American Tower Corporation — FY 2016 Form 10-K
Reporting period: Fiscal year ended December 31, 2016. The filing is an annual report, not a standalone fourth-quarter filing; quarterly figures below are unaudited. Amounts are in U.S. dollars unless noted.
Business context and reporting period
American Tower is a global REIT that primarily leases space on communications sites. Property operations generated 99% of FY 2016 revenue. At year-end, the company reported 144,884 communications sites across the U.S., Asia, EMEA and Latin America. Its 2016 expansion included acquiring a 51% controlling interest in India’s Viom Networks, with approximately 42,000 towers and 200 indoor DAS networks, and launching operations in Argentina.
Financial performance and liquidity
| Metric | FY 2016 | FY 2015 | Change |
|---|---|---|---|
| Total revenue | $5.786 billion | $4.772 billion | +21% |
| Operating income | $1.853 billion | $1.613 billion | +15% |
| Net income | $970 million | $672 million | +44% |
| Net income attributable to common stockholders | $849 million | $595 million | +43% |
| Diluted earnings per common share | $1.98 | $1.41 | +40% |
| Adjusted EBITDA | $3.553 billion | $3.067 billion | +16% |
| AFFO attributable to common stockholders | $2.400 billion | $2.116 billion | +13% |
| Cash provided by operating activities | $2.704 billion | $2.183 billion | +24% |
Property revenue grew 22%; Asia revenue rose 242%, primarily reflecting the Viom acquisition. U.S. property revenue increased 7%, EMEA 34%, and Latin America 11%. Services revenue fell 20% to $73 million. Reported operating margin was approximately 32.0%, compared with 33.8% in 2015, as operating expenses grew faster than revenue, including depreciation and amortization associated with acquired sites.
Cash used in investing activities was $2.107 billion, including approximately $1.1 billion for Viom; capital expenditures were $701 million. Cash used in financing activities was $99 million. Year-end cash and cash equivalents were $787 million, plus $149 million restricted cash. Available liquidity was $3.602 billion, including undrawn credit facilities.
Long-term obligations, including current portions, totaled $18.533 billion at year-end, versus $17.119 billion in 2015. Interest expense increased 20% to $717 million; the annualized weighted average borrowing cost rose to 3.92% from 3.67%. The company reported compliance with its credit-facility covenants. Current assets were $1.690 billion and current liabilities $1.631 billion.
Fourth-quarter figures and changes versus the prior year
Q4 2016 revenue was $1.540 billion, compared with $1.280 billion in Q4 2015. Operating income was $489 million versus $402 million, and net income was $233 million versus $222 million. Diluted EPS attributable to common stockholders was $0.47, versus $0.48; common-stockholder net income was $202 million versus $206 million. Quarterly revenue and operating income increased, while common EPS declined slightly.
FY 2016 net income benefited from higher operating profit, lower foreign-currency losses and a smaller loss on debt retirement. Comparability with 2015 is also affected by the prior-year $93 million one-time cash tax charge related to the MIPT tax election. Debt-related interest expense and depreciation, amortization and accretion increased in 2016.
Outlook, risks and unusual items
- Management expected 2017 operating cash flow to fund required distributions, capital expenditures, debt service and signed acquisitions. It forecast 2017 capital expenditures of $800 million to $900 million, including construction of approximately 2,500 to 3,500 sites. The filing does not provide a clear numerical earnings or revenue forecast.
- Management cited wireless data growth, network densification, spectrum deployment and colocations as demand drivers, while emphasizing acquisition discipline, portfolio utilization and maintaining investment-grade ratings.
- After year-end, the company completed the acquisition of FPS Towers in France for €713.9 million (about $757 million at closing). It also redeemed $300 million of 7.25% notes and repaid the remaining GTP and Unison securitized notes in February 2017, using credit-facility borrowings and cash on hand.
- Key risks include reliance on a small number of tenants—four accounted for 56% of revenue—tenant consolidation or network sharing, foreign exchange and political/regulatory risks, acquisition integration, leverage, REIT qualification, ground-lease renewals and technology shifts. Forty percent of revenue and 45% of operating expenses were denominated in foreign currencies.
- The company disputed a $69.8 million Indian tax assessment relating to pre-acquisition activity and recorded no liability, citing its expectation that its position would prevail and seller indemnification. Management reported no pending legal matter expected to materially affect consolidated financial position, results or liquidity.
- Management and the auditor reported effective internal control over financial reporting, but the assessment excluded acquired Indian subsidiary ATC TIPL, which represented 12% of assets and 10% of revenue; integration of its controls was ongoing.
Important facts for investors to verify
- Whether growth in AFFO and operating cash flow continues after separating organic performance from acquisitions, pass-through revenue and foreign-currency effects.
- Viom integration progress, acquired-asset returns, and the potential cost and timing of remaining acquisition-related obligations and put rights held by minority shareholders.
- Debt maturities, interest costs, covenant headroom and the effect of post-year-end borrowings and debt repayments on liquidity and leverage.
- Tenant concentration, renewal and churn trends, and the effects of carrier consolidation, sharing or reduced network investment.
- Exposure to currency movements, disputed tax matters and evolving foreign regulatory requirements; also monitor integration of ATC TIPL’s financial controls.
Adjusted EBITDA, FFO and AFFO are non-GAAP measures and are not substitutes for GAAP net income or operating cash flow.