’ equity interests, on specified dates beginning April 1, 2018 through March 31, 2021. The price of the put options will be based on the fair market value of the exercising Remaining Shareholder’s interest in the Company’s India operations at the time the option is exercised. Put options held by certain of the Remaining Shareholders are subject to a floor price of
216
INR per share.
The following is a reconciliation of the changes in the Redeemable noncontrolling interests (in thousands):
|
|
|
|
|
|
Balance as of January 1, 2016
|
|
$
|
—
|
|
Fair value at acquisition
|
|
1,100,804
|
|
Net income attributable to noncontrolling interests
|
|
13,851
|
|
Foreign currency translation adjustment attributable to noncontrolling interests
|
|
(23,435
|
)
|
Balance as of December 31, 2016
|
|
$
|
1,091,220
|
|
15. EQUITY
Common Stock Issuance
—On December 8, 2016, the Company issued
1,171,187
shares of its common stock directly to ALLTEL Communications, LLC (“Alltel”), a subsidiary of Verizon Wireless, in consideration of the Company's exercise of its purchase option related to
1,523
communications towers pursuant to its agreement with Alltel (see note 18).
Series A Preferred Stock
—The Company has
6,000,000
shares outstanding of its
5.25%
Mandatory Convertible Preferred Stock, Series A, par value
$0.01
per share (the “Series A Preferred Stock”), which was originally issued on May 12, 2014.
Unless converted earlier, each share of the Series A Preferred Stock will automatically convert on May 15, 2017, into between
0.9272
and
1.1591
shares of the Company’s common stock, depending on the applicable market value of the Company’s common stock and subject to anti-dilution adjustments. Subject to certain restrictions, at any time prior to May 15, 2017, holders of the Series A Preferred Stock may elect to convert all or a portion of their shares into common stock at the minimum conversion rate then in effect.
Dividends on shares of the Series A Preferred Stock are payable on a cumulative basis when, as, and if declared by the Company’s Board of Directors at an annual rate of
5.25%
on the liquidation preference of
$100.00
per share, on February 15, May 15, August 15 and November 15 of each year, commencing on August 15, 2014 to, and including, May 15, 2017.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Series B Preferred Stock
—The Company has
13,750,000
depositary shares, each representing a 1/10th interest in a share of its
5.50%
Mandatory Convertible Preferred Stock, Series B, par value
$0.01
per share (the “Series B Preferred Stock” and, together with the Series A Preferred Stock, the “Mandatory Convertible Preferred Stock”), which was originally issued on March 3, 2015.
Unless converted or redeemed earlier, each share of the Series B Preferred Stock will convert automatically on February 15, 2018, into between
8.5911
and
10.3093
shares of common stock, depending on the applicable market value of the Company’s common stock and subject to anti-dilution adjustments. Subject to certain restrictions, at any time prior to February 15, 2018, holders of the Series B Preferred Stock may elect to convert all or a portion of their shares into common stock at the minimum conversion rate then in effect.
Dividends on shares of the Series B Preferred Stock are payable on a cumulative basis when, as, and if declared by the Company’s Board of Directors at an annual rate of
5.50%
on the liquidation preference of
$1,000.00
per share (and, correspondingly,
$100.00
per share with respect to the depositary shares) on February 15, May 15, August 15 and November 15 of each year, commencing on May 15, 2015 to, and including, February 15, 2018.
The Company may pay dividends on its Mandatory Convertible Preferred Stock in cash or, subject to certain limitations, in shares of common stock or any combination of cash and shares of common stock. The terms of the Mandatory Convertible Preferred Stock provide that, unless full cumulative dividends have been paid or set aside for payment on all outstanding Mandatory Convertible Preferred Stock for all prior dividend periods, no dividends may be declared or paid on common stock.
Stock Repurchase Program
—In March 2011, the Board of Directors approved a
$1.5 billion
stock repurchase program, pursuant to which the Company is authorized to purchase up to an additional
$1.1 billion
of the Company’s common stock. The Company temporarily suspended repurchases under the program in September 2013. However, the Company may, at any time, elect to resume repurchases under the program.
Sales of Equity Securities
—The Company receives proceeds from sales of its equity securities pursuant to the ESPP and upon exercise of stock options granted under its equity incentive plans.
Distributions
—During the years ended
December 31, 2016
,
2015
and 2014, the Company declared the following cash distributions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31,
|
|
|
2016
|
|
2015
|
|
2014
|
|
|
Distribution
per share
|
|
Aggregate
Payment Amount
(in millions)
|
|
Distribution
per share
|
|
Aggregate
Payment Amount
(in millions)
|
|
Distribution
per share
|
|
Aggregate
Payment Amount
(in millions)
|
Common Stock
|
$
|
2.17
|
|
|
$
|
923.7
|
|
|
$
|
1.81
|
|
|
$
|
766.4
|
|
|
$
|
1.40
|
|
|
$
|
554.6
|
|
Series A Preferred Stock
|
$
|
5.25
|
|
|
$
|
31.5
|
|
|
$
|
3.94
|
|
|
$
|
23.7
|
|
|
$
|
3.98
|
|
|
$
|
23.9
|
|
Series B Preferred Stock
|
$
|
55.00
|
|
|
$
|
75.6
|
|
|
$
|
38.65
|
|
|
$
|
53.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table characterizes the tax treatment of distributions declared per share of common stock and Mandatory Convertible Preferred Stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31,
|
|
|
2016
|
|
2015
|
|
2014 (1)
|
|
|
Per Share
|
|
%
|
|
Per Share
|
|
%
|
|
Per Share
|
|
%
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary dividend
|
$
|
2.1700
|
|
(2)
|
100.00
|
%
|
|
$
|
1.2694
|
|
|
70.13
|
%
|
|
$
|
1.4000
|
|
|
100.00
|
%
|
|
Capital gains distribution
|
—
|
|
|
—
|
|
|
0.5406
|
|
|
29.87
|
|
|
—
|
|
|
—
|
|
|
Total
|
$
|
2.1700
|
|
|
100.00
|
%
|
|
$
|
1.8100
|
|
|
100.00
|
%
|
|
$
|
1.4000
|
|
|
100.00
|
%
|
Series A Preferred Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary dividend
|
$
|
6.4578
|
|
(3)
|
100.00
|
%
|
|
$
|
3.6818
|
|
(4)
|
70.13
|
%
|
|
$
|
2.6688
|
|
|
100.00
|
%
|
|
Capital gains distribution
|
—
|
|
|
—
|
|
|
1.5682
|
|
|
29.87
|
|
|
—
|
|
|
—
|
|
|
Total
|
$
|
6.4578
|
|
|
100.00
|
%
|
|
$
|
5.2500
|
|
|
100.00
|
%
|
|
$
|
2.6688
|
|
|
100.00
|
%
|
Series B Preferred Stock (5)
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary dividend
|
$
|
5.5000
|
|
|
100.00
|
%
|
|
$
|
2.7107
|
|
|
70.13
|
%
|
|
$
|
—
|
|
|
—
|
%
|
|
Capital gains distribution
|
—
|
|
|
—
|
|
|
1.1546
|
|
|
29.87
|
|
|
—
|
|
|
—
|
|
|
Total
|
$
|
5.5000
|
|
|
100.00
|
%
|
|
$
|
3.8653
|
|
|
100.00
|
%
|
|
$
|
—
|
|
|
—
|
%
|
_______________
|
|
(1)
|
The Company had no Series B Preferred Stock outstanding during the year ended December 31, 2014.
|
|
|
(2)
|
Includes dividend declared on December 14, 2016 of
$0.58
per share, which was paid on January 13, 2017 to common stockholders of record at the close of business on December 28, 2016.
|
|
|
(3)
|
Includes a deemed distribution as a result of a conversion rate adjustment triggered on June 17, 2016.
|
|
|
(4)
|
Includes dividend declared on December 2, 2014 of
$1.3125
per share, which was paid on February 16, 2015 to preferred stockholders of record at the close of business on February 1, 2015.
|
|
|
(5)
|
Represents the tax treatment on dividends per depositary share, each of which represents a 1/10th interest in a share of Series B Preferred Stock.
|
The Company accrues distributions on unvested restricted stock units, which are payable upon vesting. As of December 31,
2016
, the amount accrued for distributions payable related to unvested restricted stock units was
$6.7 million
. During the year ended December 31,
2016
, the Company paid
$2.4 million
of distributions payable upon the vesting of restricted stock units.
To maintain its qualification for taxation as a REIT, the Company expects to continue paying distributions, the amount, timing and frequency of which will be determined and subject to adjustment by the Company’s Board of Directors.
16. IMPAIRMENTS, NET LOSS ON SALES OF LONG-LIVED ASSETS
During the years ended
December 31, 2016
,
2015
and
2014
, the Company recorded impairment charges and net losses on sales or disposals of long-lived assets of
$53.6 million
,
$29.8 million
and
$28.5 million
, respectively. These charges were primarily related to assets included in the Company’s U.S. property segment and are included in Other operating expenses in the consolidated statements of operations.
Included in these amounts were impairment charges of
$28.5 million
,
$15.1 million
and
$15.3 million
for the years ended
December 31, 2016
,
2015
and
2014
, respectively, to write down certain assets to net realizable value after an indicator of impairment was identified. These assets consisted primarily of towers, which are assessed on an individual basis, and network location intangibles, which relate directly to towers. For the year ended
December 31, 2016
, impairment charges also included amounts related to land easements. Also included in these amounts were net losses associated with the sale or disposal of certain non-core towers, other assets and other miscellaneous items of
$25.1 million
,
$14.7 million
and
$13.2 million
for the years ended
December 31, 2016
,
2015
and
2014
, respectively.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. EARNINGS PER COMMON SHARE
The following table sets forth basic and diluted net income per common share computational data for the years ended December 31, (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Net income attributable to American Tower Corporation stockholders
|
$
|
956,425
|
|
|
$
|
685,074
|
|
|
$
|
824,910
|
|
Dividends on preferred stock
|
(107,125
|
)
|
|
(90,163
|
)
|
|
(23,888
|
)
|
Net income attributable to American Tower Corporation common stockholders
|
849,300
|
|
|
594,911
|
|
|
801,022
|
|
Basic weighted average common shares outstanding
|
425,143
|
|
|
418,907
|
|
|
395,958
|
|
Dilutive securities
|
4,140
|
|
|
4,108
|
|
|
4,128
|
|
Diluted weighted average common shares outstanding
|
429,283
|
|
|
423,015
|
|
|
400,086
|
|
Basic net income attributable to American Tower Corporation common stockholders per common share
|
$
|
2.00
|
|
|
$
|
1.42
|
|
|
$
|
2.02
|
|
Diluted net income attributable to American Tower Corporation common stockholders per common share
|
$
|
1.98
|
|
|
$
|
1.41
|
|
|
$
|
2.00
|
|
Shares Excluded From Dilutive Effect
The following shares were not included in the computation of diluted earnings per share because the effect would be anti-dilutive for the years ended December 31, (in thousands, on a weighted average basis):
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Restricted stock awards
|
6
|
|
|
—
|
|
|
5
|
|
Stock options
|
817
|
|
|
1,606
|
|
|
1,290
|
|
Preferred stock
|
17,509
|
|
|
15,408
|
|
|
4,303
|
|
18. COMMITMENTS AND CONTINGENCIES
Litigation
—The Company periodically becomes involved in various claims, lawsuits and proceedings that are incidental to its business. In the opinion of Company management, after consultation with counsel, there are no matters currently pending that would, in the event of an adverse outcome, materially impact the Company’s consolidated financial position, results of operations or liquidity.
Verizon Transaction
—On March 27, 2015, the Company entered into an agreement with various operating entities of Verizon that provides for the lease, sublease or management of
11,286
wireless communications sites from Verizon commencing March 27, 2015. The average term of the lease or sublease for all sites at the inception of the agreement was approximately
28 years
, assuming renewals or extensions of the underlying ground leases for the sites. The Company has the option to purchase the leased sites in tranches, subject to the applicable lease, sublease or management right upon its scheduled expiration. Each tower is assigned to an annual tranche, ranging from 2034 to 2047, which represents the outside expiration date for the sublease rights to the towers in each tranche. The purchase price for each tranche is a fixed amount stated in the lease for such tranche plus the fair market value of certain alterations made to the related towers. The aggregate purchase option price for the towers leased and subleased is approximately
$5.0 billion
. Verizon will occupy the sites as a tenant for an initial term of
ten years
with
eight
optional successive
five
-year terms; each such term shall be governed by standard master lease agreement terms established as a part of the transaction.
AT&T Transaction
—The Company has an agreement with SBC Communications Inc., a predecessor entity to AT&T Inc. (“AT&T”), that currently provides for the lease or sublease of approximately
2,350
towers from AT&T with the lease commencing between December 2000 and August 2004. Substantially all of the towers are part of the 2013 Securitization. The average term of the lease or sublease for all sites at the inception of the agreement was approximately
27 years
, assuming renewals or extensions of the underlying ground leases for the sites. The Company has the option to purchase the sites subject to the applicable lease or sublease upon its expiration. Each tower is assigned to an annual tranche, ranging from 2013 to 2032, which represents the outside expiration date for the sublease rights to that tower. The purchase price for each site is a fixed amount stated in the lease for that site plus the fair market value of certain alterations made to the related tower by AT&T. As of
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016
, the Company has purchased an aggregate of
77
of the subleased towers upon expiration of the applicable agreement. The aggregate purchase option price for the remaining towers leased and subleased is
$760.1 million
and will accrete at a rate of
10%
per annum through the applicable expiration of the lease or sublease of a site. For all such sites purchased by the Company prior to June 30, 2020, AT&T will continue to lease the reserved space at the then-current monthly fee which shall escalate in accordance with the standard master lease agreement for the remainder of AT&T’s tenancy. Thereafter, AT&T shall have the right to renew such lease for up to
four
successive
five
-year terms. For all such sites purchased by the Company subsequent to June 30, 2020, AT&T has the right to continue to lease the reserved space for successive
one
-year terms at a rent equal to the lesser of the agreed upon market rate and the then-current monthly fee, which is subject to an annual increase based on changes in the U.S. Consumer Price Index.
Alltel Transaction
—In December 2000, the Company entered into an agreement with Alltel, to acquire towers through a
15
-year sublease agreement. Pursuant to the agreement, as amended, with Verizon Wireless, the Company acquired rights to approximately
1,800
towers in tranches between April 2001 and March 2002. The Company has the option to purchase each tower at the expiration of the applicable sublease. The Company exercised the purchase options for
1,523
towers in a single closing which occurred on December 8, 2016. The Company has provided notice to the tower owner of its intent to exercise the purchase options related to the
243
remaining towers. As of
December 31, 2016
, the purchase price per tower was
$42,844
payable in cash or, at the tower owner’s option, with
769
shares of the Company’s common stock per tower. The aggregate cash purchase option price for the remaining subleased towers was
$10.4 million
as of
December 31, 2016
.
Other Contingencies
—The Company is subject to income tax and other taxes in the geographic areas where it operates, and periodically receives notifications of audits, assessments or other actions by taxing authorities. The Company evaluates the circumstances of each notification based on the information available and records a liability for any potential outcome that is probable or more likely than not unfavorable if the liability is also reasonably estimable. On December 5, 2016, the Company received an income tax assessment of Essar Telecom Infrastructure Private Limited (“ETIPL”) for the fiscal year ending 2008 in the amount of
4.75 billion
INR (
$69.8 million
on the date of assessment) related to capital contributions. The Company is challenging the assessment before India’s tax authority Commissioner of Income Tax (Appeals) and estimates that there is a more likely than not probability that the Company’s position will be sustained. Accordingly, no such liability has been recorded. Additionally, the assessment was made with respect to transactions that took place in the tax year commencing in 2007, prior to the Company’s acquisition of ETIPL. Under the Company’s definitive acquisition agreement of ETIPL, the seller is obligated to indemnify and defend the Company with respect to any tax-related liability that may arise from activities prior to March 31, 2010.
Lease Obligations
—The Company leases certain land, office and tower space under operating leases that expire over various terms. Many of the leases contain renewal options with specified increases in lease payments upon exercise of the renewal option. Escalation clauses present in operating leases, excluding those tied to CPI or other inflation-based indices, are recognized on a straight-line basis over the non-cancellable term of the leases.
Future minimum rental payments under non-cancellable operating leases include payments for certain renewal periods at the Company’s option because failure to renew could result in a loss of the applicable communications sites and related revenues from tenant leases, thereby making it reasonably assured that the Company will renew the leases. Such payments at
December 31, 2016
are as follows (in millions):
|
|
|
|
|
Year Ending December 31,
|
|
2017
|
$
|
869
|
|
2018
|
846
|
|
2019
|
816
|
|
2020
|
776
|
|
2021
|
737
|
|
Thereafter
|
6,638
|
|
Total
|
$
|
10,682
|
|
Aggregate rent expense (including the effect of straight-line rent expense) under operating leases for the years ended
December 31, 2016
,
2015
and
2014
approximated
$986.2 million
,
$804.8 million
and
$655.0 million
, respectively.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Future minimum payments under capital leases in effect at
December 31, 2016
were as follows (in millions):
|
|
|
|
|
Year Ending December 31,
|
|
2017
|
$
|
28
|
|
2018
|
24
|
|
2019
|
22
|
|
2020
|
18
|
|
2021
|
14
|
|
Thereafter
|
163
|
|
Total minimum lease payments
|
269
|
|
Less amounts representing interest
|
(132
|
)
|
Present value of capital lease obligations
|
$
|
137
|
|
Tenant Leases
—The Company’s lease agreements with its tenants vary depending upon the region and the industry of the tenant, and generally have initial terms of
ten years
with multiple renewal terms at the option of the tenant.
Future minimum rental receipts expected from tenants under non-cancellable operating lease agreements in effect at
December 31, 2016
were as follows (in millions):
|
|
|
|
|
Year Ending December 31,
|
|
2017
|
$
|
4,646
|
|
2018
|
4,502
|
|
2019
|
4,240
|
|
2020
|
3,905
|
|
2021
|
3,372
|
|
Thereafter
|
10,477
|
|
Total
|
$
|
31,142
|
|
Guaranties and Indemnifications
—The Company enters into agreements from time to time in the ordinary course of business pursuant to which it agrees to guarantee or indemnify third parties for certain claims. The Company has also entered into purchase and sale agreements relating to the sale or acquisition of assets containing customary indemnification provisions. The Company’s indemnification obligations under these agreements generally are limited solely to damages resulting from breaches of representations and warranties or covenants under the applicable agreements, but do not guarantee future performance. In addition, payments under such indemnification clauses are generally conditioned on the other party making a claim that is subject to whatever defenses the Company may have and are governed by dispute resolution procedures specified in the particular agreement. Further, the Company’s obligations under these agreements may be limited in duration and amount, and in some instances, the Company may have recourse against third parties for payments made by the Company. The Company has not historically made any material payments under these agreements and, as of
December 31, 2016
, is not aware of any agreements that could result in a material payment.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
19. SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental cash flow information and non-cash investing and financing activities are as follows for the years ended December 31, (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Supplemental cash flow information:
|
|
|
|
|
|
Cash paid for interest
|
$
|
645,092
|
|
|
$
|
577,952
|
|
|
$
|
548,089
|
|
Cash paid for income taxes (net of refunds of $19,554, $7,053 and $8,476, respectively)
|
96,241
|
|
|
157,058
|
|
|
69,212
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
(Decrease) increase in accounts payable and accrued expenses for purchases of property and equipment and construction activities
|
(18,973
|
)
|
|
2,780
|
|
|
1,121
|
|
Purchases of property and equipment under capital leases
|
55,635
|
|
|
36,851
|
|
|
36,486
|
|
Fair value of debt assumed through acquisitions
|
786,889
|
|
|
—
|
|
|
463,135
|
|
Exercise of purchase option for property and equipment for common shares issued
|
120,785
|
|
|
—
|
|
|
—
|
|
Settlement of accounts receivable related to acquisitions
|
—
|
|
|
899
|
|
|
31,849
|
|
Conversion of third-party debt to equity
|
—
|
|
|
—
|
|
|
111,181
|
|
20. BUSINESS SEGMENTS
The Company’s primary business is leasing space on multitenant communications sites to wireless service providers, radio and television broadcast companies, wireless data providers, government agencies and municipalities and tenants in a number of other industries. This business is referred to as the Company’s property operations, which as of December 31, 2016, consisted of the following:
|
|
•
|
U.S.: property operations in the United States;
|
|
|
•
|
Asia: property operations in India;
|
|
|
•
|
EMEA: property operations in Germany, Ghana, Nigeria, South Africa and Uganda; and
|
|
|
•
|
Latin America: property operations in Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico and Peru.
|
The Company has applied the aggregation criteria to operations within the EMEA and Latin America property operating segments on a basis that is consistent with management’s review of information and performance evaluations of these regions.
The Company’s services segment offers tower-related services in the United States, including site acquisition, zoning and permitting services and structural analysis services, which primarily support its site leasing business, including the addition of new tenants and equipment on its sites. The services segment is a strategic business unit that offers different services from, and requires different resources, skill sets and marketing strategies than, the property operating segments.
The accounting policies applied in compiling segment information below are similar to those described in note 1. Among other factors, in evaluating financial performance in each business segment, management uses segment gross margin and segment operating profit. The Company defines segment gross margin as segment revenue less segment 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 segment operating profit as segment gross margin less Selling, general, administrative and development expense attributable to the segment, excluding stock-based compensation expense and corporate expenses. For reporting purposes, the Latin America property segment gross margin and segment operating profit also include Interest income, TV Azteca, net. These measures of segment gross margin and segment operating profit are also before Interest income, Interest expense, Gain (loss) on retirement of long-term obligations, Other expense, Net income (loss) attributable to noncontrolling interests and Income tax benefit (provision). The categories of expenses indicated above, such as depreciation, have been excluded from segment operating performance as they are not considered in the review of information or the evaluation of results by management. There are no significant revenues resulting from transactions between the Company’s operating segments. All intercompany transactions are eliminated to reconcile segment results and assets to the consolidated statements of operations and consolidated balance sheets.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summarized financial information concerning the Company’s reportable segments for the years ended December 31,
2016
,
2015
and
2014
is shown in the following tables. The “Other” column (i) represents amounts excluded from specific segments, such as business development operations, stock-based compensation expense and corporate expenses included in Selling, general, administrative and development expense; Other operating expenses; Interest income; Interest expense; Gain (loss) on retirement of long-term obligations; and Other expense, as the amounts are not utilized in assessing each segment’s performance, and (ii) reconciles segment operating profit to Income from continuing operations before income taxes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
|
Total
Property
|
|
Services
|
|
Other
|
|
Total
|
Year ended December 31, 2016
|
|
U.S.
|
|
Asia
|
|
EMEA
|
|
Latin America
|
|
|
|
(in thousands)
|
Segment revenues
|
|
$
|
3,370,033
|
|
|
$
|
827,627
|
|
|
$
|
529,531
|
|
|
$
|
985,935
|
|
|
$
|
5,713,126
|
|
|
$
|
72,542
|
|
|
|
|
$
|
5,785,668
|
|
Segment operating expenses (1)
|
|
733,403
|
|
|
465,938
|
|
|
223,716
|
|
|
337,887
|
|
|
1,760,944
|
|
|
27,007
|
|
|
|
|
1,787,951
|
|
Interest income, TV Azteca, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,960
|
|
|
10,960
|
|
|
—
|
|
|
|
|
10,960
|
|
Segment gross margin
|
|
2,636,630
|
|
|
361,689
|
|
|
305,815
|
|
|
659,008
|
|
|
3,963,142
|
|
|
45,535
|
|
|
|
|
4,008,677
|
|
Segment selling, general, administrative and development expense (1)
|
|
147,559
|
|
|
48,238
|
|
|
60,903
|
|
|
60,690
|
|
|
317,390
|
|
|
12,510
|
|
|
|
|
329,900
|
|
Segment operating profit
|
|
$
|
2,489,071
|
|
|
$
|
313,451
|
|
|
$
|
244,912
|
|
|
$
|
598,318
|
|
|
$
|
3,645,752
|
|
|
$
|
33,025
|
|
|
|
|
$
|
3,678,777
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
89,898
|
|
|
89,898
|
|
Other selling, general, administrative and development expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
126,035
|
|
|
126,035
|
|
Depreciation, amortization and accretion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,525,635
|
|
|
1,525,635
|
|
Other expense (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
811,349
|
|
|
811,349
|
|
Income from continuing operations before income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,125,860
|
|
Capital expenditures (3)
|
|
$
|
310,744
|
|
|
$
|
115,508
|
|
|
$
|
86,128
|
|
|
$
|
172,568
|
|
|
$
|
684,948
|
|
|
$
|
—
|
|
|
$
|
16,439
|
|
|
$
|
701,387
|
|
_______________
|
|
(1)
|
Segment operating expenses and segment selling, general, administrative and development expenses exclude stock-based compensation expense of
$2.4 million
and
$87.5 million
, respectively.
|
|
|
(2)
|
Primarily includes interest expense.
|
|
|
(3)
|
Includes
$18.9 million
of capital lease payments included in Repayments of notes payable, credit facilities, term loan, senior notes and capital leases in the cash flow from financing activities in our consolidated statement of cash flows.
|
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
|
|
Total
Property
|
|
Services
|
|
Other
|
|
Total
|
Year ended December 31, 2015
|
|
U.S.
|
|
Asia
|
|
EMEA
|
|
Latin America
|
|
|
|
(in thousands)
|
Segment revenues
|
|
$
|
3,157,501
|
|
|
$
|
242,223
|
|
|
$
|
395,092
|
|
|
$
|
885,572
|
|
|
$
|
4,680,388
|
|
|
$
|
91,128
|
|
|
|
|
$
|
4,771,516
|
|
Segment operating expenses (1)
|
|
678,499
|
|
|
126,874
|
|
|
163,820
|
|
|
304,629
|
|
|
1,273,822
|
|
|
32,993
|
|
|
|
|
1,306,815
|
|
Interest income, TV Azteca, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,209
|
|
|
11,209
|
|
|
—
|
|
|
|
|
11,209
|
|
Segment gross margin
|
|
2,479,002
|
|
|
115,349
|
|
|
231,272
|
|
|
592,152
|
|
|
3,417,775
|
|
|
58,135
|
|
|
|
|
3,475,910
|
|
Segment selling, general, administrative and development expense (1)
|
|
138,617
|
|
|
22,771
|
|
|
48,672
|
|
|
62,111
|
|
|
272,171
|
|
|
15,724
|
|
|
|
|
287,895
|
|
Segment operating profit
|
|
$
|
2,340,385
|
|
|
$
|
92,578
|
|
|
$
|
182,600
|
|
|
$
|
530,041
|
|
|
$
|
3,145,604
|
|
|
$
|
42,411
|
|
|
|
|
$
|
3,188,015
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
90,537
|
|
|
90,537
|
|
Other selling, general, administrative and development expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
121,456
|
|
|
121,456
|
|
Depreciation, amortization and accretion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,285,328
|
|
|
1,285,328
|
|
Other expense (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
860,732
|
|
|
860,732
|
|
Income from continuing operations before income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
829,962
|
|
Capital expenditures
|
|
$
|
367,663
|
|
|
$
|
75,407
|
|
|
$
|
66,625
|
|
|
$
|
201,806
|
|
|
$
|
711,501
|
|
|
$
|
—
|
|
|
$
|
17,252
|
|
|
$
|
728,753
|
|
_______________
|
|
(1)
|
Segment operating expenses and segment selling, general, administrative and development expenses exclude stock-based compensation expense of
$2.1 million
and
$88.5 million
, respectively.
|
|
|
(2)
|
Primarily includes interest expense.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
|
|
Total
Property
|
|
Services
|
|
Other
|
|
Total
|
Year ended December 31, 2014
|
|
U.S.
|
|
Asia
|
|
EMEA
|
|
Latin America
|
|
|
|
(in thousands)
|
Segment revenues
|
|
$
|
2,639,790
|
|
|
$
|
219,566
|
|
|
$
|
315,053
|
|
|
$
|
832,445
|
|
|
$
|
4,006,854
|
|
|
$
|
93,194
|
|
|
|
|
$
|
4,100,048
|
|
Segment operating expenses (1)
|
|
515,742
|
|
|
121,797
|
|
|
126,714
|
|
|
290,527
|
|
|
1,054,780
|
|
|
37,648
|
|
|
|
|
1,092,428
|
|
Interest income, TV Azteca, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,547
|
|
|
10,547
|
|
|
—
|
|
|
|
|
10,547
|
|
Segment gross margin
|
|
2,124,048
|
|
|
97,769
|
|
|
188,339
|
|
|
552,465
|
|
|
2,962,621
|
|
|
55,546
|
|
|
|
|
3,018,167
|
|
Segment selling, general, administrative and development expense (1)
|
|
124,944
|
|
|
19,632
|
|
|
39,553
|
|
|
66,890
|
|
|
251,019
|
|
|
12,469
|
|
|
|
|
263,488
|
|
Segment operating profit
|
|
$
|
1,999,104
|
|
|
$
|
78,137
|
|
|
$
|
148,786
|
|
|
$
|
485,575
|
|
|
$
|
2,711,602
|
|
|
$
|
43,077
|
|
|
|
|
$
|
2,754,679
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
80,153
|
|
|
80,153
|
|
Other selling, general, administrative and development expense (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104,738
|
|
|
104,738
|
|
Depreciation, amortization and accretion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,003,802
|
|
|
1,003,802
|
|
Other expense (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
700,282
|
|
|
700,282
|
|
Income from continuing operations before income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
865,704
|
|
Capital expenditures
|
|
$
|
576,153
|
|
|
$
|
74,334
|
|
|
$
|
70,126
|
|
|
$
|
229,645
|
|
|
$
|
950,258
|
|
|
$
|
—
|
|
|
$
|
24,146
|
|
|
$
|
974,404
|
|
_______________
|
|
(1)
|
Segment operating expenses and segment selling, general, administrative and development expenses exclude stock-based compensation expense of
$1.8 million
and
$78.3 million
, respectively.
|
|
|
(2)
|
Includes
$7.9 million
of expense previously recorded as segment selling, general, administrative and development expense.
|
|
|
(3)
|
Primarily includes interest expense.
|
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Additional information relating to the total assets of the Company’s operating segments is as follows for the years ended December 31, (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
U.S. property
|
$
|
18,846,941
|
|
|
$
|
19,286,465
|
|
|
$
|
14,335,731
|
|
Asia property (1)
|
4,535,293
|
|
|
736,149
|
|
|
738,290
|
|
EMEA property (1)
|
2,062,399
|
|
|
2,249,634
|
|
|
1,275,253
|
|
Latin America property (1)
|
4,938,064
|
|
|
4,401,258
|
|
|
4,700,357
|
|
Services
|
48,327
|
|
|
68,388
|
|
|
57,367
|
|
Other (2)
|
448,126
|
|
|
162,378
|
|
|
156,567
|
|
Total assets
|
$
|
30,879,150
|
|
|
$
|
26,904,272
|
|
|
$
|
21,263,565
|
|
_______________
|
|
(1)
|
Balances are translated at the applicable period end exchange rate, which may impact comparability between periods.
|
|
|
(2)
|
Balances include corporate assets such as cash and cash equivalents, certain tangible and intangible assets and income tax accounts that have not been allocated to specific segments.
|
Summarized geographic information related to the Company’s operating revenues for the years ended December 31,
2016
,
2015
and
2014
and long-lived assets as of December 31,
2016
and
2015
is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Operating Revenues:
|
|
|
|
|
|
United States
|
$
|
3,442,575
|
|
|
$
|
3,248,629
|
|
|
$
|
2,732,984
|
|
Asia (1):
|
|
|
|
|
|
India
|
827,627
|
|
|
242,223
|
|
|
219,566
|
|
EMEA (1):
|
|
|
|
|
|
Germany
|
60,163
|
|
|
55,965
|
|
|
64,946
|
|
Ghana
|
116,219
|
|
|
94,549
|
|
|
95,486
|
|
Nigeria
|
215,402
|
|
|
109,701
|
|
|
—
|
|
South Africa
|
80,006
|
|
|
80,510
|
|
|
98,334
|
|
Uganda
|
57,741
|
|
|
54,367
|
|
|
56,287
|
|
Latin America (1):
|
|
|
|
|
|
Argentina
|
1,065
|
|
|
—
|
|
|
—
|
|
Brazil
|
506,182
|
|
|
408,644
|
|
|
331,089
|
|
Chile
|
33,831
|
|
|
29,650
|
|
|
31,756
|
|
Colombia
|
79,755
|
|
|
78,351
|
|
|
89,421
|
|
Costa Rica
|
18,968
|
|
|
17,244
|
|
|
16,742
|
|
Mexico
|
331,173
|
|
|
340,461
|
|
|
354,116
|
|
Panama (2)
|
—
|
|
|
—
|
|
|
1,243
|
|
Peru
|
14,961
|
|
|
11,222
|
|
|
8,078
|
|
Total International
|
2,343,093
|
|
|
1,522,887
|
|
|
1,367,064
|
|
Total operating revenues
|
$
|
5,785,668
|
|
|
$
|
4,771,516
|
|
|
$
|
4,100,048
|
|
_______________
|
|
(1)
|
Balances are translated at the applicable exchange rate, which may impact comparability between periods.
|
|
|
(2)
|
In September 2014, the Company completed the sale of its operations in Panama.
|
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Long-Lived Assets (1):
|
|
|
|
United States
|
$
|
16,969,558
|
|
|
$
|
17,516,535
|
|
Asia (2):
|
|
|
|
India
|
4,094,190
|
|
|
619,370
|
|
EMEA (2):
|
|
|
|
Germany
|
397,317
|
|
|
388,727
|
|
Ghana
|
192,158
|
|
|
217,530
|
|
Nigeria
|
640,634
|
|
|
1,018,980
|
|
South Africa
|
271,760
|
|
|
133,088
|
|
Uganda
|
141,533
|
|
|
162,346
|
|
Latin America (2):
|
|
|
|
Argentina
|
137,588
|
|
|
—
|
|
Brazil
|
2,626,431
|
|
|
2,204,494
|
|
Chile
|
137,170
|
|
|
121,938
|
|
Colombia
|
272,338
|
|
|
256,892
|
|
Costa Rica
|
117,481
|
|
|
120,292
|
|
Mexico
|
797,798
|
|
|
976,707
|
|
Peru
|
66,593
|
|
|
59,206
|
|
Total International
|
9,892,991
|
|
|
6,279,570
|
|
Total long-lived assets
|
$
|
26,862,549
|
|
|
$
|
23,796,105
|
|
_______________
|
|
(1)
|
Includes Property and equipment, net, Goodwill and Other intangible assets, net.
|
|
|
(2)
|
Balances are translated at the applicable period end exchange rate, which may impact comparability between periods.
|
The following tenants within the property segments and services segment individually accounted for
10%
or more of the Company’s consolidated operating revenues for the years ended December 31, is as follows:
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
AT&T
|
21
|
%
|
|
24
|
%
|
|
20
|
%
|
Verizon Wireless
|
15
|
%
|
|
16
|
%
|
|
11
|
%
|
Sprint
|
11
|
%
|
|
13
|
%
|
|
15
|
%
|
T-Mobile
|
9
|
%
|
|
10
|
%
|
|
10
|
%
|
21. RELATED PARTY TRANSACTIONS
During the years ended December 31,
2016
,
2015
and
2014
, the Company had no significant related party transactions.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data for the years ended
December 31, 2016
and
2015
is as follows (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Year Ended
December 31,
|
|
March 31,
|
|
June 30,
|
|
September 30,
|
|
December 31,
|
|
2016:
|
|
|
|
|
|
|
|
|
|
Operating revenues
|
$
|
1,289,047
|
|
|
$
|
1,442,227
|
|
|
$
|
1,514,845
|
|
|
$
|
1,539,549
|
|
|
$
|
5,785,668
|
|
Costs of operations (1)
|
351,445
|
|
|
459,711
|
|
|
491,237
|
|
|
487,996
|
|
|
1,790,389
|
|
Operating income
|
451,853
|
|
|
432,806
|
|
|
479,074
|
|
|
489,296
|
|
|
1,853,029
|
|
Net income
|
281,307
|
|
|
192,464
|
|
|
263,735
|
|
|
232,853
|
|
|
970,359
|
|
Net income attributable to American Tower Corporation stockholders
|
275,159
|
|
|
187,550
|
|
|
264,509
|
|
|
229,207
|
|
|
956,425
|
|
Dividends on preferred stock
|
(26,781
|
)
|
|
(26,782
|
)
|
|
(26,781
|
)
|
|
(26,781
|
)
|
|
(107,125
|
)
|
Net income attributable to American Tower Corporation common stockholders
|
248,378
|
|
|
160,768
|
|
|
237,728
|
|
|
202,426
|
|
|
849,300
|
|
Basic net income per share attributable to American Tower Corporation common stockholders
|
0.59
|
|
|
0.38
|
|
|
0.56
|
|
|
0.48
|
|
|
2.00
|
|
Diluted net income per share attributable to American Tower Corporation common stockholders
|
0.58
|
|
|
0.37
|
|
|
0.55
|
|
|
0.47
|
|
|
1.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Year Ended
December 31,
|
|
March 31,
|
|
June 30,
|
|
September 30,
|
|
December 31,
|
|
2015:
|
|
|
|
|
|
|
|
|
|
Operating revenues
|
$
|
1,079,190
|
|
|
$
|
1,174,375
|
|
|
$
|
1,237,910
|
|
|
$
|
1,280,041
|
|
|
$
|
4,771,516
|
|
Costs of operations (1)
|
264,640
|
|
|
322,458
|
|
|
365,389
|
|
|
356,381
|
|
|
1,308,868
|
|
Operating income
|
419,966
|
|
|
389,774
|
|
|
400,925
|
|
|
402,124
|
|
|
1,612,789
|
|
Net income
|
195,492
|
|
|
157,180
|
|
|
97,740
|
|
|
221,595
|
|
|
672,007
|
|
Net income attributable to American Tower Corporation stockholders
|
193,317
|
|
|
156,056
|
|
|
102,999
|
|
|
232,702
|
|
|
685,074
|
|
Dividends on preferred stock
|
(9,819
|
)
|
|
(26,782
|
)
|
|
(26,781
|
)
|
|
(26,781
|
)
|
|
(90,163
|
)
|
Net income attributable to American Tower Corporation common stockholders
|
183,498
|
|
|
129,274
|
|
|
76,218
|
|
|
205,921
|
|
|
594,911
|
|
Basic net income per share attributable to American Tower Corporation common stockholders
|
0.45
|
|
|
0.31
|
|
|
0.18
|
|
|
0.49
|
|
|
1.42
|
|
Diluted net income per share attributable to American Tower Corporation common stockholders
|
0.45
|
|
|
0.30
|
|
|
0.18
|
|
|
0.48
|
|
|
1.41
|
|
_______________
|
|
(1)
|
Represents Operating expenses, exclusive of Depreciation, amortization and accretion, Selling, general, administrative and development expense, and Other operating expenses.
|
23. SUBSEQUENT EVENTS
Redemption of
7.25%
Senior Notes
—On February 10, 2017, the Company redeemed all of the outstanding
7.25%
senior unsecured notes due 2019 (the “
7.25%
Notes”) at a price equal to
112.0854%
of the principal amount, plus accrued and unpaid interest up to, but excluding, February 10, 2017, for an aggregate redemption price of
$341.4 million
, including
$5.1 million
in accrued and unpaid interest. The Company expects to record a loss on retirement of long-term obligations of approximately
$39.1 million
, which includes prepayment consideration of
$36.3 million
, and the remaining portion of the unamortized
discount and deferred financing costs. The redemption was funded with borrowings under the 2013 Credit Facility and cash on hand. Upon completion of the redemption, none of the
7.25%
Notes remained outstanding.
Repayment of 2012 GTP Notes
—On February 15, 2017, the Company repaid the
$173.5 million
remaining principal amount outstanding under the Secured Cellular Site Revenue Notes, Series 2012-2 Class A, Series 2012-2 Class B and Series 2012-2 Class C issued by GTP Cellular Sites, LLC, plus prepayment consideration and accrued and unpaid interest. The Company expects to record a loss on retirement of long-term obligations of approximately
$1.8 million
, which includes prepayment consideration of
$7.2 million
offset by the remaining portion of the unamortized premium. The repayment was funded with borrowings under the 2013 Credit Facility and cash on hand.
Repayment of Unison Notes
—On February 15, 2017, the Company repaid the
$129.0 million
principal amount outstanding under the Secured Cellular Site Revenue Notes, Series 2010-2, Class C and Series 2010-2, Class F issued by Unison Ground Lease Funding, LLC, plus prepayment consideration and accrued and unpaid interest. The Company expects to record a loss on retirement of long-term obligations of approximately
$14.5 million
, which includes prepayment consideration of
$18.3 million
offset by the remaining portion of the unamortized premium. The repayment was funded with borrowings under the 2013 Credit Facility and cash on hand.
FPS Towers Acquisition
—On February 15, 2017, ATC Europe acquired
100%
of the outstanding shares of FPS for total consideration of
713.9 million
Euros (
$757.1 million
at the date of acquisition). The acquisition was funded by the Company and its equity partner, PGGM. The Company made a loan to ATC Europe to fund
225.0 million
Euros (
$238.6 million
at the date of acquisition) of the total consideration. The remainder of the purchase price was funded by the Company and PGGM in proportion to their respective interests in ATC Europe. The Company funded its portion of the purchase price with borrowings under the 2013 Credit Facility and cash on hand. The acquisition is consistent with the Company’s strategy to expand in selected geographic areas. A preliminary purchase price allocation is not available due to the timing of the closing.
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
SCHEDULE III—SCHEDULE OF REAL ESTATE
AND ACCUMULATED DEPRECIATION
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Encumbrances
|
|
|
Initial cost
to company
|
|
Cost
capitalized
subsequent to
acquisition
|
|
Gross amount
carried at
close of current
period
|
|
|
Accumulated
depreciation at close of current period
|
|
Date of
construction
|
|
Date
acquired
|
|
Life on which
depreciation in
latest income
statements is
computed
|
144,119
|
sites (1)
|
|
$
|
3,815,002
|
|
(2)
|
|
(3)
|
|
(3)
|
|
$
|
14,276,973
|
|
(4)
|
|
$
|
(4,548,096
|
)
|
|
Various
|
|
Various
|
|
Up to 20 years
|
_______________
(1) No single site exceeds
5%
of the total amounts indicated in the table above.
(2) Certain assets secure debt of
$3.8 billion
.
(3) The Company has omitted this information, as it would be impracticable to compile such information on a site-by-site basis.
(4) Does not include those sites under construction.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
Gross amount at beginning
|
$
|
13,046,291
|
|
|
$
|
10,434,326
|
|
(1)
|
$
|
9,921,276
|
|
(1)
|
Additions during period:
|
|
|
|
|
|
|
Acquisitions
|
787,206
|
|
|
2,620,778
|
|
|
397,837
|
|
|
Discretionary capital projects (2)
|
105,279
|
|
|
210,421
|
|
|
437,720
|
|
|
Discretionary ground lease purchases (3)
|
168,133
|
|
|
144,695
|
|
|
159,637
|
|
|
Redevelopment capital expenditures (4)
|
136,821
|
|
|
114,089
|
|
|
96,782
|
|
|
Capital improvements (5)
|
81,790
|
|
|
42,417
|
|
|
41,967
|
|
|
Start-up capital expenditures (6)
|
128,707
|
|
|
35,561
|
|
|
21,173
|
|
|
Other (7)
|
139,356
|
|
|
201,118
|
|
|
22,069
|
|
|
Total additions
|
1,547,292
|
|
|
3,369,079
|
|
|
1,177,185
|
|
|
Deductions during period:
|
|
|
|
|
|
|
Cost of real estate sold or disposed
|
(85,789
|
)
|
|
(60,975
|
)
|
|
(60,147
|
)
|
|
Other (8)
|
(230,821
|
)
|
|
(696,139
|
)
|
|
(569,107
|
)
|
|
Total deductions:
|
(316,610
|
)
|
|
(757,114
|
)
|
|
(629,254
|
)
|
|
Balance at end
|
$
|
14,276,973
|
|
|
$
|
13,046,291
|
|
|
$
|
10,469,207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Gross amount of accumulated depreciation at beginning
|
$
|
(3,994,874
|
)
|
|
$
|
(3,613,078
|
)
|
|
$
|
(3,297,033
|
)
|
Additions during period:
|
|
|
|
|
|
Depreciation
|
(647,910
|
)
|
|
(557,052
|
)
|
|
(457,135
|
)
|
Other
|
—
|
|
|
—
|
|
|
(761
|
)
|
Total additions
|
(647,910
|
)
|
|
(557,052
|
)
|
|
(457,896
|
)
|
Deductions during period:
|
|
|
|
|
|
Amount of accumulated depreciation for assets sold or disposed
|
24,911
|
|
|
30,083
|
|
|
20,953
|
|
Other (8)
|
69,777
|
|
|
145,173
|
|
|
120,898
|
|
Total deductions
|
94,688
|
|
|
175,256
|
|
|
141,851
|
|
Balance at end
|
$
|
(4,548,096
|
)
|
|
$
|
(3,994,874
|
)
|
|
$
|
(3,613,078
|
)
|
_______________
|
|
(1)
|
Beginning balance has been revised to reflect purchase accounting measurement period adjustments.
|
|
|
(2)
|
Includes amounts incurred primarily for the construction of new sites.
|
|
|
(3)
|
Includes amounts incurred to purchase or otherwise secure the land under communications sites.
|
|
|
(4)
|
Includes amounts incurred to increase the capacity of existing sites, which results in new incremental tenant revenue.
|
|
|
(5)
|
Includes amounts incurred to enhance existing sites by adding additional functionality, capacity or general asset improvements.
|
|
|
(6)
|
Includes amounts incurred in connection with acquisitions or new market launches. Start-up capital expenditures includes non-recurring expenditures contemplated in acquisitions or new market launch business cases.
|
|
|
(7)
|
Primarily includes regional improvements and other additions.
|
|
|
(8)
|
Primarily includes foreign currency exchange rate fluctuations and other deductions.
|
INDEX TO EXHIBITS
Pursuant to the rules and regulations of the SEC, the Company has filed certain agreements as exhibits to this Annual Report on Form 10-K. These agreements may contain representations and warranties by the parties. These representations and warranties have been made solely for the benefit of the other party or parties to such agreements and (i) may have been qualified by disclosures made to such other party or parties, (ii) were made only as of the date of such agreements or such other date(s) as may be specified in such agreements and are subject to more recent developments, which may not be fully reflected in the Company’s public disclosure, (iii) may reflect the allocation of risk among the parties to such agreements and (iv) may apply materiality standards different from what may be viewed as material to investors. Accordingly, these representations and warranties may not describe the Company’s actual state of affairs at the date hereof and should not be relied upon.
The exhibits below are included, either by being filed herewith or by incorporation by reference, as part of this Annual Report on Form 10-K. Exhibits are identified according to the number assigned to them in Item 601 of SEC Regulation S-K. Documents that are incorporated by reference are identified by their Exhibit number as set forth in the filing from which they are incorporated by reference. The filings of the Registrant from which various exhibits are incorporated by reference into this Annual Report are indicated by parenthetical numbering which corresponds to the following key:
|
|
|
|
|
(1
|
)
|
|
Annual Report on Form 10-K (File No. 001-14195) filed on April 2, 2001;
|
|
|
|
(2
|
)
|
|
Annual Report on Form 10-K (File No. 001-14195) filed on March 15, 2006;
|
|
|
|
(3
|
)
|
|
Tender Offer Statement on Schedule TO (File No. 005-55211) filed on November 29, 2006;
|
|
|
|
(4
|
)
|
|
Definitive Proxy Statement on Schedule 14A (File No. 001-14195) filed on March 22, 2007;
|
|
|
|
(5
|
)
|
|
Quarterly Report on Form 10-Q (File No. 001-14195) filed on August 6, 2008;
|
|
|
|
(6
|
)
|
|
Current Report on Form 8-K (File No. 001-14195) filed on March 5, 2009;
|
|
|
|
(7
|
)
|
|
Quarterly Report on Form 10-Q (File No. 001-14195) filed on May 8, 2009;
|
|
|
|
(8
|
)
|
|
Quarterly Report on Form 10-Q (File No. 001-14195) filed on August 6, 2009;
|
|
|
|
(9
|
)
|
|
Annual Report on Form 10-K (File No. 001-14195) filed on March 1, 2010;
|
|
|
|
(10
|
)
|
|
Registration Statement on Form S-3ASR (File No. 333-166805) filed on May 13, 2010;
|
|
|
|
(11
|
)
|
|
Quarterly Report on Form 10-Q (File No. 001-14195) filed on November 5, 2010;
|
|
|
|
(12
|
)
|
|
Current Report on Form 8-K (File No. 001-14195) filed on December 9, 2010;
|
|
|
|
(13
|
)
|
|
Current Report on Form 8-K (File No. 001-14195) filed on August 25, 2011;
|
|
|
|
(14
|
)
|
|
Current Report on Form 8-K (File No. 001-14195) filed on October 6, 2011;
|
|
|
|
(15
|
)
|
|
Current Report on Form 8-K (File No. 001-14195) filed on January 3, 2012;
|
|
|
|
(16
|
)
|
|
Current Report on Form 8-K (File No. 001-14195) filed on March 12, 2012;
|
|
|
|
(17
|
)
|
|
Current Report on Form 8-K (File No. 001-14195) filed on January 8, 2013;
|
|
|
|
(18
|
)
|
|
Annual Report on Form 10-K (File No. 001-14195) filed on February 27, 2013;
|
|
|
|
(19
|
)
|
|
Quarterly Report on Form 10-Q (File No. 001-14195) filed on May 1, 2013;
|
|
|
|
(20
|
)
|
|
Registration Statement on Form S-3ASR (File No. 333-188812) filed on May 23, 2013;
|
|
|
|
(21
|
)
|
|
Quarterly Report on Form 10-Q (File No. 001-14195) filed on July 31, 2013;
|
|
|
|
(22
|
)
|
|
Current Report on Form 8-K (File No. 001-14195) filed on August 19, 2013;
|
|
|
|
(23
|
)
|
|
Quarterly Report on Form 10-Q (File No. 001-14195) filed on October 30, 2013;
|
|
|
|
(24
|
)
|
|
Current Report on Form 8-K (File No. 001-14195) filed on May 12, 2014;
|
|
|
|
(25
|
)
|
|
Current Report on Form 8-K (File No. 001-14195) filed on August 7, 2014;
|
|
|
|
(26
|
)
|
|
Quarterly Report on Form 10-Q (File No. 001-14195) filed on October 30, 2014;
|
|
|
|
(27
|
)
|
|
Current Report on Form 8-K (File No. 001-14195) filed on February 23, 2015;
|
|
|
|
|
|
|
|
|
(28
|
)
|
|
Annual Report on Form 10-K (File No. 001-14195) filed on February 24, 2015;
|
|
|
|
(29
|
)
|
|
Current Report on Form 8-K (File No. 001-14195) filed on March 3, 2015;
|
|
|
|
(30
|
)
|
|
Quarterly Report on Form 10-Q (File No. 001-14195) filed on April 30, 2015;
|
|
|
|
(31
|
)
|
|
Current Report on Form 8-K (File No. 001-14195) filed on May 7, 2015;
|
|
|
|
(32
|
)
|
|
Quarterly Report on Form 10-Q (File No. 001-14195) filed on July 29, 2015;
|
|
|
|
(33
|
)
|
|
Current Report on Form 8-K (File No. 001-14195) filed on January 12, 2016;
|
|
|
|
(34
|
)
|
|
Current Report on Form 8-K (File No. 001-14195) filed on February 16, 2016;
|
|
|
|
(35
|
)
|
|
Annual Report on Form 10-K (File No. 001-14195) filed on February 26, 2016;
|
|
|
|
(36
|
)
|
|
Current Report on Form 8-K (File No. 001-14195) filed on March 9, 2016;
|
|
|
|
(37
|
)
|
|
Current Report on Form 8-K (File No. 001-14195) filed on May 13, 2016;
|
|
|
|
(38
|
)
|
|
Current Report on Form 8-K (File No. 001-14195) filed on September 30, 2016; and
|
|
|
|
(39
|
)
|
|
Quarterly Report on Form 10-Q (File No. 001-14195) filed on October 27, 2016.
|
|
|
|
|
|
|
Exhibit No.
|
|
Description of Document
|
|
Exhibit File No.
|
|
|
|
2.1
|
|
Agreement and Plan of Merger by and between American Tower Corporation and American Tower REIT, Inc., dated as of August 24, 2011
|
|
2.1 (13)
|
|
|
|
3.1
|
|
Restated Certificate of Incorporation of the Company as filed with the Secretary of State of the State of Delaware, effective as of December 31, 2011
|
|
3.1 (15)
|
|
|
|
3.2
|
|
Certificate of Merger, effective as of December 31, 2011
|
|
3.2 (15)
|
|
|
|
3.3
|
|
Amended and Restated By-Laws of the Company, effective as of February 12, 2016
|
|
3.1 (34)
|
|
|
|
|
|
3.4
|
|
Certificate of Designations of the 5.25% Mandatory Convertible Preferred Stock, Series A, of the Company as filed with the Secretary of State of the State of Delaware, effective as of May 12, 2014
|
|
3.1 (24)
|
|
|
|
3.5
|
|
Certificate of Designations of 5.50% Mandatory Convertible Preferred Stock, Series B, of the Company as filed with the Secretary of State of the State of Delaware, effective as of March 3, 2015
|
|
3.1 (29)
|
|
|
|
|
|
4.1
|
|
Indenture dated as of June 10, 2009, by and between the Company and The Bank of New York Mellon Trust Company N.A., as Trustee, for the 7.25% Senior Notes due 2019
|
|
10.1 (8)
|
|
|
|
4.2
|
|
Indenture dated May 13, 2010, by and between the Company and The Bank of New York Mellon Trust Company N.A., as Trustee
|
|
4.3 (10)
|
|
|
|
4.3
|
|
Indenture dated May 23, 2013, by and between the Company and U.S. Bank National Association, as Trustee
|
|
4.12 (20)
|
|
|
|
|
|
4.4
|
|
Supplemental Indenture No. 1, dated August 16, 2010, to Indenture dated May 13, 2010, by and between the Company and The Bank of New York Mellon Trust Company N.A., as Trustee, for the 5.050% Senior Notes due 2020
|
|
4 (11)
|
|
|
|
4.5
|
|
Supplemental Indenture No. 2, dated December 7, 2010, to Indenture dated May 13, 2010, by and between the Company and The Bank of New York Mellon Trust Company N.A., as Trustee, for the 4.500% Senior Notes due 2018
|
|
4.1 (12)
|
|
|
|
4.6
|
|
Supplemental Indenture No. 3, dated as of October 6, 2011, to Indenture dated May 13, 2010, by and between the Company and The Bank of New York Mellon Trust Company N.A., as Trustee, for the 5.900% Senior Notes due 2021
|
|
4.1 (14)
|
|
|
|
4.7
|
|
Supplemental Indenture No. 1, dated as of December 30, 2011, to Indenture dated as of June 10, 2009, with respect to the Predecessor Registrant’s 7.25% Senior Notes due 2019, by and among, the Predecessor Registrant, the Company and The Bank of New York Mellon Trust Company N.A., as Trustee
|
|
4.4 (15)
|
|
|
|
|
|
4.8
|
|
Supplemental Indenture No. 4, dated as of December 30, 2011, to Indenture dated May 13, 2010, by and among, the Predecessor Registrant, the Company and The Bank of New York Mellon Trust Company N.A., as Trustee
|
|
4.6 (15)
|
|
|
|
4.9
|
|
Supplemental Indenture No. 5, dated as of March 12, 2012, to Indenture dated May 13, 2010, by and between the Company and the Bank of New York Mellon Trust Company N.A., as Trustee, for the 4.70% Senior Notes due 2022
|
|
4.1 (16)
|
|
|
|
4.10
|
|
Supplemental Indenture No. 6, dated as of January 8, 2013, to Indenture dated May 13, 2010, by and between the Company and the Bank of New York Mellon Trust Company N.A., as Trustee, for the 3.50% Senior Notes due 2023
|
|
4.1 (17)
|
|
|
|
4.11
|
|
Supplemental Indenture No. 1, dated as of August 19, 2013, to Indenture dated May 23, 2013, by and between the Company and U.S. Bank National Association, as Trustee, for the 3.40% Senior Notes due 2019 and the 5.00% Senior Notes due 2024
|
|
4.1 (22)
|
|
|
|
|
|
4.12
|
|
Supplemental Indenture No. 2, dated as of August 7, 2014, to Indenture dated May 23, 2013, by and between the Company and U.S. Bank National Association, as Trustee, for the 3.450% Senior Notes due 2021
|
|
4.1 (25)
|
|
|
|
|
|
|
Exhibit No.
|
|
Description of Document
|
|
Exhibit File No.
|
|
|
|
|
|
4.13
|
|
Supplemental Indenture No. 3, dated as of May 7, 2015, to Indenture dated May 23, 2013, by and between the Company and U.S. Bank National Association, as trustee, for the 2.800% Senior Notes due 2020 and the 4.000% Senior Notes due 2025
|
|
4.1 (31)
|
|
|
|
|
|
4.14
|
|
Supplemental Indenture No. 4, dated as of January 12, 2016, to Indenture dated May 23, 2013, by and between the Company and U.S. Bank National Association, as trustee, for the 3.300% Senior Notes due 2021 and the 4.400% Senior Notes due 2026
|
|
4.1 (33)
|
|
|
|
|
|
4.15
|
|
Supplemental Indenture No. 5, dated as of May 13, 2016, to Indenture dated May 23, 2013, by and between the Company and U.S. Bank National Association, as trustee, for the 3.375% Senior Notes due 2026
|
|
4.1 (37)
|
|
|
|
|
|
4.16
|
|
Supplemental Indenture No. 6, dated as of September 30, 2016, to Indenture dated as of May 23, 2013, by and between the Company and U.S. Bank National Association, as trustee, for the 2.250% Senior Notes due 2022 and the 3.125% Senior Notes due 2027
|
|
4.1 (38)
|
|
|
|
|
|
4.17
|
|
Deposit Agreement, dated March 3, 2015, among the Company, Computershare Trust Company, N.A., Computershare Inc. and the holders from time to time of the depositary receipts evidencing the depositary shares, for the 5.50% Mandatory Convertible Preferred Stock, Series B
|
|
4.1 (29)
|
|
|
|
|
|
4.18
|
|
Third Amended and Restated Indenture, dated May 29, 2015, by and between GTP Acquisition Partners I, LLC, ACC Tower Sub, LLC, DCS Tower Sub, LLC, GTP South Acquisitions II, LLC, GTP Acquisition Partners II, LLC, GTP Acquisition Partners, III, LLC, GTP Infrastructure I, LLC, GTP Infrastructure II, LLC, GTP Infrastructure III, LLC, GTP Towers VIII, LLC, GTP Towers I, LLC, GTP Towers II, LLC, GTP Towers IV, LLC, GTP Towers V, LLC, GTP Towers VII, LLC, GTP Towers IX, LLC, PCS Structures Towers, LLC and GTP TRS I LLC, as obligors, and The Bank of New York Mellon, as trustee
|
|
4.2 (32)
|
|
|
|
|
|
4.19
|
|
Series 2015-1 Supplement, dated May 29, 2015, to the Third Amended and Restated Indenture dated May 29, 2015
|
|
4.3 (32)
|
|
|
|
|
|
4.20
|
|
Series 2015-2 Supplement, dated May 29, 2015, to the Third Amended and Restated Indenture dated May 29, 2015
|
|
4.4 (32)
|
|
|
|
|
|
10.1
|
|
American Tower Systems Corporation 1997 Stock Option Plan, as amended
|
|
(d)(1) (3)*
|
|
|
|
10.2
|
|
American Tower Corporation 2000 Employee Stock Purchase Plan, as amended and restated
|
|
10.5 (9)
|
|
|
|
10.3
|
|
American Tower Corporation 2007 Equity Incentive Plan
|
|
Annex A (4)*
|
|
|
|
10.4
|
|
Form of Notice of Grant of Nonqualified Stock Option and Option Agreement (U.S. Employee) Pursuant to the American Tower Corporation 2007 Equity Incentive Plan
|
|
10.6 (18)*
|
|
|
|
10.5
|
|
Form of Notice of Grant of Nonqualified Stock Option and Option Agreement (Non-U.S. Employee) Pursuant to the American Tower Corporation 2007 Equity Incentive Plan
|
|
10.31 (18)*
|
|
|
|
|
|
10.6
|
|
Form of Restricted Stock Unit Agreement (U.S. Employee/ Non-U.S. Employee Director) Pursuant to the American Tower Corporation 2007 Equity Incentive Plan
|
|
10.8 (18)*
|
|
|
|
10.7
|
|
Form of Restricted Stock Unit Agreement (Non-U.S. Employee) Pursuant to the American Tower Corporation 2007 Equity Incentive Plan
|
|
10.9 (18)*
|
|
|
|
|
|
10.8
|
|
Form of Notice of Grant of Performance-Based Restricted Stock Units Agreement (U.S. Employee) Pursuant to the American Tower Corporation 2007 Equity Incentive Plan
|
|
10.1 (27)*
|
|
|
|
|
|
10.9
|
|
Form of Notice of Grant of Restricted Stock Units and RSU Agreement (U.S. Employee / Time) (Non-Employee Director) Pursuant to the American Tower Corporation 2007 Equity Incentive Plan
|
|
10.1 (36)*
|
|
|
|
|
|
|
|
|
|
|
|
Exhibit No.
|
|
Description of Document
|
|
Exhibit File No.
|
|
|
|
|
|
10.10
|
|
Notice of Grant of Performance-Based Restricted Stock Units and PSU Agreement (U.S. Employee) Pursuant to the American Tower Corporation 2007 Equity Incentive Plan
|
|
10.2 (36)*
|
|
|
|
10.11
|
|
Noncompetition and Confidentiality Agreement dated as of January 1, 2004 between American Tower Corporation and William H. Hess
|
|
10.10 (2)*
|
|
|
|
|
|
10.12
|
|
Amendment, dated August 6, 2008, to Noncompetition and Confidentiality Agreement dated as of January 1, 2004 between American Tower Corporation and William H. Hess
|
|
10.1 (5)*
|
|
|
|
|
|
10.13
|
|
First Amended and Restated Loan and Security Agreement, dated as of March 15, 2013, by and between American Tower Asset Sub, LLC and American Tower Asset Sub II, LLC, as Borrowers, and U.S. Bank National Association, as Trustee for American Tower Trust I Secured Tower Revenue Securities, as Lender
|
|
10.1 (19)
|
|
|
|
|
|
10.14
|
|
First Amended and Restated Management Agreement, dated as of March 15, 2013, by and between American Tower Asset Sub, LLC and American Tower Asset Sub II, LLC, as Owners, and SpectraSite Communications, LLC, as Manager
|
|
10.2 (19)
|
|
|
|
|
|
10.15
|
|
First Amended and Restated Cash Management Agreement, dated as of March 15, 2013, by and among American Tower Asset Sub, LLC and American Tower Asset Sub II, LLC, as Borrowers, and U.S. Bank National Association, as Trustee for American Tower Trust I Secured Tower Revenue Securities, as Lender, Midland Loan Services, a Division of PNC Bank, National Association, as Servicer, U.S. Bank National Association, as Agent, and SpectraSite Communications, LLC, as Manager
|
|
10.3 (19)
|
|
|
|
|
|
10.16
|
|
First Amended and Restated Trust and Servicing Agreement, dated as of March 15, 2013, by and among American Tower Depositor Sub, LLC, as Depositor, Midland Loan Services, a Division of PNC Bank, National Association, as Servicer, and U.S. Bank National Association, as Trustee
|
|
10.4 (19)
|
|
|
|
|
|
10.17
|
|
Lease and Sublease by and among ALLTEL Communications, Inc. and the other entities named therein and American Towers, Inc. and American Tower Corporation, dated , 2001
|
|
2.1 (1)
|
|
|
|
|
|
10.18
|
|
Agreement to Sublease by and among ALLTEL Communications, Inc. the ALLTEL entities and American Towers, Inc. and American Tower Corporation, dated December 19, 2000
|
|
2.2 (1)
|
|
|
|
|
|
10.19
|
|
Lease and Sublease, dated as of December 14, 2000, by and among SBC Tower Holdings LLC, Southern Towers, Inc., SBC Wireless, LLC and SpectraSite Holdings, Inc. (incorporated by reference from Exhibit 10.2 to the SpectraSite Holdings, Inc. Quarterly Report on Form 10-Q (File No. 000-27217) filed on May 11, 2001)
|
|
10.2
|
|
|
|
|
|
10.20
|
|
Amendment to Lease and Sublease, dated September 30, 2008, by and between SpectraSite, LLC, American Tower Asset Sub II, LLC, SBC Wireless, LLC and SBC Tower Holdings LLC
|
|
10.7 (7)**
|
|
|
|
|
|
10.21
|
|
Summary Compensation Information for Current Named Executive Officers (incorporated by reference from Item 5.02(e) of Current Report on Form 8-K (File No. 001-14195) filed on March 3, 2016)
|
|
*
|
|
|
|
|
|
10.22
|
|
Form of Waiver and Termination Agreement
|
|
10.4 (6)
|
|
|
|
|
|
10.23
|
|
American Tower Corporation Severance Plan, as amended
|
|
10.35 (9)*
|
|
|
|
|
|
10.24
|
|
American Tower Corporation Severance Plan, Program for Executive Vice Presidents and Chief Executive Officer, as amended
|
|
10.36 (9)*
|
|
|
|
10.25
|
|
Letter Agreement, dated as of May 4, 2016, as amended, by and between the Company and William H. Hess
|
|
10.1 (39)*
|
|
|
|
|
|
|
|
|
|
|
|
Exhibit No.
|
|
Description of Document
|
|
Exhibit File No.
|
|
|
|
|
|
10.26
|
|
Letter Agreement, dated as of February 9, 2015 by and between the Company and Steven C. Marshall
|
|
10.24 (28)*
|
|
|
|
|
|
10.27
|
|
Amended and Restated Indenture, dated as of February 28, 2012, by and between GTP Cellular Sites, LLC, Cell Tower Lease Acquisition LLC, GLP Cell Site I, LLC, GLP Cell Site II, LLC, GLP Cell Site III, LLC, GLP Cell Site IV, LLC, GLP Cell Site A, LLC, Cell Site NewCo II, LLC, as obligors, and Deutsche Bank Trust Company Americas, as indenture trustee
|
|
10.15 (23)
|
|
|
|
|
|
10.28
|
|
Series 2012-1 and Series 2012-2 Indenture Supplement, dated as of February 28, 2012, to the Amended and Restated Indenture dated February 28, 2012
|
|
10.16 (23)
|
|
|
|
|
|
10.29
|
|
Loan Agreement, dated as of June 28, 2013, among the Company, as Borrower, Toronto Dominion (Texas) LLC, as Administrative Agent and Swingline Lender, Barclays Bank PLC, Citibank, N.A. and Bank of America, N.A., as Syndication Agents, JPMorgan Chase Bank, N.A., as Documentation Agent, TD Securities (USA) LLC, Barclays Bank PLC, Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith, Incorporated, as Co-Lead Arrangers and Joint Bookrunners, and the several other lenders that are parties thereto
|
|
10.1 (21)
|
|
|
|
10.30
|
|
First Amendment to Loan Agreement, dated as of September 20, 2013, among the Company, as borrower, Toronto Dominion (Texas) LLC, as administrative agent, and a majority of the lenders under the Company’s Loan Agreement entered into on June 28, 2013
|
|
10.7 (23)
|
|
|
|
10.31
|
|
Term Loan Agreement, dated as of October 29, 2013, among the Company, as borrower, The Royal Bank of Scotland plc, as administrative agent, Royal Bank of Canada and TD Securities (USA) LLC, as co-syndication agents, JPMorgan Chase Bank, N.A., Barclays Bank PLC, Citibank, N.A, Morgan Stanley MUFG Loan Partners, LLC and CoBank, ACB as co-documentation agents, RBS Securities Inc., RBC Capital Markets, LLC, TD Securities (USA) LLC, J.P. Morgan Securities LLC and Barclays Bank PLC, as joint lead arrangers and joint bookrunners, and the several other lenders that are parties thereto
|
|
10.8 (23)
|
|
|
|
10.32
|
|
Amended and Restated Loan Agreement, dated as of September 19, 2014, among the Company, as borrower, Toronto Dominion (Texas) LLC, as administrative agent, and swingline lender, TD Securities (USA) LLC, Citigroup Global Markets Inc., J.P. Morgan Securities LLC, Morgan Stanley MUFG Loan Partners, LLC and RBS Securities Inc., as joint lead arrangers and joint bookrunners, Citibank, N.A., JPMorgan Chase Bank, N.A., Morgan Stanley MUFG Loan Partners, LLC and The Royal Bank of Scotland plc, as co-syndication agents, and the other lenders that are parties thereto
|
|
10.1 (26)
|
|
|
|
|
|
10.33
|
|
Second Amendment to Loan Agreement, dated as of September 19, 2014, among the Company, as borrower, Toronto Dominion (Texas) LLC, as administrative agent, and all of the lenders under the Company’s Loan Agreement entered into on June 28, 2013
|
|
10.2 (26)
|
|
|
|
|
|
10.34
|
|
First Amendment to Term Loan Agreement, dated as of September 19, 2014, among the Company, as borrower, The Royal Bank of Scotland plc, as administrative agent, and a majority of the lenders under the Company’s Term Loan Agreement entered into on October 29, 2013
|
|
10.3 (26)
|
|
|
|
|
|
10.35
|
|
First Amendment to Loan Agreement, dated as of February 5, 2015, among the Company, as borrower, Toronto Dominion (Texas) LLC, as administrative agent, and a majority of the lenders under the Company’s Amended and Restated Loan Agreement entered into on September 19, 2014
|
|
10.51 (28)
|
|
|
|
|
|
10.36
|
|
Second Amendment to Term Loan Agreement, dated as of February 5, 2015, among the Company, as borrower, The Royal Bank of Scotland plc, as administrative agent, and a majority of the lenders under the Company’s Term Loan Agreement entered into on October 29, 2013
|
|
10.52 (28)
|
|
|
|
|
|
10.37
|
|
Third Amendment to Loan Agreement, dated as of February 5, 2015, among the Company, as borrower, Toronto Dominion (Texas) LLC, as administrative agent, and a majority of the lenders under the Company’s Loan Agreement entered into on June 28, 2013
|
|
10.53 (28)
|
|
|
|
|
|
|
Exhibit No.
|
|
Description of Document
|
|
Exhibit File No.
|
|
|
|
|
|
10.38
|
|
Second Amendment to Loan Agreement, dated as of February 20, 2015, among the Company, as borrower, Toronto Dominion (Texas) LLC, as administrative agent, and a majority of the lenders under the Company’s Amended and Restated Loan Agreement entered into on September 19, 2014
|
|
10.54 (28)
|
|
|
|
|
|
10.39
|
|
Third Amendment to Term Loan Agreement, dated as of February 20, 2015, among the Company, as borrower, The Royal Bank of Scotland plc, as administrative agent, and a majority of the lenders under the Company’s Term Loan Agreement entered into on October 29, 2013
|
|
10.55 (28)
|
|
|
|
|
|
10.40
|
|
Fourth Amendment to Loan Agreement, dated as of February 20, 2015, among the Company, as borrower, Toronto Dominion (Texas) LLC, as administrative agent, and a majority of the lenders under the Company’s Loan Agreement entered into on June 28, 2013
|
|
10.56 (28)
|
|
|
|
|
|
10.41
|
|
Third Amendment to Loan Agreement, dated as of October 28, 2015, among the Company, as borrower, Toronto Dominion (Texas) LLC, as administrative agent, and a majority of the lenders under the Company’s Amended and Restated Loan Agreement entered into on September 19, 2014
|
|
10.43 (35)
|
|
|
|
|
|
10.42
|
|
Fourth Amendment to Term Loan Agreement, dated as of October 28, 2015, among the Company, as borrower, Mizuho Bank, Ltd. (successor to The Royal Bank of Scotland plc), as administrative agent, and a majority of the lenders under the Company’s Term Loan Agreement entered into on October 29, 2013
|
|
10.44 (35)
|
|
|
|
|
|
10.43
|
|
Fifth Amendment to Loan Agreement, dated as of October 28, 2015, among the Company, as borrower, Toronto Dominion (Texas) LLC, as administrative agent, and a majority of the lenders under the Company’s Loan Agreement entered into on June 28, 2013
|
|
10.45 (35)
|
|
|
|
|
|
10.44
|
|
Fourth Amendment to Loan Agreement, dated as of November 30, 2016, among the Company, as borrower, Toronto Dominion (Texas) LLC, as administrative agent, and a majority of the lenders under the Company’s Amended and Restated Loan Agreement entered into on September 19, 2014
|
|
Filed herewith
as
Exhibit 10.44
|
|
|
|
|
|
10.45
|
|
Fifth Amendment to Term Loan Agreement, dated as of November 30, 2016, among the Company, as borrower, Mizuho Bank, Ltd. (successor to The Royal Bank of Scotland plc), as administrative agent, and a majority of the lenders under the Company’s Term Loan Agreement entered into on October 29, 2013
|
|
Filed herewith
as
Exhibit 10.45
|
|
|
|
|
|
10.46
|
|
Sixth Amendment to Loan Agreement, dated as of November 30, 2016, among the Company, as borrower, Toronto Dominion (Texas) LLC, as administrative agent, and a majority of the lenders under the Company’s Loan Agreement entered into on June 28, 2013
|
|
Filed herewith
as
Exhibit 10.46
|
|
|
|
|
|
10.47
|
|
Master Agreement, dated as of February 5, 2015, among the Company and Verizon Communications, Inc.
|
|
10.45 (28)
|
|
|
|
|
|
10.48
|
|
Master Prepaid Lease, dated as of March 27, 2015, among certain subsidiaries of the Company and Verizon Communications Inc.
|
|
10.8 (30)
|
|
|
|
|
|
10.49
|
|
Sale Site Master Lease Agreement, dated as of March 27, 2015, among certain subsidiaries of the Company, Verizon Communications Inc. and certain of its subsidiaries
|
|
10.9 (30)
|
|
|
|
|
|
10.50
|
|
MPL Site Master Lease Agreement, dated as of March 27, 2015, among Verizon Communications Inc. and certain of its subsidiaries and ATC Sequoia LLC
|
|
10.10 (30)
|
|
|
|
|
|
10.51
|
|
Management Agreement, dated as of March 27, 2015, among Verizon Communications Inc. and certain of its subsidiaries and ATC Sequoia LLC
|
|
10.11 (30)
|
|
|
|
|
|
10.52
|
|
Share Purchase Agreement, dated as of October 21, 2015, amongst ATC Asia Pacific Pte. Ltd., American Tower International, Inc., Viom Networks Limited and certain of its existing shareholders
|
|
10.52 (35)
|
|
|
|
|
|
10.53
|
|
Shareholders Agreement, dated as of October 21, 2015, by and amongst Viom Networks Limited, Tata Sons Limited, Tata Teleservices Limited, IDFC Private Equity Fund III, Macquarie SBI Investments Pte Limited, SBI Macquarie Infrastructure Trust and ATC Asia Pacific Pte. Ltd.
|
|
10.53 (35)
|
|
|
|
|
|
|
|
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Exhibit No.
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Description of Document
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Exhibit File No.
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12
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Statement Regarding Computation of Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
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Filed herewith as
Exhibit 12
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21
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Subsidiaries of the Company
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Filed herewith as
Exhibit 21
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23
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Consent of Independent Registered Public Accounting Firm—Deloitte & Touche LLP
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Filed herewith as
Exhibit 23
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31.1
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Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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Filed herewith as
Exhibit 31.1
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31.2
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Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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Filed herewith as
Exhibit 31.2
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32
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Certifications filed pursuant to 18. U.S.C. Section 1350
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Filed herewith as
Exhibit 32
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101
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The following materials from American Tower Corporation’s Annual Report on Form 10-K for the year ended December 31, 2011, formatted in XBRL (Extensible Business Reporting Language):
101.INS—XBRL Instance Document
101.SCH—XBRL Taxonomy Extension Schema Document
101.CAL—XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB—XBRL Taxonomy Extension Label Linkbase Document
101.PRE—XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF—XTRL Taxonomy Extension Definition
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Filed herewith
as Exhibit 101
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*
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Management contracts and compensatory plans and arrangements required to be filed as exhibits to this Form 10-K pursuant to Item 15(a)(3).
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**
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The exhibit has been filed separately with the Commission pursuant to an application for confidential treatment. The confidential portions of the exhibit have been omitted and are marked by an asterisk.
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