American Tower Corporation — FY 2015 Form 10-K
Reporting period: Year ended December 31, 2015; selected fourth-quarter results are also disclosed. American Tower is a global REIT that leases communications-site space. Property operations generated 98% of revenue. At year-end, its portfolio comprised 100,615 communications sites across the U.S., Asia, EMEA and Latin America.
Financial performance
| Metric | FY 2015 | FY 2014 | Change |
|---|---|---|---|
| Revenue | $4.772 billion | $4.100 billion | +16% |
| Operating income | $1.613 billion | $1.487 billion | +8% |
| Net income | $672 million | $803 million | −16% |
| Net income attributable to common stockholders | $595 million | $801 million | −26% |
| Diluted EPS | $1.41 | $2.00 | −30% |
| Adjusted EBITDA | $3.067 billion | $2.650 billion | +16% |
| NAREIT FFO | $1.733 billion | $1.674 billion | +4% |
| AFFO | $2.150 billion | $1.815 billion | +18% |
| Cash provided by operating activities | $2.183 billion | $2.135 billion | +2% |
| Capital expenditures | $729 million | $974 million | −25% |
Revenue growth reflected acquisitions and organic leasing. U.S. revenue increased 20%, including $296.8 million from the Verizon assets; EMEA grew 25%, including $109.7 million from the Airtel Nigeria sites; Asia rose 10%; and Latin America rose 6%. Foreign exchange materially reduced reported growth in international markets. Services revenue declined 2%.
Operating margin was approximately 33.8%, versus 36.3% in 2014, as depreciation, amortization and accretion rose 28% to $1.285 billion, largely due to acquired and newly built sites. Interest expense increased 3% to $596 million. The common-stockholder earnings decline also reflected higher preferred dividends, a $79.6 million debt-retirement loss, greater tax expense and foreign-currency losses. Adjusted EBITDA, FFO and AFFO are non-GAAP measures; AFFO excludes the one-time MIPT tax charge.
Balance sheet, liquidity and capital
- Long-term obligations were $17.12 billion, up from $14.54 billion; total assets were $26.90 billion. The weighted-average contractual interest rate was 3.45% at year-end.
- Year-end liquidity was $1.855 billion, comprising $1.534 billion of net availability under credit facilities and $321 million of cash and cash equivalents. The company reported covenant compliance.
- Cash used in investing activities was $7.742 billion, principally for the Verizon transaction ($5.059 billion), TIM Brazil ($797 million), Airtel Nigeria ($1.1 billion) and capital expenditures.
- Financing cash flow was $5.589 billion. Common and preferred equity offerings raised net proceeds of approximately $2.44 billion and $1.34 billion, respectively, primarily to fund Verizon. Common distributions declared were $1.81 per share, up from $1.40.
- Operating lease payments totaled $9.85 billion over contractual periods; this is separate from reported debt. Tenant leases were expected to provide $30.28 billion of future minimum rentals under non-cancellable agreements.
Material changes, outlook and risks
- The company added approximately 25,368 sites in 2015, including the Verizon transaction, 5,483 TIM sites and 4,716 Airtel sites. It agreed to acquire a 51% controlling interest in India’s Viom Networks for approximately $1.2 billion, subject to closing conditions; closing was expected in the first half of 2016.
- Management forecast 2016 capital expenditures of $700–$800 million, including expected Viom-related spending and construction of approximately 2,500–3,000 sites. It stated that expected operating cash flow and credit-facility capacity should cover distributions, capex, debt service and signed acquisitions; no specific revenue or earnings guidance is provided in the supplied filing text.
- Management cited long-term, generally non-cancellable leases, contractual escalators and historically low churn (about 1%–2% of property revenue annually) as supports for recurring revenue. It expects demand from wireless data growth, network densification and spectrum deployment, while emphasizing disciplined investment and balance-sheet management.
- Customer concentration is significant: four tenants accounted for 63% of revenue; AT&T alone contributed 24%, Verizon Wireless 16%, Sprint 13% and T-Mobile 10%. Risks include tenant consolidation or network sharing, technology shifts, competition, zoning and permitting constraints, ground-lease rights, acquisition integration, leverage, REIT qualification and international political, tax and currency exposure.
- Foreign-currency losses totaled $134.7 million in other expense, while foreign-currency translation reduced other comprehensive income by approximately $1.079 billion. The MIPT tax election resulted in a $93 million one-time cash tax charge; a Ghana tax-law change added $13.1 million of tax expense. Goodwill impairment testing identified no potential impairment, though $15.1 million of long-lived asset impairment charges were recorded.
- Management said no pending litigation was expected to materially affect financial position, results or liquidity. Deloitte issued an unqualified opinion on the financial statements and internal controls; management also assessed internal control over financial reporting as effective.
Investor verification points
- Reconcile reported revenue and operating growth with acquisition contributions, organic leasing, pass-through revenue and foreign-exchange effects by region.
- Assess whether the Verizon, TIM and Airtel portfolios meet return expectations after integration costs, and verify the status, financing and terms of the Viom acquisition.
- Review debt maturities, variable-rate exposure, covenant headroom and the effect of the January 2016 refinancing; year-end debt was substantial relative to reported cash.
- Evaluate tenant concentration, renewal and churn trends, and the potential effect of carrier consolidation or network sharing on lease demand.
- Check the sustainability of distributions against AFFO, preferred dividends, required REIT distributions and planned capital spending; note that AFFO is non-GAAP and excludes the one-time MIPT tax charge.
- Monitor foreign-currency movements, tax exposures and the company’s ability to protect land and operating rights at leased sites.