American Tower Corporation — FY2010 Form 10-K
Reporting period: Year ended December 31, 2010. The filing also provides unaudited fourth-quarter results. American Tower owns, operates and develops wireless and broadcast communications infrastructure; leasing antenna space generated about 98% of 2010 revenue.
Financial performance
| Metric | FY2010 | FY2009 | Change |
|---|---|---|---|
| Revenue | $1,985.3 million | $1,724.1 million | +15% |
| Operating income | $784.4 million | $672.3 million | +17% |
| Net income attributable to American Tower | $372.9 million | $246.6 million | +51% |
| Diluted continuing-operations EPS | $0.92 | $0.59 | Up |
| Adjusted EBITDA | $1,347.7 million | $1,180.9 million | +14% |
| Cash from operating activities | $1,021.0 million | $842.1 million | +21% |
Approximate GAAP operating margin was 39.5%, versus 39.0% in 2009; net margin was 18.8%, versus 14.3%. Adjusted EBITDA is a non-GAAP measure. Cash used in investing was $1,300.9 million, including $899.6 million for acquisitions and $346.7 million for property, equipment and construction. Cash provided by financing was $910.3 million.
In Q4 2010, revenue was $547.6 million, operating income $203.4 million and net income attributable to American Tower $83.5 million. Q4 2009 amounts were $448.0 million, $176.4 million and $64.4 million, respectively.
Liquidity, debt and capital allocation
- Year-end cash and cash equivalents were $884.0 million; restricted cash was $76.0 million. Reported available liquidity was approximately $1.802 billion, including $917.7 million available under the revolving facility.
- Long-term obligations, including current portion, were $5.587 billion, up from $4.212 billion. The company reported about $5.6 billion of consolidated debt.
- During 2010, the company issued $1.0 billion of 4.50% notes due 2018 and $700 million of 5.05% notes due 2020, alongside repayments and refinancing. The $300 million revolving-facility balance and $325 million term loan mature June 2012; a $72.9 million Colombian facility was due in 2011.
- The company repurchased 9.3 million shares for $420.8 million during 2010. It had not historically paid common dividends. The remaining authorization was $273.1 million as of February 11, 2011.
- Management said operating cash was expected to cover 2011 operating needs, capital expenditures and cash debt service.
Changes and business developments
- Domestic rental and management revenue rose 11% to $1.565 billion; international revenue rose 43% to $370.9 million. International growth included substantial contribution from acquired and constructed sites; organic growth was about 8% in each segment, as described by management.
- Network development services revenue fell 12% to $49.0 million, partly because a major 2009 project did not recur.
- The company acquired or constructed approximately 7,800 sites in 2010, including ETIPL in India, which added more than 4,600 towers. International expansion increased the international share of revenue to about 19%, from 15%.
- Net income growth outpaced operating-income growth partly because 2009 included a larger loss on retirement of debt. The 2008–2009 comparison is also affected by a $110.1 million tax benefit related to discontinued Verestar operations recorded in 2008.
Outlook, risks and unusual items
- For 2011, management expected total capital expenditures of approximately $400–$450 million, including $80–$100 million for ground-lease purchases and $200–$220 million for other capital projects, including construction of about 1,200–1,500 sites. No specific earnings or revenue guidance is provided in the supplied filing text.
- Management was considering a possible REIT election for the taxable year beginning January 1, 2012; the decision and timing were uncertain and subject to board approval.
- Growth depends on carrier network investment, lease-up of existing sites and successful acquisitions. Risks include customer concentration, carrier consolidation or financial distress, technology changes that reduce tower demand, foreign currency and political exposure, zoning and environmental constraints, and acquisition integration.
- AT&T Mobility, Sprint Nextel and Verizon Wireless represented approximately 20%, 16% and 15% of consolidated revenue, respectively. Iusacell, about 4% of total revenue, was undergoing a debt restructuring and pre-packaged Mexican insolvency process; related receivables and other associated assets were disclosed.
- Material contingencies include Mexican litigation with potential damages of about $6.7 million, which remained under appeal, and an XCEL-related escrow lawsuit seeking punitive damages exceeding $69 million. A January 2011 ruling favored the company on the disputed tax escrow timing; other claims remained pending.
- Other notable items: acquisition costs and asset impairments contributed to higher other operating expenses; asset retirement obligations rose to $341.2 million, with estimated undiscounted future outlays of $966.3 million. The SEC said in December 2010 it did not intend to recommend enforcement action concerning a prior stock-option inquiry.
- The company reported effective disclosure controls and internal control over financial reporting; Deloitte issued unqualified opinions on the financial statements and internal controls.
Most important facts for investors to verify
- Whether organic leasing growth, tenant additions and contractual escalations continue to support revenue growth apart from acquisitions and currency effects.
- Debt maturities and refinancing plans, especially the June 2012 revolving facility and term loan, and the effect of leverage and covenants on liquidity and capital allocation.
- Whether the 2011 capex and site-construction plans meet return targets, and whether announced international transactions close on expected terms.
- Credit condition and payment performance of major tenants, particularly the concentrated U.S. carriers and Iusacell.
- Developments in REIT consideration, the pending litigation and tax uncertainties, and the realization of deferred tax assets and net operating losses.