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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1999
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF
1934
For the transition period from to
Commission file number 333-46025
AMERICAN TOWER CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 65-0723837
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
116 Huntington Avenue
Boston, Massachusetts 02116
(Address of principal executive offices and Zip Code)
(617) 375-7500
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act:
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(Title of Class) Name of exchange on Which Registered
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Class A Common Stock, $0.01 par value New York Stock Exchange
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Securities registered pursuant to Section 12 (g) of the Act:
(Title of Class)
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this form 10-K. [_]
The aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant as of March 9, 2000 was approximately
$6,807,440,854. As of March 9, 2000, 146,232,690 shares of Class A Common
Stock, 8,373,252 shares of Class B Common Stock and 2,422,804 shares of the
Class C Common Stock were issued and outstanding.
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AMERICAN TOWER CORPORATION
TABLE OF CONTENTS
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Page
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PART I.
ITEM 1. Business..................................................... 1
ITEM 2. Properties................................................... 16
ITEM 3. Legal Proceedings............................................ 16
ITEM 4. Submission of Matters to a Vote of Security Holders.......... 16
PART II.
ITEM 5. Market for the Registrant's Common Equity and Related 17
Stockholder Matters..........................................
ITEM 6. Selected Financial Data...................................... 18
ITEM 7. Management's Discussion and Analysis of Financial Condition 19
and Results of Operations....................................
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk... 27
ITEM 8. Financial Statements and Supplementary Data.................. 29
ITEM 9. Changes In and Disagreements With Accountants On Accounting
and Financial Disclosure..................................... 29
PART III.
ITEM 10. Directors and Executive Officers of the Registrant........... 30
ITEM 11. Executive Compensation....................................... 32
ITEM 12. Security Ownership of Certain Beneficial Owners and 35
Management...................................................
ITEM 13. Certain Relationships and Related Transactions............... 38
PART IV.
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 39
8-K..........................................................
Signatures................................................... 40
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this document. Our forward-
looking statements are subject to risks and uncertainties. You should note
that many factors, some of which are described in this section or discussed
elsewhere in this document, could affect our company in the future and could
cause our results to differ materially from those expressed in our forward-
looking statements. Forward-looking statements include those regarding our
goals, beliefs, plans or current expectations and other statements regarding
matters that are not historical facts. For example, when we use the words
"believe," "expect," "anticipate" or similar expressions, we are making
forward-looking statements. Factors that could affect our forward-looking
statements include:
. the outcome of our growth strategy;
. future results of operations;
. liquidity and capital expenditures;
. construction and acquisition activities;
. debt levels and the ability to obtain financing and make payments on our
debt;
. regulatory developments and competitive conditions in the communications
site and wireless carrier industries;
. projected growth of the wireless communications and wireless carrier
industries;
. dependence on demand for satellites for Internet data transmission; and
. general economic conditions.
We are not required to release publicly the results of any revisions to
these forward-looking statements we may make to reflect future events or
circumstances.
ITEM 1. BUSINESS
General
We are a wireless communications and broadcast infrastructure company with
three operating segments.
. We operate a leading network of communications towers and are the
largest independent operator of broadcast towers in North America.
. We provide comprehensive network development services for wireless
service providers and broadcasters.
. We operate a leading teleport business, which transmits Internet, voice,
data and video communications worldwide.
Our three operating segments accounted for the following percentages of 1999
operating revenues:
. Rental and management -- 52%
. Network development services -- 35%, and
. Internet, voice, data and video transmission services -- 13%.
Rental and Management. We believe we are the largest independent owner,
operator and developer of broadcast and wireless communications sites in North
America. Assuming consummation of all pending transactions, we operate a
network of approximately 10,400 multi-user sites in the United States, Mexico
and Canada, including approximately 300 broadcast tower sites. Of those sites,
approximately 9,000 are owned or leased sites and approximately 1,400 are
managed or lease-sublease sites. Our U.S. network spans 48 states and the
District of Columbia, with tower clusters in 43 of the 50 largest U.S.
metropolitan statistical areas. Our developing Mexican network includes sites
in highly populated areas such as Mexico City, Monterrey, Guadalajara and
Acapulco. Our newly organized Canadian operation will include sites in major
metropolitan areas such as Toronto, Montreal, Quebec City, Edmonton and
Hamilton.
Our primary business is the leasing of antenna space to a diverse range of
wireless communications and broadcast industries. Wireless industries served
include personal communications services ("PCS"), cellular,
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enhanced specialized mobile radio ("ESMR"), specialized mobile radio ("SMR"),
paging, fixed microwave and fixed wireless. Our customers include AirTouch,
Alltell, AT&T, AT&T Wireless Services, Bell Atlantic Mobile, BellSouth, GTE
Mobilnet, Mobile Wireless, Nextel, Omnipoint, PacBell, PowerTel, PrimeCo PCS,
Southwestern Bell, Sprint PCS, Telligent, Western Wireless and WinStar.
Through our broadcast tower network we serve most major radio and television
broadcasters, including, ABC, AMFM, CBS, Clear Channel, Cox, Fox, Infinity,
NBC, Paxson, Paramount, Sinclair, Telemedia, Tribune, TV Azteca and Univision.
Network Development Services. We are a leading provider of network
development services and components for both wireless service providers and
broadcasters. We offer full turnkey network development solutions to our
customers, consisting of radio frequency engineering, network design, site
acquisition, zoning and other regulatory approvals, construction management,
tower construction and antenna installation. We also offer a complete line of
wireless infrastructure components that are sold to service providers,
broadcasters, developers and others within the wireless industry. We provide
site acquisition services to most of the major wireless service providers and
have constructed or are constructing towers on a build-to-suit basis for
wireless and broadcast companies such as AirTouch, AT&T affiliates, AT&T
Wireless Services, BellSouth, Nextel, Omnipoint, Paxson, PrimeCo PCS, Sinclair
and Southwestern Bell.
We have performed network development services for other companies on more
than 10,000 sites. We constructed approximately 1,000 towers for our own
account in 1999, at an aggregate cost of approximately $220.0 million,
excluding broadcast towers. Our 2000 business plan, exclusive of broadcast
towers, calls for construction of approximately 1,200 towers for our own
account at an estimated cost of between $196.0 million and $240.0 million. In
addition, the plan calls for construction of approximately 20 broadcast towers
at an estimated cost of between $50.0 million and $70.0 million.
Internet Voice, Data and Video Transmission Services. We are a leading
Internet, voice, data and video satellite transmission company, providing
services to both land and sea worldwide. Assuming consummation of pending
transactions, we own and operate approximately 160 satellite antennas in
various locations across the United States, with major facilities serving New
York, Washington, D.C., San Francisco and Dallas, as well as the Northeast,
Southwest and Pacific Northwest. Our teleports are used by leading Internet,
voice and data providers, as well as television networks, broadcast and cable
programmers. Our customers include ABC, British Telecom, Cable and Wireless,
CBS, CNN, Deutsche Telekom, Fox, MCI Worldcom, TCI, Telefonica and Uunet. We
are also a leading provider of Internet, voice and data services to major
cruise lines and the U.S. military.
We believe that leasing activities generate the highest profit margins. We
also believe that leasing activities are likely to grow rapidly because of our
recent and pending acquisitions and our build-to-suit and other construction
activities. These acquisitions and construction activities will increase
significantly the number of antenna sites available for leasing. The industry
trend towards outsourcing infrastructure needs may also result in a decline in
our site acquisition and construction activities for other companies.
We have a diversified base of more than 7,100 customers. For the year ended
December 31, 1999, one customer, Sprint, accounted for approximately 17% of
total operating revenues. Our five largest customers accounted for
approximately 37% of our 1999 operating revenues. We estimate that PCS
accounted for more than 30% of our 1999 operating revenues and paging
accounted for approximately 13% of those revenues. We believe that no other
industry sector accounted for 10% or more of 1999 revenues.
These historical numbers may not be indicative of our future results because
they do not reflect our recent major acquisitions, including the Airtouch and
AT&T transactions. For example on a proforma basis, for the year ended
December 31, 1999 PCS, cellular and paging account for approximately 29%, 19%
and 12% of proforma 1999 operating revenues. On a proforma basis no other
industry sector accounted for 10% or more of proforma 1999 operating revenues.
The importance of the different sectors will probably change because of the
emergence of new wireless data providers and the anticipated growth of PCS,
cellular and ESMR, compared to other wireless service providers. The relative
contributions of the different sectors will also be affected as major wireless
service providers create strategic alliances with independent operators,
including in our case AirTouch
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and AT&T. Finally, the percentage of operating revenues derived from PCS will
also be affected by the decline in our site acquisition and construction
activities for that sector, as providers continue to outsource those
requirements. Slightly more than one-half of PCS's contribution to our pro
forma 1999 operating revenue was attributable to site acquisition and
construction activities.
Growth Strategy
Our growth strategy seeks to capitalize on the rapid expansion taking place
in the wireless communications industry. We believe the increase in demand for
wireless communications is attributable to a number of factors. These include:
. decreasing costs of wireless services;
. the increasing mobility of the U.S. population;
. the growing awareness of the benefits of mobile communications;
. technological advances in communications equipment;
. favorable changes in telecommunications regulations; and
. business and consumer preferences for higher quality voice and data
transmission.
We designed our growth strategy to create and then enhance our position as a
leader in each of our operating segments. Our goals were to:
. create a leading national footprint of desirable communications towers
in all major markets in the United States;
. establish the capacity to profitably serve most of the infrastructure
needs of the wireless service and broadcast industries; and
. create a leader in the transmission of Internet, voice, data and video
content through our teleport facilities.
We implemented our strategy through a combination of acquisitions and
construction. We initially pursued acquisitions with independent tower
operators and other consolidators and more recently with major wireless
service providers disposing of their towers. This acquisition program also
broadened the scope of our network development services and our Internet
voice, data and video transmission service.
Our strategy has enabled us to create an organization with a depth of
personnel, computer and financial systems, sales and marketing, and
engineering and other technical expertise to take advantage of the growth in
wireless communications, digital television and the Internet. We believe we
are well positioned competitively for growth because we can meet the majority
of infrastructure requirements of wireless communications and digital
television and are playing an increasing role in addressing the Internet's
infrastructure needs. We will continue to pursue our growth strategy by:
. maximizing utilization of antenna sites through targeted sales and
marketing techniques;
. capitalizing on our ability to provide full turnkey network development
solutions principally through build-to-suit projects and other tower
construction activities; and
. pursuing strategic mergers and acquisitions with independent tower
operators and other consolidators and wireless service providers.
We believe that as the wireless communications industry has grown it has
become more competitive. As a consequence, many carriers may seek to preserve
capital and speed access to their markets by (a) focusing on activities that
contribute directly to subscriber growth, (b) outsourcing infrastructure
requirements such as owning, constructing and maintaining towers, and (c) co-
locating transmission facilities. We also believe that the co-location trend
is likely to accelerate because of regulatory restrictions and the growing
tendency of local municipalities seeking to slow the proliferation of towers
in their communities by requiring that towers accommodate multiple tenants. We
believe that national and other large wireless service providers prefer to
deal
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with a company, such as ours, that can meet the majority of its needs within a
particular market or region. This is in contrast to the past, when carriers
typically sourced many of those services in-house, and used local non-
integrated contractors for specific segments like radio frequency engineering,
site acquisition and tower construction.
We believe that, in addition to such favorable growth and outsourcing
trends, the communications site industry and our company will benefit from
several favorable characteristics, including the following:
. a recurring and growing revenue stream due in part to long-term leases;
. low tenant "churn" due to the costs and disruption associated with
reconfiguring a wireless network or broadcasting location;
. a customer base that is diversified by industry and that consists
principally of large, financially responsible national companies;
. favorable absolute and incremental tower cash flow margins due to low
variable operating costs;
. low on-going maintenance capital requirements;
. local government and environmental initiatives to reduce the numbers of
towers thereby requiring carriers to co-locate antennae; and
. the opportunity to consolidate in an industry that remains highly
fragmented, thereby creating the potential for enhanced levels of
customer service and operating efficiency.
Internal Growth through Sales, Service and Capacity Utilization. We believe
that a substantial opportunity for profitable growth exists by maximizing the
utilization of existing and future towers. Because the costs of operating a
site are largely fixed, increasing tower utilization significantly improves
site operating margins. Moreover, when a specific tower reaches full antennae
attachment capacity, we are often able to construct an additional tower at the
same location. This further leverages our investment in land, related
equipment and certain operating costs, including taxes, utilities and
telephone service.
We intend to continue to use targeted sales and marketing techniques to
increase utilization of both existing and newly constructed towers and to
maximize investment returns on acquired towers with underutilized capacity. We
believe that the key to the success of this strategy lies in our ability to
develop and consistently deliver a high level of customer service, and to be
widely recognized as a company that makes realistic commitments and then
delivers on them. Since speed to market and reliable network performance are
critical components to the success of wireless service providers, our ability
to assist our customers in meeting these goals will ultimately define our
marketing success and capacity utilization. We target wireless service
providers that are expanding or improving their existing network
infrastructure, as well as those deploying new technologies.
Growth by Build-to-Suit/Construction. We believe we can achieve attractive
investment returns by constructing new tower clusters in and around markets in
which we already have a presence, along major highways and in targeted new
markets, particularly markets that have not been significantly built out by
carriers or other communications site companies. By working with one or more
"anchor" tenants, we seek to develop an overall master plan for a particular
network by locating new sites in areas identified by our customers as optimal
for their network expansion requirements. We generally secure commitments for
leasing prior to commencing construction, thereby minimizing, to some extent,
the risks associated with the investment. In some cases, however, we may
invest in the zoning and permitting of sites, and even the construction of
towers, where we have no anchor tenant. We do this when we believe demand will
exist in the near term. We will also pursue strategic acquisitions as a means
of filling out or, in certain cases, initiating, a tower cluster.
We intend to place a strong emphasis on new tower development for the
foreseeable future because we believe that this can produce relatively
attractive initial returns. In addition, we can design and build towers to
specifications that assure ample future capacity and minimize the need for
future capital expenditures. We also intend to pursue new tower construction
to service the demand for digital television and for tower space for radio
antennae displaced by digital television requirements.
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We and others in the industry are increasingly devoting our construction
activities to build-to-suit projects. Under these arrangements, we, and
others, agree with a major wireless service provider to build a network of
significant towers to the provider's specifications. Our increasing focus on
major build-to-suit projects for wireless service providers entails several
unique risks. The first is the greater dependence on a single customer.
Second, because of intense competition for these projects, we often grant the
wireless service provider non-economic lease and control provisions more
favorable than our general terms. Finally, although we have the benefit of an
"anchor" tenant in build-to-suit projects, we may not be able to find a
sufficient number of additional tenants. In fact, one reason wireless service
providers may want build-to-suit arrangements is to share or escape the costs
of an undesirable site. A site may be undesirable because it has high
construction costs or may be considered a poor location by other providers.
Our expanded construction activities also involve other substantial risks.
These risks include:
. increasing our debt and the amount of payments on that debt;
. uncontrollable risks that could delay or increase the cost of a project;
. increasing competition for construction sites and experienced tower
construction companies, resulting in significantly higher costs and
failure to meet time schedules;
. failing to meet time schedules could result in our paying significant
penalties to prospective tenants, particularly in build-to-suit
situations; and
. possible lack of sufficient experienced personnel to manage an expanded
construction program.
We cannot control the main factors that can prevent, delay or increase the
cost of construction. These factors include:
. zoning and local permitting requirements;
. environmental group opposition;
. availability of skilled construction personnel and construction
equipment;
. adverse weather conditions; and
. federal regulations.
As the pace of tower construction has increased in recent years, the
required manpower and equipment have been in increasing demand. The
anticipated increase in construction activity, both for us and the industry,
could significantly increase costs and delay time schedules associated with
tower construction, either of which could materially and adversely affect us.
The construction of towers to accommodate the introduction of digital
television service could be particularly affected by a potential shortage of
construction capability.
The ability to obtain, and commit to, large new construction projects will
require significant financial resources. We believe that our cost of capital,
relative to the cost of capital of our competitors, will be an important
factor in determining the success of our growth by construction strategy.
Based on our previous capital market transactions, we believe that we have a
good reputation in the financial community, including among banks, investment
banking firms, institutional investors and public investors. We believe that
reputation will help us attract capital on the favorable terms necessary to
finance our growth. However, funds may not be available to us on favorable
terms.
Growth by Acquisitions. We have achieved a leading industry position
primarily through acquisitions. We intend to continue to pursue strategic
mergers and acquisitions with independent tower operators and consolidators
and with wireless providers. Our acquisition strategy is designed principally
to:
. achieve enhanced operating efficiencies;
. take advantage of divestiture opportunities presented by wireless
service providers;
. broaden and strengthen our penetration of major markets;
. facilitate entry into new geographic markets in the United States and
abroad; and
. complement our construction program.
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Among the potential acquisitions are tower networks still owned by major
wireless service providers. We have entered into these types of transactions
with AirTouch and AT&T, as described elsewhere in this document. These
transactions are usually substantial, involving several thousand towers and
purchase prices in the hundreds of millions of dollars. Construction
commitments that may attend such acquisitions may also entail hundreds of
millions of dollars of capital expenditures. We have experienced increased
competition for towers being divested by wireless service providers, resulting
in substantially higher prices to complete those transactions. Transactions
with wireless service providers entail the risk of dependence on a single
customer with, in many instances, more favorable lease and control provisions
than we make available generally. We intend to continue to pursue those
opportunities actively, although the remaining opportunities of this nature
are limited. We may not, necessarily, enter into any additional major
transaction of this nature.
Our current activities with respect to possible significant acquisitions
range from the evaluation of properties, to submissions of indications of
interests and first-round bids, to negotiations. Generally the purchase price
consists of cash, although we may, in certain circumstances, include our
common stock or other securities. No single material acquisition has reached
the legally binding agreement stage other than those described in this
document. See "--Recent Transactions" below.
We probably have sufficient capital resources available to us under our
credit facilities to finance any potential acquisition from wireless providers
or other independent operators. However, were we to combine with a major
consolidator, unless we used our common stock, we might be required to raise
additional equity capital. See "Competition" below.
We will attempt to increase revenues and operating margins at acquired
communications sites through expanded sales and marketing efforts, improved
customer service, the elimination of redundant overhead and, in certain
instances, increasing tower capacity. Acquisitions of communications towers
and sites are evaluated using numerous criteria, including potential demand,
tower location, tower height, existing capacity utilization, local competition
and local government restrictions on new tower development.
We also intend to pursue, on a selective basis, the acquisition of providers
of Internet, voice, data and video transmission services, and may pursue
acquisitions related to the network development services industry, including
companies engaged in the tower fabrication business.
To the extent we pursue acquisitions and construction activities abroad,
including those in Mexico, we will face certain political and economic risks
not inherent in our U.S. operations. These include governmental expropriation
and regulation, inability to repatriate earnings or other funds, currency
fluctuations, difficulty in recruiting trained personnel, and language and
cultural differences that could impair management control and operations.
Products and Services
We operate in three business segments:
. Rental and management ("RM");
. network development services ("Services"); and
. Internet, voice, data and video transmission services ("IVDV").
The RM segment provides for the leasing and subleasing of antennae sites on
multi-tenant towers for a diverse range of wireless communication industries,
including PCS, paging, cellular, ESMR, SMR, fixed microwave and fixed
wireless, as well as radio and television broadcasters. The Services segment
offers a broad range of network development services, including network
design, radio frequency engineering, site acquisition, zoning and other
regulatory approvals, tower construction, component part sales, and antennae
installation. The IVDV segment offers transmission services to both land and
sea worldwide.
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Rental and Management Segment
Leasing of Antennae Sites. We believe we are the largest independent owner,
operator and developer of wireless communications sites in North America.
Assuming consummation of pending transactions, we operate a national network
of approximately 10,400 multi-user sites, approximately 9,000 of which are
owned or leased and approximately 1,400 of which are managed or leased-
subleased. Included in our network are approximately 300 broadcast towers. Our
network spans 48 states and the District of Columbia, with tower clusters in
43 of the 50 largest U.S. metropolitan statistical areas. Our developing
Mexican network includes sites in highly populated areas, including Mexico
City, Monterrey, Guadalajara and Acapulco. Our newly organized Canadian
operation will include sites in major metropolitan areas such as Toronto,
Montreal, Quebec City, Edmonton and Hamilton.
Our primary business is the leasing of antenna space to a diverse range of
wireless communications and broadcast industries. Wireless industries served
include PCS, cellular, ESMR, SMR, paging, fixed microwave and fixed wireless.
Our broadcast towers serve most major radio and television broadcasters.
We are geographically diversified with a significant number of towers
throughout the United States. Our largest tower clusters are in California,
Florida and Texas. We also own and operate communications sites or are
constructing towers in cities such as Albuquerque, Atlanta, Austin, Baltimore,
Boston, Charlotte, Dallas, Houston, Jacksonville, Kansas City, Los Angeles,
Miami-Ft. Lauderdale, Minneapolis, Philadelphia, Raleigh, San Antonio, San
Diego, San Francisco, Tucson, Washington, D.C. and West Palm Beach.
Our leases, like most of those in the industry, generally vary depending
upon the industry user. Television and radio broadcasters prefer long-term
leases, while wireless communications providers favor somewhat shorter lease
terms, with, in both cases, multiple renewals at the option of the tenant.
Governmental agencies, because of budgetary restrictions, generally have one-
year leases that tend to renew automatically. Tenants tend to renew their
leases because of the complications associated with moving antennae. For
example, a move by a television or radio broadcaster would necessitate FCC
approval and could entail major dislocations and the uncertainty associated
with building antennae in new coverage areas. In the case of cellular, PCS and
other wireless users, moving one antennae might necessitate moving several
others because of the interlocking grid-like nature of wireless systems. In
addition, the increasing difficulty of obtaining local zoning approvals, the
increasing environmental concerns of communities and the restrictions imposed
by the Federal Aviation Administration and FCC tend to reduce the number of
choices available to a tower user.
Most of our leases have escalator provisions. These annual automatic
increases are based on specified estimated cost measures or on increases in
the consumer price index. While we do not intend these provisions to be a
primary source of growth, they provide a stable and predictable growth
component that is enhanced by increased tower utilization. We may also receive
fees if we are retained to install the customer's equipment and antennae at
the communications site.
Annual rental payments vary considerably depending upon:
. type of service being provided;
. size of the transmission line and the number and weight of the antennae
on the tower;
. existing capacity of the tower;
. antenna's placement on, and the location and height of, the tower; and
. competitive environment.
We believe that it is not possible to state with any degree of precision the
vacancy or unused capacity of a "typical" tower, group of related towers or
all of our towers for a variety of reasons. These include, among others, the
variations that occur depending on the types of antennae placed on the tower,
the types of services being provided by the tower users, the type and location
of the tower or towers, the ability to build other towers so as to configure a
network of related towers, whether any of the users have imposed restrictions
on competitive users, and whether any environmental, zoning or other
restrictions exist on the number or type of users.
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Our antennae site leasing business is dependent on many factors that are
beyond our control, including:
. consumer demand for wireless services;
. the financial condition of wireless service providers and their
preference for owning or leasing antennae sites;
. governmental licensing of broadcast rights;
. zoning, environmental and other governmental regulations;
. national, regional and industry economic conditions, including a
slowdown in the growth of wireless communications, a downturn in a
particular wireless segment or a decrease in the number of carriers,
nationally or locally, in a particular segment; and
. technological changes.
Demand could also be adversely affected by "roaming" and "resale"
arrangements. These arrangements enable a provider to serve customers outside
its license area, to give licensed providers the right to enter into
arrangements to serve overlapping license areas and to permit nonlicensed
providers to enter the wireless marketplace. Wireless providers might consider
such roaming and resale arrangements as superior to constructing their own
facilities or leasing antennae space from us. Any material decrease in demand
or proliferation of "roaming" and "resale" arrangements could have a material
adverse effect on our company.
The demand for antenna space is dependent, to a significantly lesser extent,
on the needs of television and radio broadcasters. Among other things, certain
technological advances, including the development of satellite-delivered
radio, may reduce the need for tower-based broadcast transmission. We could
also be affected adversely should the development of digital television be
delayed or impaired, or if demand for it were to be less than anticipated
because of delays, disappointing technical performance or cost to the
consumer.
Communications Site Management Business. We are a leading manager of
communications sites. These are principally rooftop sites, but also include
ground towers. A principal aspect of this business is the development of new
sources of revenue for building owners by effectively managing all aspects of
rooftop telecommunications, including two-way radio systems, microwave, fiber
optics, wireless cable and paging and rooftop infrastructure construction
services. Assuming consummation of our pending transactions, we manage or
lease-sublease approximately 1,400 sites.
Management contracts are generally for a period of five years and contain
automatic five-year renewal periods unless terminated by either party before
renewal or upon an uncured default. Under these contracts, we are responsible
for a wide range of activities including:
. marketing antennae sites on the tower;
. reviewing existing and negotiating future license agreements with tenant
users;
. managing and enforcing those agreements;
. supervising installation of equipment by tenants to ensure, among other
things, non-interference with other users;
. supervising repairs and maintenance to the towers; and
. site billing, collections and contract administration.
In addition, we handle all calls as well as questions regarding the site so
that the building management team or owner is relieved of this responsibility.
For such services, we are entitled to a percentage of lease payments, which is
higher for new tenants than for existing tenants. Upon termination of a
contract, unless it is because of our default, we are generally entitled to
our percentage with respect to then existing tenants so long as they remain
tenants.
Services Segment
We are a leading provider of network development services and components for
both wireless service providers and broadcasters. We offer full turnkey
network development solutions to our customers, consisting of
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network design, radio frequency engineering, site acquisition, zoning and
other regulatory approvals, tower construction, component part sales, and
antennae installation. We provide site acquisition services to most of the
major wireless service providers and have constructed or are constructing
towers on a build-to-suit basis for a variety of wireless and broadcast
companies.
Site Acquisition Business/Construction. Our site acquisition division has
developed more than 10,000 sites in 48 states and currently has field offices
in several major cities, including Atlanta, Chicago, Charlotte, Cleveland,
Jacksonville, New Orleans and Seattle.
The site selection and acquisition process begins with the network design.
Highway corridors, population centers and topographical features are
identified within the carrier's existing or proposed network, and drive tests
are performed to monitor all PCS, cellular and ESMR frequencies to locate the
systems then operating in that area and identify where any holes in coverage
may exist. Based on this data, we and the carrier develop a "search ring,"
generally of one-mile radius, within which the site acquisition department
identifies land available either for purchase or lease. Our personnel select
the most suitable sites, based on demographics, traffic patterns and signal
characteristics. The site is then submitted to the local zoning/planning board
for approval. If the site is approved, in certain instances we will supervise
construction of the towers and other improvements on the communications site.
We have performed site acquisition business for, among others, AirTouch,
Alltel, AT&T Wireless, Ameritech, Bell Atlantic Mobile, BellSouth, GTE
Mobilnet, MobileComm, PageNet, Power Tel, SkyTel, Southwestern Bell, Sprint
PCS and Western Wireless. While we will continue to provide site acquisition
services to those customers desiring them, we also intend to continue to
actively market our construction and leasing services as an extension of these
services.
Build to Suit Business/Construction. We currently design, build, install,
modify and maintain land-based wireless communications transmitting and
receiving facilities primarily for providers of wireless communications
services. We also provide radio frequency and network design services,
including drive testing, voice quality analysis and transport engineering,
interconnect and microwave services, certain electrical engineering and
wireless equipment testing services, and, as noted, site acquisition and
evaluation services in connection with the location and installation of
wireless communications facilities.
Historically, cellular and other wireless service providers have constructed
a majority of their towers for their own use, while usually outsourcing
certain services such as site acquisition and construction management.
Beginning a few years ago, service providers expressed a growing interest in
having independent companies own the towers on which they lease space. We
believe this trend is the result of a need among such providers to preserve
capital and to speed access to their markets by focusing on activities that
contribute to subscriber growth and by outsourcing infrastructure requirements
such as owning, constructing and maintaining towers or by co-locating their
transmission infrastructure.
We positioned ourselves as an attractive choice for this build-to-suit
opportunity. We did so by acquiring and developing reputable site acquisition
companies with established client relationships in both site acquisition and
construction management, and by obtaining the financial resources necessary to
participate in the build-to-suit arena on a substantial scale. We believe
companies that are able to demonstrate the ability to successfully locate,
acquire and permit sites and finance and construct towers in a timely manner
will be used by a significant number of wireless service providers on an
expanded basis.
We are currently engaged in build-to-suit efforts for AirTouch, AT&T
Wireless, BellSouth, Nextel, Omnipoint, PrimeCo PCS and Southwestern Bell. We
are seeking several other major build-to-suit projects, although no definitive
agreements may result.
The cost of construction of a tower varies both by site location, which will
determine, among other things, the required height of the tower, and type of
tower. Non-broadcast towers, whether on a rooftop or the ground,
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generally cost between approximately $180,000 and $220,000. Broadcast towers
generally are built to bear a greater load and usually cost between $300,000
and $1.0 million if on an elevated location and between $1.0 million and $3.5
million if on flat terrain.
The number of antennae that our towers can accommodate varies depending on
whether the tower is broadcast or non-broadcast, and on the tower's location,
height and the loaded capacity at certain wind speeds. An antenna's height on
a tower and the tower's location determine the line-of-sight of the antenna
with the horizon and, consequently, the distance a signal can be transmitted.
Some users, including paging companies and SMR providers in rural areas, need
higher elevations for broader coverage. Other carriers such as PCS, ESMR and
cellular companies in metropolitan areas usually do not need to place their
equipment at the highest tower point. Non-broadcast towers of 200-300 feet
that are designed to maximize capacity generally are capable of housing
between five and ten tenants using an aggregate of between 25 and 50 antennae.
Broadcasting towers generally are capable of housing between ten and forty
tenants using an aggregate of between 50 and 100 antennae. In most cases, well
engineered and well located towers built to serve the specifications of an
initial anchor tenant in the wireless communications sector will attract three
or more additional wireless tenants over time, thereby increasing revenue and
enhancing margins.
Component Parts. As a result of several acquisitions consummated in 1999, we
expanded the scope of our Services segment to include the manufacture and sale
of wireless components. These include fasteners and other mounting components,
waveguide bridge products, square support rail, tower lighting systems, tower
safety products and other hardware products. End users utilize these products
primarily in connection with the installation and maintenance of wireless
communications facilities. We also manufacture certain wireless components on
a private label basis for sale to several large wireless communications
equipment vendors who market these products under their own brand names. We
expect to continue our aggressive marketing strategy with respect to the sale
of our component parts into 2000, and believe that we are well positioned to
take advantage of the continued demand for wireless components.
IVDV Segment
We are a leading Internet, voice, data and video satellite transmission
company, providing services to both land and sea worldwide. Assuming
consummation of pending transactions, we own and operate approximately 160
satellite antennas in various locations across the United States, with major
facilities near New York, Washington, D.C., Dallas and San Francisco, as well
as the Northeast, Southwest and Pacific Northwest. Our teleports are used by
leading Internet, voice and data providers as well as television networks,
broadcasters and cable programmers. Our customers include ABC, British
Telecom, CBS, Cable and Wireless, CNN, Deutsche Telekom, Fox, MCI Worldcom,
TCI, Telefonica and Uunet. We are also a leading provider of Internet, voice
and data services to major cruise lines and the U.S. military.
Our Internet voice, data and video transmission business is conducted
through teleports. A teleport is a hub for transmissions to and from ground
based sources and satellites. A typical teleport facility consists of
satellite antennas, known as dishes, terrestrial network interconnect
platforms, a 24-hour, 365-day operations center, terrestrial links and other
support facilities.
We own two teleports outside of New York City, one outside of Washington,
D.C. and two outside of Dallas, Texas. We also have a terrestrial system
connecting Washington, D.C., Baltimore, Philadelphia and New York City. The
New York teleport system is located on a 70-acre owned site which is zoned for
29 satellite dishes of which 22 are existing, thereby providing significant
expansion capacity. The Washington teleport is located in northern Virginia,
inside of the Washington Beltway, on 16 acres and has 40 dishes with the
capacity for an additional 20. The terrestrial system between the teleports
consists of fiber and microwave channels. The entire system is used by
television networks, broadcasters, cable programmers, and many of the leading
voice, data and Internet providers. The teleports can access all of the
domestic and major international satellites in their operating regions. The
Texas system consists of two teleports outside of Dallas and a terrestrial
system connecting Dallas, Austin, San Antonio, Houston and Corpus Christi. The
system connects to all major sports and convention venues, broadcasters and
other significant video users in Texas.
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Our ICG acquisition in December 1999 involved a major around-the-clock
teleport facility in New Jersey and a global maritime telecommunications
network headquartered in Miami, Florida. Through these facilities we provide
Internet, voice, data and compressed video satellite services to major cruise
lines, the U.S. military, Internet-related companies and international
telecommunications customers. The New Jersey teleport and operations center
has 12 existing antennas and one under construction that access satellites
covering the continental United States, South America and the Atlantic Ocean
region. See "Recent Transactions" below.
See the consolidated financial statements for revenues, operating profit
(loss), and assets of each of our operating segments.
Management Organization
We are headquartered in Boston and organized on a regional basis with each
region being headed by a vice president who reports to the chief operating
officer. Our current regional operations are based in Boston, Atlanta,
Chicago, Houston, the San Francisco Bay area and Mexico City, although
additional regional centers may develop over time, including one in Canada. We
believe that our regional operations centers, are capable of responding
effectively to the opportunities and customer needs of their respective
defined geographic areas and that these operations centers have adequately
skilled engineering, construction management and marketing personnel. We also
believe that over time enhanced customer service and greater operating
efficiencies can be achieved by centralizing certain operating functions,
including accounting and lease administration. This centralization, when
achieved, will enable key information about each site, tower lease and
customers to become part of a centralized database, with communications links
to regional operations centers.
In conjunction with our various acquisitions, we believe we have obtained
the services of key personnel with skills in areas such as site acquisition,
construction management, tower operations, engineering, marketing, lease
administration and finance. As we seek to expand our size and improve on the
quality and consistency of service delivery, we believe we may need to
supplement our current workforce in certain critical areas, develop new
regional centers and intensify our dedication to customer service.
Accordingly, we are actively recruiting key personnel to complete the staffing
of our regional operations centers and to strengthen and deepen our corporate
group. We focus our efforts on recruiting people from the industry sectors we
serve and in some instances recruiting skilled engineering, marketing and
other personnel from outside the communications site, wireless communications
and broadcasting industries.
History
In early 1995, Steven B. Dodge, the then chairman of the board, president
and chief executive officer of American Radio Systems Corporation ("American
Radio" or "ARS"), and other members of its management, recognized the
opportunity in the communications site industry as a consequence of its
ownership and operation of broadcast towers. American Radio formed our company
to capitalize on this opportunity. American Radio distributed its stock in our
company to its securityholders in connection with its merger with CBS in June
1998.
Recent Transactions
Consummated Transactions
Since January 1, 1999, we have consummated more than 60 transactions
involving the acquisition of more than 4,460 communications sites and related
businesses and two teleport businesses for an aggregate purchase price of
approximately $2.1 billion. This purchase price includes the payment of $1.4
billion in cash, the issuance of 21.2 million shares of Class A common stock
and the assumption of $193.7 million of debt. The most recent principal
transactions were the following:
AirTouch transaction. In August 1999, we agreed to lease on a long-term
basis up to 2,100 towers from AirTouch Communications, Inc. ("AirTouch").
These towers are located in all of AirTouch's major markets, other than Los
Angeles, San Diego and Kansas City, including Albuquerque, Atlanta, Cleveland,
Denver, Detroit, Minneapolis, Omaha, Phoenix, Portland, San Francisco and
Seattle. Our cumulative lease payments, based on
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2,100 towers, aggregate $800.0 million in cash payable in part upon each
closing, and a five-year warrant to purchase 3.0 million shares of Class A
common stock at $22.00 per share. At the first three closings in January and
February 2000, we leased 1,180 towers, paid AirTouch $449.5 million in cash
and issued warrants for 3.0 million shares of Class A common stock. The
remaining closings are expected to occur during the first half of 2000.
Under the lease, we are entitled to all income generated from leasing space
on the towers and are responsible for the payment of all expenses of the
towers, including ground rent. AirTouch has reserved space on the towers for
its antennas, for which it will pay us a site maintenance charge equal to
$1,500 per month for each non-microwave reserved space and $385 per month for
each microwave reserved space, with annual increases of 3%.
We have also entered into an exclusive three-year build-to-suit agreement
with AirTouch. Under that agreement, we have the right to build all of
AirTouch's towers in all of the markets covered by the lease. AirTouch entered
into a separate master lease covering all towers to be constructed pursuant to
the build-to-suit agreement. AirTouch will lease space for a period of ten
years and has the option to extend for five, five-year periods. The rent is
$1,500 per month for each non-microwave antenna site and $385 per month for
each microwave antenna site, with annual increases of 3%. We expect this
build-to-suit agreement will produce 400 to 500 towers.
AT&T transaction. In September 1999, we agreed to purchase up to 1,942
towers from AT&T. These towers are located throughout the United States and
were constructed by AT&T for its microwave operations. The purchase price is
$260.0 million in cash, subject to adjustment if all towers are not purchased.
At the first two closings in January and February 2000, we acquired 863 towers
and paid AT&T $177.2 million. The remaining closings are expected to occur
during the first half of 2000.
AT&T entered into a master lease agreement covering the towers we acquired
and will acquire on which it conducts microwave operations. The lease has an
initial term of ten years and AT&T has five, five-year renewal options. The
annual base rent for the microwave operations is approximately $1.0 million,
payable in January of each lease year. We will adjust the rent based upon
AT&T's use of the towers. However, except that any downward adjustment can be
used by AT&T as a credit only against future additional rent and not against
the base rent. AT&T currently uses 468 of these towers for its microwave
operations. We expect that as many as 50% of the towers may not be marketable,
at least in the near future, because of location.
We also entered into a build-to-suit agreement with AT&T Wireless Services.
This agreement requires AT&T Wireless Services to present 1,200 sites
nationwide from which we will select and be required to build 1,000 towers.
There is a separate master lease with AT&T Wireless Services for the build-to-
suit towers. The initial term is ten years, and AT&T has three, five-year
renewals. The rent for lease supplements entered into in the initial year is
$1,350 per month, per antenna site, increasing annually by $50 per year for
lease supplements entered into in subsequent years. All rents will be subject
to 4% annual increases.
UNIsite merger. In January 2000, we consummated our merger with UNIsite. The
purchase price was $196.4 million, which included a cash payment of $147.7
million and the assumption of $48.7 million of debt. In February 2000, we
repaid the debt assumed in connection with the UNIsite transaction. Such
repayment was at a premium of the outstanding principal balance. Accordingly,
we will recognize an extraordinary loss from extinguishment of debt in the
first quarter of 2000. At closing, UNIsite had more than 600 towers then
completed or under construction. UNIsite's towers are located primarily in the
Northeast and Midwest.
Galaxy merger. In January 2000, we merged with Galaxy Engineering Services,
a global turnkey provider of engineering consulting services, based in
Atlanta, GA. The aggregate purchase price paid to the other Galaxy
stockholders consisted of 523,113 shares of Class A common stock and $0.3
million in cash. We had previously purchased one-third of Galaxy for $0.5
million and loaned them $13.5 million. Galaxy provides wireless local
loop/fixed wireless engineering, radio frequency ("RF") network design, drive
testing, optimization, competitive benchmarking of wireless local loop, PCS
and cellular networks, VQUAL(TM) voice quality analysis and transport
engineering, interconnect and microwave services.
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ICG transaction. In December 1999, we acquired all of the stock of ICG
Satellite Services and its subsidiary, Maritime Telecommunications Network,
for approximately $100.0 million in cash. The acquisition involved a major
around-the-clock teleport facility in New Jersey and a global maritime
telecommunications network headquartered in Miami, Florida. The acquired
company provides Internet, voice, data, and compressed video satellite
services to major cruise lines, the U.S. military, Internet-related companies
and international telecommunications customers. The New Jersey teleport and
operations center has 12 existing antennas and one under construction that
access satellites covering the continental United States, South America and
the Atlantic Ocean region.
TV Azteca transaction. In February 2000, we loaned approximately $100.0
million (of a committed $120.0 million) to TV Azteca S.A. de C.V. ("TV
Azteca"), the owner of a major national television broadcast network in
Mexico, and assumed marketing responsibility for approximately 190 of its
towers. The 20-year loan, which may be extended for an additional 50 years,
earns net interest at approximately 11.6% per annum. We are entitled to
receive 100% of the revenues generated by third party leases and are
responsible for incremental operating expenses of third party tenants on the
towers during the term of the loan. In December 1999, an executive officer and
director of our Company also became a director of TV Azteca. In September
1999, we made an interim loan of $60.0 million to TV Azteca when we entered
into a letter of intent relating to the loan and marketing agreements. The
interim loan which earned interest at approximately 11%, was repaid out of the
proceeds of the loan described above.
Iusacell transaction. In December 1999, we entered into a management
agreement for approximately 350 existing towers and a build-to-suit agreement
for approximately 200 towers with Grupo Iusacell, S.A. de C.V. and its
affiliates ("Iusacell"), the second largest wireless telecommunications
provider in Mexico. As part of the transaction, we have agreed to pay a $10.0
million refundable deposit upon the satisfaction of certain conditions to
retain the exclusive rights to acquire the approximately 350 existing towers
through 2005, or earlier at Iusacell's option, subject to certain
restrictions. The existing group of wireless towers that will be marketed
under this agreement, and may be acquired, are located in urban and rural
areas of Mexico City, Guadalajara, Veracruz and Acapulco. The build-to-suit
towers will be constructed over the next two years in key metropolitan areas
where Iusacell's expansion plans are most critical.
Canadian Joint Venture. In March 2000, we entered into a joint venture with
Telemedia Corporation, a privately held Canadian telecommunications company,
to form Canadian Tower, L.P. Under the terms of the agreement, Canadian Tower,
which will be both Canadian controlled and operated, will develop and acquire
both wireless and broadcast towers throughout Canada. We have committed to
invest $18.0 million (Canadian) for which we will initially own 45% of the
joint venture. The joint venture's initial assets include more than 20
broadcast towers to be contributed by Telemedia. These broadcast towers are
located in major metropolitan areas, including Toronto, Montreal, Quebec City,
Edmonton and Hamilton. We believe these towers are well positioned to take
advantage of both the strong demand for wireless applications as well as
television broadcasters' eventual conversion from analog to digital.
Pending Transactions
At March 1, 2000 we were a party to numerous pending transactions involving
the acquisition of more than 1,990 communications sites and related businesses
and a major teleport transaction for an aggregate purchase price of
approximately $510.9 million, including the remaining portions of the AirTouch
transaction and the AT&T transactions (assuming all towers are acquired or
leased). These transactions remain subject to regulatory approvals in certain
cases and other conditions. The other principal transaction is the following:
USEI transaction. In December 1999, we agreed to merge with U.S.
Electrodynamics. The purchase price of $60.0 million is payable through the
issuance of 1,040,153 shares of Class A common stock and cash. The purchase
price is subject to adjustment based on the net working capital and the long-
term debt of U.S. Electrodynamics at closing. The acquisition involves around-
the-clock teleport facilities in the Pacific Northwest,
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the Southwest and the Northeast with a total of 52 antennas. The transaction
is expected to close in the second quarter of 2000, subject to satisfaction of
customary conditions including FCC approval. We have received early
termination of the Hart-Scott-Rodino Act waiting period.
Regulatory Matters
Towers. Both the FCC and the FAA regulate towers used for wireless
communications and radio and television antennae. These regulations control
the siting, lighting, marking and maintenance of towers and may, depending on
the characteristics of the tower, require registration of tower facilities and
issuance of determinations of no hazard. Wireless communications devices
operating on towers are separately regulated and independently licensed by the
FCC based upon the regulation of the particular frequency used. In addition,
the FCC separately licenses and regulates television and radio stations
broadcasting from towers. Depending on the height and location, proposals to
construct new antenna structures or to modify existing antenna structures are
reviewed by the FAA to ensure that the structure will not present a hazard to
aircraft. That review is a prerequisite to FCC authorization of communications
devices placed on the tower. Tower owners also bear the responsibility for
notifying the FAA of any tower lighting failures. We generally indemnify our
customers against any failure to comply with applicable standards. Failure to
comply with applicable requirements may lead to monetary penalties.
The introduction and development of digital television also may affect us
and some of our largest customers. The need to install additional antennae
required to deliver digital television service may necessitate the relocation
of many currently co-located FM antennae. The need to secure state and local
regulatory approvals for the construction and reconstruction of this
substantial number of antennae and the structures on which they are mounted
presents a potentially significant regulatory obstacle to the communications
site industry. As a result, the FCC has solicited comments on whether, and in
what circumstances, the FCC should preempt state and local zoning and land use
laws and ordinances regulating the placement and construction of
communications sites. Federal preemptive regulations may never be promulgated.
If adopted, it may be more or less restrictive than existing state and local
regulations. In addition, those regulations, if challenged on constitutional
grounds, may not be upheld.
Local regulations include city and other local ordinances, zoning
restrictions and restrictive covenants imposed by local authorities. These
regulations vary greatly, but typically require tower owners to obtain
approval from local officials or community standards organizations prior to
tower construction. Local regulations can delay or prevent new tower
construction or site upgrade projects, thereby limiting our ability to respond
to customer demand. In addition, those regulations increase costs associated
with new tower construction. Existing regulatory policies may adversely affect
the timing or cost of new tower construction and additional regulations may be
adopted which increase delays or result in additional costs to us. These
factors could materially adversely affect our financial condition, results of
operations or liquidity.
IVDV. We are required to obtain authorization from the FCC for our use of
radio frequencies to provide satellite and wireless services. We hold a number
of point-to-point microwave radio licenses that are used to provide
telecommunications services. Additionally, we hold a number of satellite earth
station licenses in connection with our operation of satellite-based networks.
We also provide maritime communications services pursuant to an experimental
license and a grant of Special Temporary Authority. We also filed 32
applications for permanent full-term FCC licenses to operate shipboard earth
stations in fixed ports. Those applications are pending. We may not be granted
permanent licenses, the experimental license and Special Temporary Authority
currently being used may not be renewed for future terms, and any license
granted by the FCC may require substantial payments by us.
Environmental Matters
Under various federal, state and local environmental laws, ordinances and
regulations, an owner of real estate or a lessee conducting operations thereon
may become liable for the costs of investigation, removal or remediation of
soil and groundwater contaminated by certain hazardous substances or wastes.
Certain of these
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laws impose cleanup responsibility and liability without regard to whether the
owner or operator of the real estate or operations thereon knew of or was
responsible for the contamination, and whether or not operations at the
property have been discontinued or title to the property has been transferred.
The owner or operator of contaminated real estate also may be subject to
common law claims by third parties based on damages and costs resulting from
off-site migration of the contamination. In connection with our former and
current ownership or operation of our properties, we may be potentially liable
for those types of environmental costs.
We believe we are in compliance in all material respects with applicable
environmental laws relating to tower site contamination. We have not received
any written notice from any governmental authority or third party asserting,
and we are not otherwise aware of, any material environmental non-compliance,
liability or claim relating to hazardous substances or wastes. However, we
might be liable in the future for existing undetected environmental
conditions. We also may incur costs for future regulatory action, as well as
compliance with future environmental laws. The foregoing could have a material
adverse affect our financial condition, results of operations or liquidity.
Competition and New Technologies
We compete for antennae site customers with other national independent tower
companies, wireless carriers that own and operate their own tower networks and
lease tower space to other carriers, site development companies that acquire
space on existing towers for wireless service providers and manage new tower
construction, and traditional local independent tower operators. We believe
that tower location and capacity, price, quality of service and density within
a geographic market historically have been and will continue to be the most
significant competitive factors affecting owners, operators and managers of
communications sites.
We face strong competition for build-to-suit opportunities, particularly
those with the remaining wireless service providers seeking to divest their
ownership of towers, principally from other independent tower companies and
site developers. We expect such competition to intensify and believe that the
terms of those transactions may become significantly less favorable to our
company and other independent tower owners as a consequence of potentially
intensifying competition.
We compete for tower and site acquisitions principally with other
independent tower owners and operators. Increased competition may intensify
and result in substantially higher prices, particularly for towers being
divested by wireless service providers. We may not, therefore, be able to
complete acquisitions on as favorable terms as in the past. Under certain
circumstances, we may also be required to pay higher prices or agree to less
favorable terms than we would otherwise have desired. We may also be impeded
in our future acquisition activities by antitrust constraints, either in local
markets or on a regional or national basis.
In the delivery of domestic and international satellite services, we compete
with other full service teleports in the United States. The bases of
competition are primarily reliability, price and transmission quality.
Competition is expected principally from a number of domestic and foreign
telecommunications carriers, many of which have substantially greater
financial and other resources than we do. In the maritime telecommunications
market, we compete primarily with several other companies that provide similar
telecommunications services. Several of these companies have FCC licenses that
are similar to ours and own their own satellites.
The emergence of new technologies could reduce the need for tower-based
transmission and reception and may, thereby, have a negative impact on our
operations. For example, the FCC has granted license applications for several
low-earth orbiting satellite systems that are intended to provide mobile voice
and/or data services. In addition, the emergence of new technologies could
reduce the need for tower-based transmission and reception and have an adverse
effect on our operations. Additionally, the growth in delivery of video
services by direct broadcast satellites and the development and implementation
of signal combining technologies, which permit one antenna to service two
different frequencies of transmission and, thereby, two customers, may reduce
the need for tower-based broadcast transmission and hence demand for tower
space.
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Manufacturing and Raw Materials
We build, maintain and install land based wireless communication
transmitting and receiving facilities by obtaining sheet metal and other raw
material parts and components from a variety of vendors. We also engage third
party contract manufacturers to produce certain of these wireless transmitting
and receiving facilities. We have historically obtained the majority of our
sheet metal and other raw materials from a limited number of suppliers.
However, substantially all of these items are available from numerous other
suppliers. We have not, to date, experienced any significant difficulties in
obtaining the needed quantities of materials from suppliers in a timely
manner.
Employees
As of March 1, 2000, we employed approximately 1,750 full time individuals
and consider our employee relations to be satisfactory.
ITEM 2. PROPERTIES.
In 1999 we purchased the building located at 116 Huntington Avenue, Boston,
Massachusetts. We occupy approximately 15,500 square feet within the premises,
which we use primarily for our corporate headquarters. In addition, we own
and/or lease space in Waterbury (CT) (90,000 square feet), Dallas (60,000
square feet) Salem, (OR) (35,000 square feet) and Tampa, FL (8,000 square
feet) which we use to manufacture and store component parts. We also lease
space for our IVDV segment in Alexandria (VA) (5,400 square feet), Dallas
(7,200 square feet), San Francisco (3,500 square feet), Miami (23,000 square
feet) and New York (3,600 square feet). Finally, we lease office space in
Albuquerque, Atlanta, Chicago, Houston, San Francisco and Mexico City, which
function as our primary regional operating centers for our Rental and
Management and Services segments.
Our interests in communications sites are comprised of a variety of fee and
leasehold interests created by long-term lease agreements, private easements
and easements, licenses or rights-of-way granted by government entities. In
rural areas, a communications site typically consists of a three-to five-acre
tract, which supports towers, equipment shelters and guy wires to stabilize
the structure. Less than 2,500 square feet are required for a self-supporting
tower structure of the kind typically used in metropolitan areas. Land leases
generally have twenty to twenty-five-year terms, with three five-year
renewals, or are for five-year terms with automatic renewals unless we
otherwise specify. Pursuant to our credit facilities, the lenders have liens
on, among other things, all tenant leases, contracts relating to the
management of towers for others, cash, accounts receivable, the stock and
other equity interests of all subsidiaries and all inter-company debt,
inventory and other personal property, fixtures including towers, intellectual
property, as well as certain fee and leasehold interests, and the proceeds of
the foregoing.
We believe that our owned and leased facilities are suitable and adequate to
meet our anticipated needs.
ITEM 3. LEGAL PROCEEDINGS.
We periodically become involved in various claims and lawsuits that are
incidental to our business. Management believes, after consultation with
counsel, that no matters currently pending would, in the event of adverse
outcome, have a material impact on our consolidated financial position,
results of operations or liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of our security holders in the fourth
quarter of 1999.
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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Market Price Data
On February 27, 1998, the Class A common stock commenced trading on a "when-
issued" basis on the inter-dealer bulletin board of the over-the-counter
market. The Class A common stock commenced trading under the symbol AMT on the
New York Stock Exchange (NYSE) on June 5, 1998 (the day after we separated
from American Radio Systems Corporation). The following table presents
reported high and low sales prices for our Class A common stock for the
periods indicated.
<TABLE>
<CAPTION>
1998 High Low
---- ------- -------
<S> <C> <C>
Quarter Ended March 31 (commencing February 27, 1998)....... $20.25 $15.50
Quarter Ended June 30....................................... 26.125 18.75
Quarter Ended September 30.................................. 28.625 14.375
Quarter Ended December 31................................... 29.625 13.25
<CAPTION>
1999
----
<S> <C> <C>
Quarter Ended March 31...................................... 30.25 20.50
Quarter Ended June 30....................................... 26.875 20.50
Quarter Ended September 30.................................. 26.00 19.50
Quarter Ended December 31................................... 33.25 17.125
</TABLE>
As of March 9, 2000 there were 558 record holders of Class A common stock,
61 record holders of Class B common stock and one record holder of Class C
common stock.
We have not paid a dividend on any class of common stock and anticipate that
we will not pay cash dividends in the foreseeable future. Rather, we intend to
retain future earnings, if any, to fund the development and growth of our
business. In addition, substantially all of our subsidiaries are restricted
under the terms of our credit facilities from paying dividends or making
distributions and repurchasing, redeeming or otherwise acquiring any shares of
common stock. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources" and notes to the
consolidated financial statements.
Recent Sales of Unregistered Securities
All sales of unregistered securities occuring during the year ended December
31, 1999 have been disclosed in our previous filings on Form 10-Q. Refer to
those filings for additional information.
17
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The financial data set forth below has been derived from our audited
consolidated financial statements, certain of which are included in this
Annual Report on Form 10-K. The data should be read in conjunction with our
audited consolidated financial statements and with "Management's Discussion
and Analysis of Financial Condition and Results of Operations." Prior to the
ATC Separation on June 4, 1998, we operated as a subsidiary of American Radio
and not as an independent public company. Therefore, the results of operations
and the financial condition shown below for such period and prior may be
different from what they might have been had we operated as a separate,
independent public company. The information is not necessarily indicative of
our future results of operations or financial condition.
SELECTED FINANCIAL DATA(1)
(In thousands, except per share data)
<TABLE>
<CAPTION>
July 17, 1995
Year Ended December 31, through
---------------------------------------- December 31,
1999 1998 1997 1996 1995 (1)
---------- ---------- ------- ------- -------------
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Operating revenues...... $ 258,081 $ 103,544 $17,508 $ 2,897 $ 163
---------- ---------- ------- ------- -------
Operating expenses:
Operating expenses
excluding
depreciation and
amortization, tower
separation,
development and
corporate general and
administrative
expenses............. 155,857 61,751 8,713 1,362 60
Depreciation and
amortization......... 132,539 52,064 6,326 990 57
Tower separation
expense (2).......... 12,772
Development expense
(2).................. 1,607
Corporate general and
administrative
expense.............. 9,136 5,099 1,536 830 230
---------- ---------- ------- ------- -------
Total operating
expenses........... 299,139 131,686 16,575 3,182 347
---------- ---------- ------- ------- -------
(Loss) income from
operations............. (41,058) (28,142) 933 (285) (184)
Interest expense........ (27,492) (23,229) (3,040)
Interest income and
other, net............. 19,551 9,217 251 36
Minority interest in net
earnings of
subsidiaries........... (142) (287) (193) (185)
---------- ---------- ------- ------- -------
Loss before (provision)
benefit for income
taxes and extraordinary
losses................. (49,141) (42,441) (2,049) (434) (184)
(Provision) benefit for
income taxes........... (214) 4,491 473 (45) 74
---------- ---------- ------- ------- -------
Loss before
extraordinary losses... $ (49,355) $ (37,950) $(1,576) $ (479) $ (110)
========== ========== ======= ======= =======
Basic and diluted loss
per common share
amounts before
extraordinary losses
(3).................... $ (.33) $ (0.48) $ (0.03) $ (0.01) $ (0.00)
========== ========== ======= ======= =======
Basic and diluted common
shares outstanding
(3).................... 149,749 79,786 48,732 48,732 48,732
========== ========== ======= ======= =======
Other Operating Data:
Tower cash flow (4)..... $ 102,224 $ 41,793 $ 8,795 $ 1,535 $ 103
EBITDA (4).............. 91,481 36,694 7,259 705 (127)
EBITDA margin........... 35.4% 35.4% 41.5% 24.3% (N/A)
After-tax cash flow
(4).................... 83,184 14,114 4,750 511 (53)
Balance Sheet Data:
Cash and cash
equivalents............ $ 25,212 $ 186,175 $ 4,596 $ 2,373 $ 12
Working capital
(deficiency), excluding
current portion of
long-term debt......... 19,156 93,602 (2,208) 663 (40)
Property and equipment,
net.................... 1,092,346 449,476 117,618 19,710 3,759
Total assets............ 3,018,866 1,502,343 255,357 37,118 3,863
Long-term debt,
including current
portion................ 740,822 281,129 90,176 4,535
Total stockholders'
equity................. 2,145,083 1,091,746 153,208 29,728 3,769
</TABLE>
18
<PAGE>
(1) We were organized on July 17, 1995.
(2) We use the term "tower separation expenses" to refer to one-time expenses
incurred as a result of our separation from American Radio. We use the
term "development expenses" to refer to costs incurred in connection with
the integration of acquisitions and development of new business
initiatives.
(3) Basic and diluted loss per common share amounts before extraordinary
losses have been computed using the weighted average number of shares
outstanding during each period presented. Shares outstanding upon
consummation of our separation from American Radio (the "ATC Separation")
are assumed to be outstanding for all periods prior to June 4, 1998.
Shares issuable upon exercise of options and other common stock
equivalents have been excluded from the computations as the effect is
anti-dilutive.
(4) We use the term "tower cash flow" to mean operating income (loss) before
depreciation and amortization, tower separation, development and
corporate general and administrative expenses. We use "EBITDA" to mean
operating income (loss) before depreciation and amortization and tower
separation expense. "After-tax cash flow" means income (loss) before
extraordinary losses, plus depreciation and amortization, less preferred
stock dividends. We do not consider tower cash flow, EBITDA and after-tax
cash flow as a substitute for alternative measures of operating results
or cash flow from operating activities or as a measure of our
profitability or liquidity. These measures of performance are not
calculated in accordance with generally accepted accounting principles
("GAAP"). However, we have included them because they are generally used
in the communications site industry as a measure of a company's operating
performance. More specifically, we believe they can assist in comparing
company performances on a consistent basis without regard to depreciation
and amortization. Our concern is that depreciation and amortization can
vary significantly among companies depending on accounting methods,
particularly where acquisitions are involved, or non-operating factors
such as historical cost bases. We believe tower cash flow is useful
because it enables you to compare tower performance before the effect of
tower separation, development and corporate general and administrative
expenses that do not relate directly to such performance.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
General
This discussion contains "forward-looking statements," including statements
concerning projections, plans, objectives, future events or performance and
underlying assumptions and other statements which are other than statements of
historical fact. Various factors affect our results and could cause our actual
results to differ materially from those expressed in any forward-looking
statement. Such factors include:
. the outcome of our growth strategy;
. future results of operations;
. liquidity and capital expenditures;
. construction and acquisition activities;
. debt levels and the ability to obtain financing and service debt;
. regulatory developments and competitive conditions in the communications
site and wireless carrier industries;
. projected growth of the wireless communications and wireless carrier
industries;
. dependence on demand for satellites for internet data transmission; and
. general economic conditions.
As we were a wholly-owned subsidiary of American Radio through June 4, 1998,
the consolidated financial statements may not reflect our results of
operations or financial position had we been an independent public company
during such periods. Because of our relatively brief operating history and the
large number of recent acquisitions, the following discussion will not
necessarily reveal all significant developing or continuing trends.
19
<PAGE>
We are a wireless communications and broadcast infrastructure company with
three operating segments.
. We operate a leading network of communications towers and are the
largest independent operator of broadcast towers in the United States.
. We provide comprehensive network development services for wireless
service providers and broadcasters.
. We operate a leading teleport business, which transmits Internet, voice,
data and video communications worldwide.
During the years ended December 31, 1999, 1998 and 1997, we acquired various
communications sites, related businesses and teleports for aggregate
preliminary purchase prices of approximately $1.2 billion, $853.8 million and
$180.4 million, respectively. Management expects that acquisitions consummated
to date will have a material impact on future revenues, expenses and income
from operations. In addition, certain historical financial information
presented below and elsewhere in this document does not reflect the impact of
our construction program to any significant extent because most of that
activity is of more recent origin and is expected to continue during 2000 and
thereafter.
Results of Operations
Years Ended December 31, 1999 and 1998 (in thousands)
As of December 31, 1999, we operated approximately 5,100 communications
sites, as compared to approximately 2,300 communications sites as of December
31, 1998. See the notes to the consolidated financial statements for a
description of the acquisitions consummated in 1999 and 1998. These
transactions have significantly affected operations for the year ended
December 31, 1999 as compared to the year ended December 31, 1998.
<TABLE>
<CAPTION>
Year Ended
December 31, Amount of Percent
------------------ Increase Increase
1999 1998 (Decrease) (Decrease)
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Rental and management revenues....... $135,303 $ 60,505 $ 74,798 124 %
Services revenues.................... 90,416 23,315 67,101 288
Internet, voice, data and video
transmission revenues............... 32,362 19,724 12,638 64
-------- -------- --------
Total operating revenues............. 258,081 103,544 154,537 149
-------- -------- --------
Rental and management expenses....... 62,441 29,455 32,986 112
Services expenses.................... 69,318 19,479 49,839 256
Internet, voice, data and video
transmission expenses............... 24,098 12,817 11,281 88
-------- -------- --------
Total operating expenses excluding
depreciation and amortization, tower
separation expense, development ex-
pense and corporate general and ad-
ministrative expense................ 155,857 61,751 94,106 152
Depreciation and amortization........ 132,539 52,064 80,475 155
Tower separation expense............. 12,772 (12,772) N/A
Development expense.................. 1,607 1,607 N/A
Corporate general and administrative
expense............................. 9,136 5,099 4,037 79
Interest expense..................... 27,492 23,229 4,263 18
Interest income and other, net....... 19,551 9,217 10,334 112
Minority interest in net earnings of
subsidiaries........................ 142 287 (145) (51)
Income tax (provision) benefit....... (214) 4,491 (4,705) (105)
Extraordinary loss on extinguishment
of debt, net........................ 1,372 1,382 (10) (1)
Extraordinary loss on redemption of
preferred stock, net................ 7,510 (7,510) N/A
-------- -------- --------
Net loss............................. $(50,727) $(46,842) $ 3,885 8 %
======== ======== ========
Tower cash flow...................... $102,224 $ 41,793 $ 60,431 145 %
======== ======== ========
EBITDA............................... $ 91,481 $ 36,694 $ 54,787 149 %
======== ======== ========
</TABLE>
20
<PAGE>
Rental and Management Revenue
Rental and management revenue for the year ended December 31, 1999 was
$135.3 million, an increase of $74.8 million from the year ended December 31,
1998. The majority of the increase, $56.4 million, is attributable to revenue
generated from acquisitions consummated and/or towers constructed subsequent
to December 31, 1998. The remaining factor contributing to the additional
revenue is an increase in comparable tower revenue of $18.4 million during
1999 for towers that existed during 1998.
Services Revenue
Services revenue for the year ended December 31, 1999 was $90.4 million, an
increase of $67.1 million from the year ended December 31, 1998. The primary
reason for the increase is due to the $66.7 million of revenue earned after
the merger with OmniAmerica, Inc. The remaining component of the increase is
attributable to revenue generated from our existing services business of
approximately $0.4 million.
IVDV Revenue
Internet, voice, data and video (IVDV) revenue for the year ended December
31, 1999 was $32.4 million, an increase of $12.6 million from the year ended
December 31, 1998. The primary reason for the increase is attributed to
approximately $9.9 million of revenue earned during 1999 as a result of
acquisitions consummated in 1999. The remaining component of the increase,
$2.7 million, is due to an increase in revenue from the IVDV business that
existed at December 31, 1998.
Rental and Management, Services and IVDV Expenses
Rental and management, Services and IVDV expenses for the year ended
December 31, 1999 were $62.4 million, $69.3 million and $24.1 million,
respectively, an increase of $33.0 million, $49.8 million and $11.3 million,
respectively, from the year ended December 31, 1998. The primary reasons for
the increase in these expenses are essentially the same as those discussed
above under each respective revenue segment.
Depreciation and Amortization
Depreciation and amortization for the year ended December 31, 1999 was
$132.5 million, an increase of $80.5 million from the year ended December 31,
1998. A component of the increase is attributable to an increase in
depreciation expense of $30.5 million resulting from our purchase,
construction and/or acquisition of approximately $693.4 million of property
and equipment from January 1, 1999 to December 31, 1999. The remaining
component of the increase is attributable to an increase in amortization
expense of $50.0 million, resulting from our amortization of approximately
$751.7 million of goodwill and other intangible assets related to acquisitions
consummated during the period from January 1, 1999 to December 31, 1999.
Tower Separation Expense
We completed our separation from American Radio in 1998. No additional
expenses related to the separation were incurred in 1999, nor are any expected
to occur in the future. See note 1 of the consolidated financial statements
for a description of tower separation expense.
Corporate General Administrative Expense
Corporate general and administrative expense for the year ended December 31,
1999 was $9.1 million, an increase of $4.0 million from the year ended
December 31, 1998. The majority of this increase resulted from higher
personnel ($2.5 million) and marketing ($0.5 million) costs associated with
our growing revenue base and market position. The remaining component of the
increase is attributable to overall increases in other administrative expenses
incurred in supporting our growth.
21
<PAGE>
Development Expense
Development expense for the year ended December 31, 1999 was $1.6 million.
These expenses include the costs incurred for abandoned acquisitions, the
integration of acquisitions and new business initiatives.
Interest Expense
Interest expense for the year ended December 31, 1999 was $27.5 million, an
increase of $4.3 million from the year ended December 31, 1998. The increase is
primarily attributable to an increase of interest on our outstanding debt
obligations ($8.9 million), amortization of deferred financing costs ($0.7
million) and interest on notes payable related to acquisitions ($0.5 million).
These increases were offset by a decrease of $3.1 million in interest incurred
during 1998 on our outstanding redeemable preferred stock (which was redeemed
in July 1998), as well as an increase in interest capitalized during the year
ended December 31, 1999.
Interest Income and Other, Net
Interest income and other, net for the year ended December 31, 1999 was $19.6
million, an increase of $10.3 million from the year ended December 31, 1998.
The increase is primarily related to an increase in interest earned on invested
cash on hand ($6.7 million), interest earned on notes receivable ($1.4 million)
and interest earned on security/escrow deposits ($2.2 million).
Income Taxes
The income tax provision for the year ended December 31, 1999 was $0.2
million, a decrease of $4.7 million from the income tax benefit recorded for
the year ended December 31, 1998. The decrease in the tax benefit is due to an
increase in nondeductible permanent items (principally goodwill amortization).
The increase in nondeductible permanent items occurred as a result of the
consummation of several mergers and acquisitions in 1999. As of December 31,
1999 we had a net deferred tax asset of $116.0 million. In assessing the
realizability of the deferred tax asset, we analyzed our forecast of future
taxable income and concluded that recoverability of the net deferred tax asset
is more likely than not. The realization of the deferred tax asset is not
dependent upon significant changes in the current relationship between income
reported for financial and tax purposes, or material asset sales or other
transactions not in the ordinary course of business.
Extraordinary Losses on Extinguishment of Debt
We incurred an extraordinary loss on the extinguishment of debt in 1999 of
$1.4 million due to the early repayment of one of our term loans. We recorded
an extraordinary loss of $1.4 million in 1998 due to the refinancing of our
then existing credit facility. We also recorded an extraordinary loss of $7.5
million in 1998 due to the redemption of our interim preferred stock.
22
<PAGE>
Years Ended December 31, 1998 and 1997 (in thousands)
As of December 31, 1998, we operated approximately 2,300 communications
sites, as compared to approximately 700 communications sites as of December
31, 1997. See the notes to consolidated financial statements for a description
of the acquisitions consummated in 1998 and 1997. These transactions have
significantly affected operations for the year ended December 31, 1998 as
compared to the year ended December 31, 1997.
<TABLE>
<CAPTION>
Year Ended
December 31, Amount of Percent
----------------- Increase Increase
1998 1997 (Decrease) (Decrease)
-------- ------- ---------- ----------
<S> <C> <C> <C> <C>
Rental and management revenues....... $ 60,505 $13,302 $47,203 355%
Services revenues.................... 23,315 2,122 21,193 999
Internet, voice, data and video
transmission revenues............... 19,724 2,084 17,640 846
-------- ------- -------
Total operating revenues............. 103,544 17,508 86,036 491
-------- ------- -------
Rental and management expenses....... 29,455 6,080 23,375 384
Services expenses.................... 19,479 1,360 18,119 1,332
Internet, voice, data and video
transmission expenses............... 12,817 1,273 11,544 907
-------- ------- -------
Total operating expenses excluding
depreciation and amortization, tower
separation expense, development
expense and corporate general and
administrative expense.............. 61,751 8,713 53,038 609
Depreciation and amortization........ 52,064 6,326 45,738 723
Tower separation expense............. 12,772 12,772 N/A
Corporate general and administrative
expense............................. 5,099 1,536 3,563 232
Interest expense..................... 23,229 3,040 20,189 664
Interest income and other, net....... 9,217 251 8,966 3,572
Minority interest in net earnings of
subsidiaries........................ 287 193 94 49
Income tax benefit................... 4,491 473 4,018 849
Extraordinary loss on extinguishment
of debt, net........................ 1,382 694 688 99
Extraordinary loss on redemption of
preferred stock, net................ 7,510 7,510 N/A
-------- ------- -------
Net loss............................. $(46,842) $(2,270) $44,572 1,964%
======== ======= =======
Tower cash flow...................... $ 41,793 $ 8,795 $32,998 375%
======== ======= =======
EBITDA............................... $ 36,694 $ 7,259 $29,435 405%
======== ======= =======
</TABLE>
Rental and Management Revenue
Rental and management revenue for the year ended December 31, 1998 was $60.5
million, an increase of $47.2 million from the year ended December 31, 1997.
The majority of the increase is attributable to revenue generated from
acquisitions consummated and/or towers constructed subsequent to December 31,
1997, coupled with an increase in revenue for towers that existed in 1997.
Services Revenue
Services revenue for the year ended December 31, 1998 was $23.3 million, an
increase of $21.2 million from the year ended December 31, 1997. The primary
reason for the increase is due to the $21.0 million of revenue earned in 1998
from operations acquired in the Gearon & Co. Inc. merger. The remaining
portion of the increase is due to revenue generated in 1998 from this
segment's business that existed as of December 31, 1997.
23
<PAGE>
IVDV Revenue
IVDV revenue for the year ended December 31, 1998 was $19.7 million, an
increase of $17.6 million from the year ended December 31, 1997. The primary
reason for the increase is attributed to an increase of approximately $11.5
million of revenue related to the IVDV business that existed at December 31,
1997. The remaining component of the increase, $6.1 million, is due to an
acquisition that closed in the second quarter of 1998.
Rental and Management, Services and IVDV Expenses
Rental and management, Services and IVDV expenses for the year ended
December 31, 1998 were $29.5 million, $19.5 million and $12.8 million,
respectively, an increase of $23.4 million, $18.1 million and $11.5 million,
respectively, from the year ended December 31, 1997. The primary reasons for
the increase in these expenses are essentially the same as those discussed
above under each respective revenue segment.
Depreciation and Amortization
Depreciation and amortization for the year ended December 31, 1998 was $52.1
million, an increase of $45.7 million from the year ended December 31, 1997. A
component of the increase is attributable to an increase in depreciation
expense of $15.8 million resulting primarily from our acquisition and
construction of approximately $346.8 million of property and equipment from
January 1, 1998 to December 31, 1998. The remaining component of the increase
is attributable to an increase in amortization of $29.9 million, resulting
from our amortization of approximately $628.0 million of goodwill and other
intangible assets related to acquisitions consummated from January 1, 1998 to
December 31, 1998.
Tower Separation Expense
We started and completed our separation from American Radio in 1998. We did
not incur any expenses related to the separation in 1997. See note 1 of the
consolidated financial statements for a description of tower separation
expense.
Corporate General and Administrative Expense
Corporate general and administrative expense for the year ended December 31,
1998 was $5.1 million, an increase of $3.6 million from the year ended
December 31, 1997. The majority of the increase is due to higher personnel and
marketing costs associated with our growing revenue base and market position.
The remaining component of the increase is attributable to overall increases
in other administrative expenses incurred in supporting our growth.
Interest Expense
Interest expense for the year ended December 31, 1998 was $23.2 million, an
increase of $20.2 million from the year ended December 31, 1997. The increase
is primarily attributable to our increased borrowing levels under our credit
facility and interest incurred on our redeemable preferred stock.
Interest Income and Other, Net
Interest income and other, net for the year ended December 31, 1998 was $9.2
million, an increase of $9.0 million from the year ended December 31, 1997.
The increase is primarily related to interest earned on invested cash on hand,
interest earned on notes receivable and interest earned on security/escrow
deposits related to several acquisitions that we consummated in the latter
part of 1998.
24
<PAGE>
Income Tax Benefit
The income tax benefit for the year ended December 31, 1998 was $4.5
million, an increase of $4.0 million from the income tax benefit recorded for
the year ended December 31, 1997. The increase in the tax benefit is due to an
overall increase in our pre-tax loss. As of December 31, 1998 we had a net
deferred tax asset of $110.0 million. In assessing the realizability of the
deferred tax asset, we analyzed our forecast of future taxable income and
concluded that recoverability of the net deferred tax asset is more likely
than not. The realization of the deferred tax asset is not dependent upon
significant changes in the current relationship between income reported for
financial and tax purposes, or material asset sales or other transactions not
in the ordinary course of business.
Extraordinary Losses on Extinguishment of Debt
We incurred extraordinary losses on extinguishment of debt of $1.4 and $0.7
million for the years ended December 31, 1998 and 1997, respectively, due to
the refinancing of our then existing credit facilities. In addition, we
incurred an extraordinary loss of $7.5 million in 1998 due to the redemption
of our interim preferred stock.
Liquidity and Capital Resources
Our liquidity needs arise from our acquisition-related activities, debt
service, working capital and capital expenditures associated principally with
our construction program. As of December 31, 1999, we maintained approximately
$25.2 million in cash and cash equivalents and working capital of
approximately $14.4 million. Historically, we have met our operational
liquidity needs with internally generated funds and have financed the
acquisition of tower related properties and our construction program,
including related working capital needs, with a combination of capital funds
from sales of our equity and debt securities (including sales prior to the ATC
Separation) and bank borrowings. See the notes to the consolidated financial
statements. For the year ended December 31, 1999, cash flows from operating
activities were $97.0 million, as compared to $18.4 million of cash flows from
operating activities in 1998. The change is primarily attributable to the
favorable cash flow generated from consummated acquisitions in 1999 and 1998.
For the year ended December 31, 1999 cash flows used for investing
activities were $1.1 billion as compared to $350.4 million for the year ended
December 31, 1998. The increase in 1999 is due primarily to an increase in
property and equipment expenditures of approximately $167.8 million coupled
with the increase in spending on mergers and acquisitions (which includes
advances and deposits) during 1999 of approximately $619.1 million.
For the year ended December 31, 1999, cash flows provided by financing
activities were $879.7 million as compared to $513.5 million for the year
ended December 31, 1998. The increase in 1999 is due principally to the impact
of borrowings under our credit arrangements, the issuance of the 2.25% and
6.25% Convertible Notes, and the sale of our common stock.
During the year ended December 31, 1999, we had capital expenditures of
approximately $294.2 million primarily related to construction activities. We
completed construction on approximately 1,000 towers for our own account
during this period. Our 2000 business plan calls for total capital
expenditures of approximately $415.0 million. Included in that plan (exclusive
of broadcast towers, but inclusive of our commitment under build-to-suit
agreements) is the construction of approximately 1,200 towers for our own
account at a cost of between $196.0 million and $240.0 million. In addition,
the plan includes the construction of approximately 20 broadcast towers at an
estimated cost of between $50.0 million and $70.0 million. Remaining capital
expenditures relate to enhancements in information technology, infrastructure
and structural improvements. We believe that we have sufficient funds
available to us to finance our current plans and pending acquisitions.
We expect that the consummated acquisitions and current and future
construction activities will have a material impact on liquidity. We believe
that the acquisition activities, once integrated, will have a favorable impact
25
<PAGE>
on liquidity and will offset the initial effects of the funding requirements.
We also believe that the construction activities may initially have an adverse
effect on our future liquidity as newly constructed towers will initially
decrease overall liquidity. However, as such sites become fully operational
and achieve higher utilization, they should generate cash flow, and in the
long-term, increase liquidity.
Financing Transactions
New Credit Facilities. In January 2000, we entered into a new loan agreement
with our lending banks and other financial institutions relating to credit
facilities of $2.0 billion. The credit facilities are with several of our
principal operating subsidiaries (the "borrower subsidiaries") and consist of
three separate types of loans:
. a $650.0 million reducing revolving credit facility maturing on June 30,
2007,
. a $850.0 million multiple-draw term loan maturing on June 30, 2007, and
. a $500.0 million term loan maturing on December 31, 2007.
The credit facilities also contemplate possible additional borrowings of up
to $500.0 million, although the banks are not committed to fund those
borrowings. Borrowings under the credit facilities are limited by (a) the cash
flow of the borrower subsidiaries and the Restricted Subsidiaries, (b) their
construction costs of developing towers, and (c) the aggregate number of
developing towers and AirTouch towers acquired by them. As of March 9, 2000,
the $500.0 million term loan and $230.0 million of the multiple draw term loan
were outstanding. Our amount available under the credit facilities, giving
effect to the financial tests and borrowing ratios, as of March 9, 2000 was
$492.0 million.
The credit facilities contain certain financial and operational covenants
and other restrictions with which the borrower subsidiaries and the Restricted
Subsidiaries must comply, whether or not there are any borrowings outstanding.
These include restrictions on certain types of acquisitions, not including
towers and communications sites, indebtedness, liens, capital expenditures,
investments in Unrestricted Subsidiaries and the ability of the borrower
subsidiaries and the Restricted Subsidiaries to pay dividends or make other
distributions. The credit facilities also require the borrower subsidiaries to
comply with certain financial ratios. The credit facilities include two events
of default that have the effect of restricting debt of the parent company and
requiring it to invest the net cash proceeds of any issue of capital stock
(other than pursuant to permitted acquisitions and up to $2.0 million under
stock option plans) or debt as equity in the borrower subsidiaries.
We and the Restricted Subsidiaries have guaranteed all of the loans. We have
secured the loans by liens on substantially all assets of the borrower
subsidiaries and the Restricted Subsidiaries and all outstanding capital stock
and other debt and equity interests of all of our direct and indirect
subsidiaries.
February 2000 Convertible Note Issue. In February 2000, we issued $450.0
million principal amount of 5% Convertible Notes due 2010. The 5% notes are
convertible into shares of Class A common stock at a conversion price of
$51.50 per share. We may not redeem the 5% notes prior to February 20, 2003.
Holders may require us to repurchase all or any of their 5% notes on February
20, 2007 at their principal amount, together with accrued and unpaid interest.
We may, at our option, elect to pay the repurchase price in cash or shares of
Class A common stock, or any combination thereof.
October 1999 Convertible Note Issue. In October 1999, we issued 6.25%
Convertible Notes due 2009 in an aggregate principal amount of $300.0 million
and 2.25% Convertible Notes due 2009 at an issue price of $300.1 million,
representing 70.52% of their principal amount at maturity of $425.5 million.
The difference between the issue price and the principal amount at maturity of
the 2.25% notes will be accreted each year as interest expense in our
financial statements. The 6.25% notes are convertible into shares of Class A
common stock at a conversion price of $24.40 per share. The 2.25% notes are
convertible into shares of Class A common stock at a conversion price of
$24.00 per share.
We may not redeem the 6.25% notes prior to October 22, 2002 or the 2.25%
notes prior to October 22, 2003. Holders may require us to repurchase all or
any of their 6.25% notes on October 22, 2006 at their principal
26
<PAGE>
amount, together with accrued and unpaid interest. Holders may require us to
repurchase all or any of their 2.25% notes on October 22, 2003 at $802.93,
which is the issue price plus the accreted original issue discount, together
with accrued and unpaid interest. We may, at our option, elect to pay the
repurchase price of each series in cash or shares of Class A common stock, or
any combination thereof.
Debt service requires a substantial portion of our cash flow from
operations. Accordingly, our leverage could make us vulnerable to a downturn
in the operating performance of our tower properties or in economic
conditions. We believe that our cash flows from operations will be sufficient
to meet our debt service and covenant requirements under the credit
facilities. If such cash flows were not sufficient to meet such debt service
and covenant requirements, we might be required to sell equity securities,
refinance our obligations or dispose of one or more of our properties in order
to make such scheduled payments. We may not be able to affect any of such
transactions on favorable terms. We believe that we have sufficient financial
resources available to us, including borrowings under our credit facilities,
to finance operations for the foreseeable future.
ATC Separation. As of December 31, 1999, we continue to be obligated under
the ATC Separation agreement for certain tax indemnification liabilities to
CBS Corporation. See the notes to the consolidated financial statements.
Pending and Other Transactions. See notes 5 and 14 of the consolidated
financial statements.
Recent Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (FAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities" which was amended in May 1999
by FAS No. 137 "Accounting for Derivative Instruments and Hedging Activities--
Deferral of the Effective Date of FASB Statement No. 133--An Amendment of FASB
Statement No. 133." This Statement establishes accounting and reporting
standards for derivative instruments. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position, and measure those instruments at fair value. The accounting for
changes in the fair value of a derivative (that is, gains and losses) will
depend on the entity's intended use of the derivative and its resulting
designation (as defined in the Statement). FAS No. 133, as amended, will be
effective for the Company on January 1, 2001. We are currently in the process
of evaluating the impact FAS No. 133 will have on our consolidated financial
statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As of and for the years ended December 31, 1999 and 1998, we were exposed to
market risk from changes in interest rates on long-term debt obligations. We
attempted to reduce these risks by utilizing derivative financial instruments,
namely interest rate caps and swaps. All derivative financial instruments are
for purposes other than trading.
During 1999, we issued the 2.25% and 6.25% notes and received net proceeds
of approximately $584.0 million (see the notes to the consolidated financial
statements). A portion of the net proceeds received was used to pay down
outstanding debt under our credit facilities. Accordingly, the outstanding
debt related to the credit facilities has decreased by approximately $185.0
million from December 31, 1998 to December 31, 1999. In addition, during 1999
we sold interest rate swaps with total notional amounts of $24.9 million and
had an interest rate CAP with a notional amount of $7.0 million expire.
27
<PAGE>
The following table provides information as of December 31, 1999, about our
market risk exposure associated with changing interest rates. For long-term
debt obligations, the table presents principal cash flows and related average
interest rates by contractual maturity dates. For interest rate caps and
swaps, the table presents notional principal amounts and weighted-average
interest rates by contractual maturity dates.
As of December 31, 1999
Principal Payments and Interest Rate Detail by Contractual Maturity Dates (In
Thousands)
<TABLE>
<CAPTION>
Fair
Long-Term Debt 2000 2001 2002 2003 2004 Thereafter Total Value
- -------------- ---- ------ ------- ------- ------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Principal Amount(a)..... $270 $7,069 $11,597 $13,878 $18,411 $679,534 $730,759 $730,759
Average Interest
Rate(a)................
</TABLE>
Aggregate Notional Amounts Associated with Interest Rate Caps and Swaps in
Place During the Year and Interest Rate Detail by Contractual Maturity Dates
(In Thousands)
<TABLE>
<CAPTION>
Interest Rate CAPS
- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Notional Amount.................. $66,860(c)
Weighted-Average Fixed Rate(b)... 8.82%
</TABLE>
As of December 31, 1998
Principal Payments and Interest Rate Detail by Contractual Maturity Dates (In
Thousands)
<TABLE>
<CAPTION>
Fair
Long-Term Debt 1999 2000 2001 2002 2003 Thereafter Total Value
- -------------- ------- ------- ------- ------- ------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Principal Amount(a)..... $10,500 $17,125 $20,250 $227,125 $275,000 $275,000
Average Interest
Rate(a)................
Aggregate Notional Principal Amounts Associated with Interest Rate Caps and
Swaps in Place During the Year and Interest Rate Detail by Contractual
Maturity Dates (In Thousands)
<CAPTION>
Interest Rate CAPS
- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Notional Amount......... $73,860(d) $66,860(c)
Weighted-Average Fixed
Rate(b)................ 8.79% 8.82%
<CAPTION>
Interest Rate SWAPS
- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Notional Amount......... $24,890 $24,890 $24,890(e) $17,550 $17,550(f) $ (369)
Weighted-Average Fixed
Rate(b)................ 6.04% 6.04% 6.04% 5.9% 5.9%
</TABLE>
- --------
(a) December 31, 1999 long-term debt consists of our credit facilities
existing at December 31, 1999 ($90.0 million), the 2.25% and the 6.25%
notes ($602.3 million) and a mortgage payable ($38.5 million). Interest
on the credit facilities is payable in accordance with the applicable
London Interbank Offering Rate (LIBOR) agreement or quarterly, and
accrues at our option either at LIBOR plus margin (as defined) or the
Base Rate plus margin (as defined). The interest rate in effect at
December 31, 1999 for the borrower subsidiaries revolving credit facility
was 9.25%. For the year ended December 31, 1999, the weighted
28
<PAGE>
average interest rate under the credit facilities was 7.94%. The 2.25% and
6.25% notes each bear interest (after giving effect to the accretion of the
original discount on the 2.25% notes) at 6.25%, which is payable
semiannually on April 15 and October 15 of each year beginning April 15,
2000. The mortgage payable bears interest at 8.42% and is payable on a
monthly basis.
December 31, 1998 long-term debt consists of our credit facilities (see the
notes to the consolidated financial statements). Interest on the credit
facilities is payable in accordance with the applicable LIBOR agreement or
quarterly, and accrues, at our option, either at the LIBOR plus margin (as
defined) or the Base Rate plus margin (as defined). The interest rate in
effect at December 31, 1998 for our term loan and the Borrower
Subsidiaries' term loan and revolving credit facility was 8.71% and 7.30%,
respectively. For the year ended December 31, 1998, the weighted average
interest rate of the credit facilities was 7.7%.
(b) Represents the weighted-average-fixed rate of interest based on contract
notional amount as a percentage of total notional amounts in a given
year.
(c) Includes notional amounts of $21,500, $23,750 and $21,610, which will
expire in January, April and July 2000, respectively.
(d) Includes notional amount of $7,000, which expired in November 1999.
(e) Includes notional amount of $7,340, which will expire in January 2001.
(f) Includes notional amount of $17,550, which will expire in June 2003.
We maintain a portion of our cash and cash equivalents in short-term
financial instruments which are subject to interest rate risks. Due to the
relatively short duration of such instruments and our expectation that such
investments will not be significant on an ongoing basis, fluctuations in
interest rates with respect to such investments should not materially affect
our financial condition or results of operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See Item 14(a).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not Applicable.
29
<PAGE>
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table sets forth certain information concerning our executive
officers and directors:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Steven B. Dodge(1)...... 54 Chairman of the Board, President and Chief Executive Officer
Alan L. Box............. 48 Executive Vice President and Director
Arnold L.
Chavkin(1)(2)(3)....... 48 Director
James S. Eisenstein..... 41 Executive Vice President--Corporate Development
Dean H. Eisner.......... 42 Director
Jack D. Furst........... 41 Director
J. Michael Gearon, Jr... 35 Executive Vice President and Director
Fred R. Lummis(2)....... 46 Director
Randall T. Mays(2)...... 34 Director
Steven J. Moskowitz..... 36 Executive Vice President--Marketing
Thomas H. Stoner(1)(3).. 65 Director
Douglas C. Wiest........ 47 Chief Operating Officer
Maggie Wilderotter(3)... 45 Director
Joseph L. Winn.......... 48 Treasurer and Chief Financial Officer
</TABLE>
- --------
(1) Member of the Executive Committee; Mr. Stoner is the Chairman of the
Executive Committee.
(2) Member of the Audit Committee; Mr. Mays is the Chairman of the Audit
Committee.
(3) Member of the Compensation Committee; Mr. Stoner is the Chairman of the
Compensation Committee.
Two independent directors will be elected annually by the holders of Class A
common stock, voting as a separate class. All directors hold office until the
annual meeting of the stockholders next following their election or until
their successors are elected and qualified. Each executive officer is
appointed annually and serves at the discretion of the Board of Directors (the
"Board").
Mr. Dodge has served as the Chairman of the Board, President and Chief
Executive Officer since our organization. Mr. Dodge was also the Chairman of
the Board of Directors, President and Chief Executive Officer of American
Radio Systems ("American Radio" or "ARS"), a position he occupied since its
founding on November 1, 1993 until June 1998. In June 1998, American Radio
became a subsidiary of CBS, and our company became an independent public
company through the distribution by American Radio to its securityholders of
all of its shares in us (the "ATC Separation"). Mr. Dodge was the founder in
1988 of Atlantic Radio, which was one of the predecessor entities of American
Radio. Mr. Dodge also serves as a director of Weblink Wireless, Inc., TD
Waterhouse Group, Inc. and Nextel Partners, Inc.
Mr. Box has served as an Executive Vice President since March 1998 and has
been a director since its organization. Mr. Box served as Chief Operating
Officer from June 1997 to March 1998, at which time he assumed his present
role as the Executive Vice President responsible for the Internet, voice, data
and video transmission business. Mr. Box also was an Executive Vice President
and a director of American Radio from April 1997, when EZ Communications, Inc.
("EZ") merged into American Radio (the "EZ Merger"), until consummation of the
ATC Separation. Prior to the EZ merger, Mr. Box had been the Chief Executive
Officer of EZ, a company he formed in 1974.
Mr. Chavkin has been a member of the Executive Committee, the Audit
Committee and the Compensation Committee since November 1997. Mr. Chavkin was
the Chairman of the Audit Committee of American Radio from its founding until
consummation of the ATC Separation and of the Audit Committee of American
Radio from November 1997 until November 1998. Mr. Chavkin is a general partner
of Chase Capital Partners ("CCP"), which indirectly controls Chase Equity
Associates LLC ("CEA"), a stockholder of American Tower, and the President of
Chemical Investments, Inc., where he has served since 1991. Mr. Chavkin is
also a director of R&B Falcon Corporation, Wireless One, Inc. and Patina Oil &
Gas Corporation.
30
<PAGE>
James S. Eisenstein is the Executive Vice President--Corporate Development.
Mr. Eisenstein has overall responsibility for seeking out acquisition and
development opportunities. Mr. Eisenstein helped form our company in the
summer of 1995. From 1990 to 1995, he was Chief Operating Officer for Amaturo
Group Ltd., a broadcast company operating 11 radio stations and four
broadcasting towers, several of which were purchased by American Radio. Mr.
Eisenstein serves on the Board of Directors of the Personal Communications
Industry Association, the leading international trade association representing
the wireless communications industry.
Mr. Eisner has been a director since our merger with TeleCom Towers LLC
("Telecom") on February 26, 1999. Since May 1995, Mr. Eisner has served as
Vice President, Business Development and Planning of Cox Enterprises, Inc., an
affiliate of Cox Telecom Towers, Inc., the former principal member of TeleCom.
He joined Cox Enterprises, Inc. in 1993.
Mr. Furst has been a director since our merger with OmniAmerica, Inc.
("OmniAmerica") on February 25, 1999. Mr. Furst was Chairman of OmniAmerica
prior to the merger. He has been a partner of Hicks, Muse, Tate & Furst,
Incorporated, an affiliate of OmniAmerica's former principal stockholder since
1989. Mr. Furst currently serves as a director of Cooperative Computing, Inc.,
Hedstrom Corp., Globix Corporation, International Wire Group, Inc.,
Viasystems, Inc., Home Interiors & Gifts, Inc., LLS Corp. and Triton Energy
Limited.
Mr. Gearon has served as an Executive Vice President and has been a director
since our merger with Gearon & Co., Inc. ("Gearon") on January 22, 1998. Mr.
Gearon had been the principal stockholder and Chief Executive Officer of
Gearon since September, 1991. Mr. Gearon currently serves as a director of TV
Azteca.
Mr. Lummis has been a member of the Audit Committee since our merger with
American Tower Corporation (Old ATC), an unaffiliated company, on June 8,
1998. Mr. Lummis was the Chairman, Chief Executive Officer and President of
Old ATC. Since June 1998, Mr. Lummis has also served as the Chairman,
President and Chief Executive Officer of Advantage Outdoor Company, L.P. Mr.
Lummis has been the President of Summit Capital, a private investment firm and
a substantial stockholder of Old ATC, since June 1990. Mr. Lummis currently
serves on the board of several private companies and is a trustee of the
Baylor College of Medicine.
Mr. Mays has been the Chairman of the Audit Committee since November 1998
and a director since the merger with Old ATC on June 8, 1998. Mr. Mays has
served as Chief Financial Officer and Executive Vice President of Clear
Channel Communications, Inc. (Clear Channel), which had been the principal
stockholder of Old ATC, since February 1997, prior to which he had served as a
Vice President and Treasurer since joining Clear Channel in 1993.
Steven J. Moskowitz is Executive Vice President--Marketing and General
Manager of the Northeast Region. Mr. Moskowitz joined us in January 1998,
initially as a Vice President and General Manager of the Northeast Region, and
assumed his current position in March 1999. Prior to joining us, Mr. Moskowitz
had served as a Vice President of The Katz Media Group, the largest broadcast
media representation firm in the U.S., since 1989.
Mr. Stoner has been the Chairman of the Executive Committee and the
Compensation Committee since November 1997. Mr. Stoner was the Chairman of the
Executive Committee and the Compensation Committee of American Radio from its
founding until consummation of the ATC Separation. In 1965, Mr. Stoner founded
Stoner Broadcasting Systems, Inc. one of the predecessors of American Radio.
Mr. Stoner is a director of Gaylord Container Corporation and a trustee of the
Chesapeake Bay Foundation.
Douglas C. Wiest is the Chief Operating Officer. Mr. Wiest joined us in
February 1998, initially as the Chief Operating Officer of Gearon
Communications, and assumed his current position in March 1998. Prior to
joining us, Mr. Wiest had been Regional Vice President of Engineering and
Operations for Nextel's southern region since 1993.
31
<PAGE>
Ms. Wilderotter has been a member of the Compensation Committee since
November 1998 and a director since August 1998. Ms. Wilderotter is the
President and Chief Executive Officer of Wink Communications ("Wink"), a
California company that develops technology for adding simple interactivity
and graphics to mass-market consumer electronic products. Before joining Wink
in 1997, Ms. Wilderotter was the Executive Vice President of National
Operations for AT&T Wireless Services, Inc., and Chief Executive Officer of
AT&T's Aviation Communications Division. Ms. Wilderotter has also served as
Senior Vice President of McCaw Cellular Communications, Inc. and Regional
President of its California, Arizona, New Mexico, Nevada and Hawaii Region.
Ms. Wilderotter serves on the boards of Airborne Express, Electric Lightwave,
Inc., Gaylord Entertainment, Allied Riser Communications Corp., California
Cable Television Association and the California Chamber of Commerce and she is
a trustee of Holy Cross College in Worcester, Massachusetts.
Joseph L. Winn is the Chief Financial Officer and Treasurer. Mr. Winn was
also Treasurer, Chief Financial Officer and a director of American Radio since
its founding in 1993 until consummation of the ATC Separation.
ITEM 11. EXECUTIVE COMPENSATION
The following table provides certain information concerning compensation
earned by the Chief Executive Officer and the four other most highly
compensated executive officers who received compensation in excess of $100,000
in 1999.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-term
Annual Compensation Compensation
------------------------------------- ------------
Shares
Name and Principal Other Annual Underlying All Other
Position Year Salary(a) Bonus Compensation Options Compensation(b)
- ------------------------ ---- --------- ------ ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Steven B. Dodge......... 1997(c) $502,338 -- -- 100,000 $ 1,719
Chairman of the Board, 1998(c) $370,349 -- -- 3,300,000 $ 5,946
President and Chief 1999 $412,363 -- -- 300,000 $ 6,736
Executive Officer
Douglas C. Wiest........ 1998 $211,007 -- -- 365,001 $ 4,576
Chief Operating Officer 1999 $318,001 -- -- 60,000 $ 8,400
Joseph L. Winn.......... 1997(c) $352,329 40,000 -- 35,000 $12,876
Treasurer and Chief 1998(c) $298,779 -- -- 610,000 $13,210
Financial Officer 1999 $288,268 -- -- 60,000 $12,996
James S. Eisenstein..... 1997 $212,367 -- -- 27,310 $12,656
Executive Vice 1998 $204,850 50,000 -- 150,000 $13,295
President -- 1999 $263,263 -- -- 50,000 $11,130
Corporate Development
J. Michael Gearon, Jr... 1998 $176,135 -- -- 334,451 $ 346
Executive Vice
President 1999 $212,625 -- -- 100,000 $ 476
</TABLE>
- --------
(a) Includes employer's 401(k) plan contributions.
(b) Includes group term life insurance, automobile expense and parking
expenses paid by employer, except for Mr. Gearon, in which case it
includes group term life insurance only.
(c) Represents compensation paid by American Radio for 1997 and both American
Radio and American Tower for 1998.
32
<PAGE>
Director Compensation
Our nonemployee directors received options to purchase 25,000 shares of
Class A Common Stock during the fiscal year ended December 31, 1999. In March
1999, Messrs. Furst and Eisner each received an initial option to purchase
25,000 shares of Class A Common Stock. All of the options granted to the
nonemployee directors are exercisable in 20% cumulative annual increments
commencing one year from the date of grant and expiring at the end of ten
years. The nonemployee directors also receive $2,500 for attending each board
meeting, $1,000 for each committee on which he or she serves, and $3,000 for
each committee on which he or she serves as chairperson.
Option Grants in 1999
The following table sets forth certain information relating to 1999 option
grants pursuant to the American Tower Systems Corporation 1997 Stock Option
Plan, as amended and restated ("the Stock Option Plan") issued to the
individuals named in the Summary Compensation Table above.
<TABLE>
<CAPTION>
Potential Realization
Value at Annual
Rates of Appreciation
of Option Terms
----------------------
Percent of
Number of Total Options
Shares of Granted to Exercise
Underlying Employees Price
Options in Fiscal Per Expiration
Name Granted Year (a) Share Date 5% 10%
---- ---------- ------------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Steven B. Dodge......... 300,000 5.56 $23.813 11/11/09 $4,492,666 $11,385,298
Douglas C. Wiest........ 60,000 1.11 $23.813 11/11/09 $ 898,533 $ 2,277,060
Joseph L. Winn.......... 60,000 1.11 $23.813 11/11/09 $ 898,533 $ 2,277,060
James S. Eisenstein..... 50,000 .93 $23.813 11/11/09 $ 748,778 $ 1,897,550
J. Michael Gearon, Jr... 100,000 1.85 $23.813 11/11/09 $1,497,555 $ 3,795,099
</TABLE>
- --------
(a) The total number of shares covered by options granted to our employees
and directors during 1999 pursuant to the Stock Option Plan was
5,391,450.
(b) A 5% and 10% per year appreciation in stock price from $23.813 per share
yields appreciation of $14.97 per share and $37.95 per share,
respectively. The actual value realized, if any, will depend on the
excess of the stock price over the exercise price on the date the option
is exercised, so that there is no assurance the value realized by an
executive will be at or near the amounts reflected in this table.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table sets forth certain information regarding the unexercised
options granted pursuant to the Stock Option Plan (or outstanding with respect
to options granted under the predecessors' plans) to the individuals referred
to in the Summary Compensation Table above. None of the individuals shown
exercised any options in 1999.
<TABLE>
<CAPTION>
Number of Value of Unexercised
Unexercised Options at In-the-Money Options at
December 31, 1999 December 31, 1999 (a)
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Steven B. Dodge............ 1,325,066 3,176,191 $27,051,907 $46,531,319
Douglas C. Wiest........... 73,000 352,000 $ 1,013,330 $ 4,458,250
Joseph L. Winn(b).......... 255,177 641,232 $ 4,992,236 $ 9,235,925
James S. Eisenstein........ 358,869 265,872 $ 8,724,499 $ 3,959,373
J. Michael Gearon, Jr...... 66,891 367,560 $ 959,773 $ 4,514,023
</TABLE>
- --------
(a) Based on the closing price of the Class A Common Stock on the New York
Stock Exchange on December 31, 1999 of $30.5625 per share.
(b) Mr. Winn exercised options for an aggregate of 203,709 shares of Class B
Common Stock in 1998, realizing a value of $5,542,160 based on the
closing price of our Class A Common Stock on December 31, 1998 of $29.56
per share.
33
<PAGE>
Employment Agreements
J.Michael Gearon, Jr. and Douglas C. Wiest are the only executive officers
who have employment agreements. Mr. Gearon entered into his employment
agreement in connection with the Gearon merger. That employment agreement is
for an initial term ending December 31, 2000 and is renewable thereafter for
successive one year periods. It provides that Mr. Gearon shall receive an
annual minimum base salary of $200,000 and shall be eligible to participate in
the Stock Option Plan and other benefits. Mr. Wiest's employment agreement
provides for a lump sum cash payment of $350,000, or 1.5 times his salary, if
Mr. Wiest's employment is terminated (except for cause) within five years of
the date of the agreement (April 13, 1998). It also provides that under
certain circumstances, if we are sold within such five year period, Mr. Wiest
would be entitled to accelerated vesting of any options he held at the time.
Compensation Committee Interlocks and Insider Participation
The Chase Manhattan Bank ("Chase"), an entity related to CEA, CCP and Chase
Manhattan Capital, L.P. ("Chase Capital"), affiliates of Mr. Chavkin, has been
a lender to the Company and is a lender under the credit facilities. See the
explanation below under "Certain Relationships and Transactions"(Item 13).
34
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following sets forth certain information known to us as of March 1, 2000
with respect to the shares of common stock that are beneficially owned as of
such date by (1) each director, (2) each executive officer, (3) all directors
and executive officers as a group, and (4) each person known by us to own more
than 5% of our outstanding common stock. The number of shares beneficially
owned by each person is determined according to the rules of the Securities
and Exchange Commission, and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under these rules, beneficial
ownership includes any shares as to which the individual or entity has sole or
shared voting power or investment power and also any shares which the
individual or entity has the right to acquire within sixty days of March 1,
2000 through the exercise of an option, conversion feature or similar right.
Except as noted below, each holder has sole voting and investment power with
respect to all shares of common stock listed as owned by that holder.
<TABLE>
<CAPTION>
Percent of
Percent of Total
Number Percent of Percent of Common Voting
of Shares Class A Class B Stock Power
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Directors and Executive
Officers
- -----------------------
Steven B. Dodge(1)...... 7,459,710 * 71.73 4.70 28.94
Thomas H. Stoner(2)..... 1,441,653 * 16.78 * 6.13
Alan L. Box(3).......... 966,396 * -- * *
Arnold L. Chavkin
(CEA)(4)............... 6,298,816 2.65 -- 4.01 1.69
James S. Eisenstein(5).. 394,931 * 1.17 * *
Dean H. Eisner(6)....... 1,886,055 1.29 -- 1.20 *
Jack D. Furst(7)........ 24,364 * -- * *
J. Michael Gearon,
Jr.(8)................. 4,017,868 2.75 -- 2.56 1.75
Fred R. Lummis(9)....... 1,356,749 * -- * *
Randall T. Mays (Clear
Channel)(10)........... 9,029,717 6.18 -- 5.76 3.93
Steven J.
Moskowitz(11).......... 106,000 * -- * *
Douglas C. Wiest(12).... 156,557 * -- * *
Maggie Wilderotter(13).. 10,000 * -- * *
Joseph L. Winn(14)...... 577,120 * 4.49 * 1.74
All executive officers
and directors as a
group (fourteen
persons)(15)........... 33,725,936 15.12 88.69 21.01 44.88
Five Percent
Stockholders
Wellington Management
Company,
LLP(16) ............... 16,507,240 11.30 -- 10.52 7.18
FMR Corp.(17)........... 8,959,384 6.13 -- 5.71 3.90
Putnam Investments,
Inc.(18)............... 11,696,754 8.01 -- 7.46 5.09
</TABLE>
- --------
* Less than 1%.
(1) Mr. Dodge's address is 116 Huntington Avenue, Boston, Massachusetts
02116. Includes 10,030 shares of Class A Common Stock and 3,561,911
shares of Class B Common Stock owned by Mr. Dodge, an aggregate of 25,050
shares of Class A Common Stock and 33,915 shares of Class B Common Stock
owned by three trusts for the benefit of Mr. Dodge's children, 66,720
shares of Class A Common Stock and 2,000,000 shares of Class B Common
Stock owned by a limited liability company, of which Mr. Dodge is the
sole member, 5,000 shares of Class A Common Stock owned by Mr. Dodge's
wife and 5,000 shares of Class B Common Stock owned by a charitable
foundation of which Mr. and Mrs. Dodge are trustees. Mr. Dodge's wife and
a third party serve as co-trustees for the three trusts. Mr. Dodge
disclaims beneficial ownership of all shares owned by such trusts, the
charitable foundation and his wife. Does not include 170 shares of Class
A Common Stock held by Thomas S. Dodge, an adult child of Mr. Dodge, with
respect to which Mr. Dodge disclaims beneficial ownership. Includes
options to purchase an aggregate of 1,432,084 shares of Class B Common
Stock and 320,000 shares of Class A Common Stock that are vested. Does
not include options to purchase an aggregate of 1,169,173 shares of Class
B Common Stock and 1,580,000 shares of Class A Common Stock that are
unvested.
35
<PAGE>
(2) Mr. Stoner's address is 116 Huntington Avenue, Boston, Massachusetts
02116. Includes 31,311 shares of Class B Common Stock owned by his wife,
an aggregate of 1,316,285 shares of Class B Common Stock and 2,500
shares of Class A Common Stock owned by trusts of which he and/or
certain other persons are trustees, and 56,988 shares of Class B Common
Stock and 10,245 shares of Class A Common Stock to be issued upon
conversion of convertible notes owned by a charitable foundation of
which Mr. Stoner serves as an officer. Mr. Stoner disclaims beneficial
ownership of 278,853 shares of Class B Common Stock and 2,500 shares of
Class A Common Stock owned by the charitable foundation and such trusts.
Does not include 93,852 shares of Class A Common Stock and 28,727 shares
of Class B Common Stock owned by Mr. Stoner's adult children with
respect to which Mr. Stoner disclaims beneficial ownership. Includes
options to purchase an aggregate of 24,324 shares of Class A Common
Stock that are vested. Does not include options to purchase an aggregate
of 66,215 shares of Class A Common Stock that are unvested.
(3) Mr. Box's address is 116 Huntington Avenue, Boston, Massachusetts 02116.
Includes 698,858 shares of Class A Common Stock owned by Mr. Box, 2,070
shares of Class A Common Stock owned by two trusts for the benefit of Mr.
Box's children and options to purchase an aggregate of 265,468 shares of
Class A Common Stock that are vested. Does not include options to
purchase an aggregate of 370,310 shares of Class A Common Stock that are
unvested.
(4) Mr. Chavkin's address is 116 Huntington Avenue, Boston, Massachusetts
02116. Mr. Chavkin, as a general partner of CCP, which indirectly
controls CEA, may be deemed to own beneficially shares held by CEA and
Chase Capital, an affiliate of Mr. Chavkin. Includes 21,719 shares of
Class A Common Stock and 2,422,804 shares of Class C Common Stock owned
by CEA and 3,829,969 shares of Class A Common Stock owned by Chase
Capital. Mr. Chavkin disclaims beneficial ownership of such shares. The
address of CCP and CEA is 380 Madison Avenue, 12th Floor, New York, New
York 10017. Includes options to purchase an aggregate of 24,324 shares of
Class A Common Stock that are vested. Does not include options to
purchase an aggregate of 66,215 shares of Class A Common Stock that are
unvested.
(5) Mr. Eisenstein's address is 116 Huntington Avenue, Boston, Massachusetts
02116. Includes 25,000 shares of Class A Common Stock owned by Mr.
Eisenstein. Includes options to purchase an aggregate of 99,450 shares of
Class B Common Stock and 270,481 shares of Class A Common Stock that are
vested. Does not include options to purchase an aggregate of 24,861
shares of Class B Common Stock and 229,949 shares of Class A Common Stock
that are unvested.
(6) Mr. Eisner's address is 1400 Lake Hearn Drive, N.E., Atlanta, GA 30319.
Includes 1,881,055 shares of Class A Common Stock owned by Cox Telecom
Towers, Inc., an affiliate of Cox Enterprises, Inc., which may be deemed
to be beneficially owned by Mr. Eisner. Includes options to purchase an
aggregate of 5,000 shares of Class A Common Stock that are vested. Does
not include options to purchase an aggregate of 45,000 shares of Class A
Common Stock that are unvested.
(7) Mr. Furst's address is 200 Crescent Court, Suite 1600, Dallas, Texas
75201-6950. Includes 19,364 shares of Class A Common Stock owned by Mr.
Furst. Mr. Furst, as a shareholder of the general partner and as a
limited partner of Hicks Muse & Co. Partners L.P., ("Hicks Muse"), may be
deemed to own beneficially shares held by Hicks Muse. Includes options
held by Hicks Muse to purchase an aggregate of 5,000 shares of Class A
Common Stock that are vested. Does not include options held by Hicks Muse
to purchase an aggregate of 45,000 shares of Class A Common Stock that
are unvested. Mr. Furst disclaims beneficial ownership of the shares held
by Hicks Muse except to the extent of his pecuniary interest therein.
(8) Mr. Gearon's address is 116 Huntington Avenue, Boston, Massachusetts
02116. Includes 738,833 shares of Class A Common Stock owned directly by
Mr. Gearon and an aggregate of 3,165,254 shares of Class A Common Stock
owned by limited partnerships that Mr. Gearon controls. Does not include
300,000 shares of Class A Common Stock held by a trust for the benefit of
Mr. Gearon's children, of which J. Michael Gearon, Sr. is the trustee.
Mr. Gearon disclaims beneficial ownership in all shares owned by such
trust. Includes options to purchase an aggregate of 113,781 shares of
Class A Common Stock that are vested. Does not include options to
purchase an aggregate of 320,670 shares of Class A Common Stock that are
unvested.
36
<PAGE>
(9) Mr. Lummis' address is 3411 Richmond Avenue, Suite 400, Houston, Texas
77046. Includes 69,105 shares of Class A Common Stock owned by Mr.
Lummis, an aggregate of 256,252 shares of Class A Common Stock owned by
trusts of which he is trustee, 524,349 shares of Class A Common Stock
owned by Summit Capital, an affiliate of Mr. Lummis by reason of Mr.
Lummis's 50% ownership of its common stock. Mr. Lummis disclaims
beneficial ownership of all shares owned by the trusts and Summit
Capital, except to the extent of his pecuniary interest therein. Includes
options to purchase an aggregate of 507,043 shares of Class A Common
Stock that are vested. Does not include options to purchase an aggregate
of 64,999 shares of Class A Common Stock that are unvested.
(10) Mr. Mays' address is P.O. Box 659512, San Antonio, Texas 78265-9512.
Clear Channel owns all of the shares of Class A Common Stock shown in
the table. Mr. Mays disclaims beneficial ownership of Clear Channel's
ownership of such shares. Includes options to purchase an aggregate of
10,000 shares of Class A Common Stock that are vested. Does not include
options to purchase an aggregate of 65,000 shares of Class A Common
Stock that are unvested.
(11) Mr. Moskowitz's address is 116 Huntington Avenue, Boston, Massachusetts
02116. Includes 28,000 shares of Class A Common Stock owned by Mr.
Moskowitz. Includes options to purchase an aggregate of 78,000 shares of
Class A Common Stock that are vested. Does not include options to
purchase an aggregate of 232,000 shares of Class A Common Stock that are
unvested.
(12) Mr. Wiest's address is 116 Huntington Avenue, Boston, Massachusetts
02116. Includes 35,556 shares of Class A Common Stock owned by Mr.
Wiest. Includes options to purchase an aggregate of 121,000 shares of
Class A Common Stock that are vested. Does not include options to
purchase an aggregate of 304,000 shares of Class A Common Stock that are
unvested.
(13) Ms. Wilderotter's address is 116 Huntington Avenue, Boston,
Massachusetts 02116. Includes options to purchase an aggregate of 10,000
shares of Class A Common Stock that are vested. Does not include options
to purchase an aggregate of 65,000 shares of Class A Common Stock that
are unvested.
(14) Mr. Winn's address is 116 Huntington Avenue, Boston, Massachusetts
02116. Includes 2,000 shares of Class A Common Stock and 230,657 shares
of Class B Common Stock owned individually by Mr. Winn and 100 shares of
Class A Common Stock held for the benefit of his children. Includes
options to purchase an aggregate of 152,315 shares of Class B Common
Stock and 192,048 shares of Class A Common Stock that are vested. Does
not include options to purchase an aggregate of 49,014 shares of Class B
Common Stock and 503,032 shares of Class A Common Stock that are
unvested.
(15) Includes all shares stated to be owned in the preceding notes.
(16) The address of Wellington Management Company, LLP ("Wellington") is 75
State Street, Boston, Massachusetts 02109. Based on Wellington's
Schedule 13G dated February 1, 2000, Wellington has sole voting power
over 0 shares of Class A Common Stock, shared voting power over
11,330,780 shares of Class A Common Stock, sole dispositive power over 0
shares of Class A Common Stock and shared dispositive power over
16,316,540 shares of Class A Common Stock.
(17) The address of FMR Corp. ("FMR") is 82 Devonshire Street, Boston,
Massachusetts 02109. Based on FMR's Schedule 13G dated February 11,
2000, FMR has sole voting power over 20,000 shares of Class A Common
Stock, shared voting power over 0 shares of Class A Common Stock, sole
dispositive power over 8,959,384 shares of Class A Common Stock and
shared dispositive power over 0 shares of Class A Common Stock.
(18) The address of Putnam Investments, Inc. ("PI") is One Post Office
Square, Boston, Massachusetts 02109. PI, which is a wholly owned
subsidiary of Marsh & McLennan Companies, Inc. ("MMC"), wholly owns two
registered investment advisers: Putnam Investment Management, Inc.
("PIM"), which is the investment adviser to the Putnam family of mutual
funds, and The Putnam Advisory Company, Inc. ("PAC"), which is the
investment advisor to Putnam's institutional clients. Both subsidiaries
have dispositive power over the shares as investment managers, but each
of the mutual fund's trustees have voting power over the shares held by
each fund, and PAC has shared voting power over the shares held by
Putnam's institutional clients. MMC has sole voting power over 0 shares
of Class A Common Stock, shared voting power over 0 shares of Class A
Common Stock, sole dispositive power over 0 shares of Class A Common
Stock and shared dispositive power over 0 shares of Class A Common
Stock. PIM has sole voting power over 0 shares of Class A Common Stock,
shared voting power over 0 shares of Class A Common Stock, sole
dispositive
37
<PAGE>
power over 0 shares of Class A Common Stock and shared dispositive power
over 11,315,774 shares of Class A Common Stock. PAC has sole voting power
over 0 shares of Class A Common Stock, shared voting power over 89,600
shares of Class A Common Stock, sole dispositive power over 0 shares of
Class A Common Stock and shared dispositive power over 380,980 shares of
Class A Common Stock. PI has sole voting power over 0 shares of Class A
Common Stock, shared voting power over 89,600 shares of Class A Common
Stock, sole dispositive power over 0 shares of Class A Common Stock and
shared dispositive power over 11,696,754 shares of Class A Common Stock.
All of the above information is based on PI's Schedule 13G, dated February
7, 2000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Chase was a lender in our credit facilities with participation ranging from
5.2% to 6.67% under the old credit facilities and a 6.6% participation in
certain of our new credit facilities. Chase is an affiliate of CCP, CEA and
Chase Capital. CEA and Chase Capital are stockholders of the Company. Mr.
Chavkin, a director of American Tower, is a general partner of CCP. The
aggregate principal amount outstanding under the credit facilities was $730.0
million as of March 1, 2000. Chase's share of interest and fees paid by
American Tower pursuant to its various credit arrangements from January 1,
1999 until March 1, 2000 was $1.4 million.
Mr. Eisenstein received a $1,022,366 demand loan in August 1998. As of March
1, 2000 the outstanding principal amount of the loan was $322,365, which was
the largest amount outstanding at any time since January 1, 1999.
Mr. Wiest received a $700,000 demand loan in March 1999 and an additional
advance in December 1999 of $100,000. As of March 1, 2000 the outstanding
principal amount of the loan was $800,000, which was the largest amount
outstanding at any time since January 1, 1999.
Management believes that the above transactions, to the extent they were
with affiliated parties, were on terms, and American Tower intends to continue
its policy that all future transactions between it and its officers,
directors, principal stockholders and affiliates will be on terms, not less
favorable to the Company than those which could be obtained from unaffiliated
parties.
38
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)Documents filed as part of this report.
(1)Financial Statements
<TABLE>
<CAPTION>
Page
----
<S> <C>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
Independent Auditors' Report............................................ F-1
Consolidated Balance Sheets as of December 31, 1999 and 1998............ F-2
Consolidated Statements of Operations for the years ended December 31,
1999, 1998 and 1997.................................................... F-3
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1999, 1998 and 1997....................................... F-4
Consolidated Statements of Cash Flows for the years ended December 31,
1999, 1998 and 1997.................................................... F-5
Notes to Consolidated Financial Statements.............................. F-6
</TABLE>
(b)Reports on Form 8-K.
Form 8-K (Item 7) filed on November 15, 1999.
(c)Exhibits.--See Exhibit Index.
(d)Index to Financial Statement Schedules.
All schedules have been omitted because the required information either is
not applicable or is shown in or determinable from the consolidated
financial statements or notes thereto.
39
<PAGE>
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on the 27th day of
March 2000.
American Tower Corporation
/s/ Steven B. Dodge
By: _________________________________
Steven B. Dodge
Chief Executive Officer,
Director,
President and Chairman of the
Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Steven B. Dodge Chairman of the Board and March 27, 2000
______________________________________ Chief Executive Officer
Steven B. Dodge
/s/ Joseph L. Winn Chief Financial Officer March 27, 2000
______________________________________
Joseph L. Winn
/s/ Alan L. Box Director March 27, 2000
______________________________________
Alan L. Box
/s/ Justin D. Benincasa Corporate Controller March 27, 2000
______________________________________
Justin D. Benincasa
/s/ Thomas H. Stoner Director March 27, 2000
______________________________________
Thomas H. Stoner
/s/ Dean H. Eisner Director March 27, 2000
______________________________________
Dean H. Eisner
/s/ Jack D. Furst Director March 27, 2000
______________________________________
Jack D. Furst
/s/ Arnold L. Chavkin Director March 27, 2000
______________________________________
Arnold L. Chavkin
/s/ Randall T. Mays Director March 27, 2000
______________________________________
Randall T. Mays
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Maggie Wilderotter Director March 27, 2000
______________________________________
Maggie Wilderotter
/ J. Michael Gearon, Jr. Director March 27, 2000
______________________________________
J. Michael Gearon, Jr.
/s/ Fred R. Lummis Director March 27, 2000
______________________________________
Fred R. Lummis
</TABLE>
41
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
American Tower Corporation:
We have audited the accompanying consolidated balance sheets of American Tower
Corporation and subsidiaries (the "Company") as of December 31, 1999 and 1998,
and the related consolidated statements of operations, stockholders' equity,
and cash flows for each of the three years in the period ended December 31,
1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of the Company as of
December 31, 1999 and 1998, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1999 in
conformity with accounting principles generally accepted in the United States
of America.
Deloitte & Touche LLP
Boston, Massachusetts
March 1, 2000
F-1
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 1998
(In thousands, except share data)
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................. $ 25,212 $ 186,175
Accounts receivable, net.............................. 58,482 15,506
Prepaid and other current assets...................... 13,835 4,065
Inventories........................................... 11,262
Costs in excess of billings on uncompleted contracts
and unbilled receivables............................. 13,363 1,344
Deferred income taxes................................. 1,718 495
Due from CBS Corporation.............................. 15,535
---------- ----------
Total current assets................................ 139,407 207,585
---------- ----------
PROPERTY AND EQUIPMENT, net............................ 1,092,346 449,476
GOODWILL AND OTHER INTANGIBLE ASSETS, net.............. 1,403,897 718,575
NOTES RECEIVABLE (including $60,000 due from related
party)................................................ 118,802 7,585
DEPOSITS AND OTHER LONG-TERM ASSETS.................... 134,568 9,704
INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES............. 15,594
DEFERRED INCOME TAXES.................................. 114,252 109,418
---------- ----------
TOTAL.................................................. $3,018,866 $1,502,343
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt..................... $ 4,736 $ 1,652
Accounts payable...................................... 25,564 6,696
Accrued expenses...................................... 32,732 11,347
Accrued tower construction costs...................... 37,671 16,099
Accrued interest...................................... 6,769 1,132
Billings in excess of costs on uncompleted contracts
and unearned revenue................................. 17,515 6,610
Accrued separation costs.............................. 5,058
Due to CBS Corporation................................ 45,127
Accrued acquisition purchase price.................... 21,914
---------- ----------
Total current liabilities........................... 124,987 115,635
---------- ----------
LONG-TERM DEBT......................................... 736,086 279,477
OTHER LONG-TERM LIABILITIES............................ 4,057 1,429
---------- ----------
Total liabilities................................... 865,130 396,541
---------- ----------
COMMITMENTS AND CONTINGENCIES (Notes 7 and 14)
MINORITY INTEREST IN SUBSIDIARIES...................... 8,653 4,116
---------- ----------
REDEEMABLE CLASS A COMMON STOCK- $.01 par value,
336,250 shares issued and outstanding at estimated
redemption value of $29.56 per share.................. 9,940
---------- ----------
STOCKHOLDERS' EQUITY:
Preferred Stock; $0.01 par value; 20,000,000 shares
authorized; no shares issued or outstanding..........
Class A Common Stock; $.01 par value; 500,000,000
shares authorized; 144,965,623 shares and 96,291,111
shares issued and outstanding, respectively.......... 1,450 963
Class B Common Stock; $.01 par value; 50,000,000
shares authorized; 8,387,910 shares and 9,001,060
shares issued and outstanding, respectively.......... 84 90
Class C Common Stock; $.01 par value; 10,000,000
shares authorized; 2,422,804 shares and 3,002,008
shares issued and outstanding, respectively.......... 24 30
Additional paid-in capital............................ 2,245,482 1,140,365
Accumulated deficit................................... (100,429) (49,702)
Less: treasury stock (76,403 shares issued at
cost).............................................. (1,528)
---------- ----------
Total stockholders' equity.......................... 2,145,083 1,091,746
---------- ----------
TOTAL.................................................. $3,018,866 $1,502,343
========== ==========
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 1999, 1998, and 1997
(In thousands, except per share data)
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------
1999 1998 1997
-------- -------- -------
<S> <C> <C> <C>
REVENUES:
Rental and management........................... $135,303 $ 60,505 $13,302
Services........................................ 90,416 23,315 2,122
Internet, voice, data and video transmission.... 32,362 19,724 2,084
-------- -------- -------
Total operating revenues...................... 258,081 103,544 17,508
-------- -------- -------
OPERATING EXPENSES:
Operating expenses excluding depreciation and
amortization, tower separation, development and
corporate general and administrative expense:
Rental and management.......................... 62,441 29,455 6,080
Services....................................... 69,318 19,479 1,360
Internet, voice, data and video transmission... 24,098 12,817 1,273
Depreciation and amortization................... 132,539 52,064 6,326
Tower separation expense........................ 12,772
Development expense............................. 1,607
Corporate general and administrative expense.... 9,136 5,099 1,536
-------- -------- -------
Total operating expenses...................... 299,139 131,686 16,575
-------- -------- -------
(LOSS) INCOME FROM OPERATIONS..................... (41,058) (28,142) 933
-------- -------- -------
OTHER INCOME (EXPENSE):
Interest expense................................ (27,492) (23,229) (3,040)
Interest income and other, net (See Note 5)..... 19,551 9,217 251
Minority interest in net earnings of
subsidiaries................................... (142) (287) (193)
-------- -------- -------
TOTAL OTHER EXPENSE............................... (8,083) (14,299) (2,982)
-------- -------- -------
LOSS BEFORE INCOME TAXES AND EXTRAORDINARY
LOSSES........................................... (49,141) (42,441) (2,049)
(PROVISION) BENEFIT FOR INCOME TAXES.............. (214) 4,491 473
-------- -------- -------
LOSS BEFORE EXTRAORDINARY LOSSES.................. (49,355) (37,950) (1,576)
EXTRAORDINARY LOSS ON EXTINGUISHMENT OF DEBT, NET
OF INCOME TAX BENEFIT OF $914 IN 1999, $921 IN
1998 AND $463 IN 1997, RESPECTIVELY.............. (1,372) (1,382) (694)
EXTRAORDINARY LOSS ON REDEMPTION OF INTERIM
PREFERRED STOCK, NET OF INCOME TAX BENEFIT OF
$5,000........................................... (7,510)
-------- -------- -------
NET LOSS.......................................... $(50,727) $(46,842) $(2,270)
======== ======== =======
BASIC AND DILUTED LOSS PER COMMON SHARE AMOUNTS:
Loss before extraordinary losses................ $ (0.33) $ (0.48) $ (0.03)
Extraordinary losses............................ (0.01) (0.11) (0.01)
-------- -------- -------
Net loss........................................ $ (0.34) $ (0.59) $ (0.05)
======== ======== =======
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING...................................... 149,749 79,786 48,732
======== ======== =======
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1999, 1998 and 1997
(In thousands, except share data)
<TABLE>
<CAPTION>
Common Stock Common Stock Common Stock Common Stock Treasury Stock
------------------ ------------------ ------------------ ------------------ -------------------
Class A Class B Class C
------------------ ------------------ ------------------
Outstanding Outstanding Outstanding Outstanding Outstanding Notes
Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Receivable
----------- ------ ----------- ------ ----------- ------ ----------- ------ ----------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY
1, 1997......... 3,000
Contributions
from ARS:
Cash............
Non-cash........
Transfers to
ARS:
Cash............
Non-cash........
Recapitalization
(Note 10)....... (3,000) 29,667,883 $ 297 4,670,626 $47 1,295,518 $13
Net loss........
------ --- ----------- ------ --------- --- --------- ---
BALANCE,
DECEMBER 31,
1997............ 29,667,883 297 4,670,626 47 1,295,518 13
====== ===
Contributions
from ARS:
Cash............
Non-cash........
Transfers to
ARS:
Cash............
Issuance of
common stock
under stock
purchase
agreement, net
of issuance
costs of $630... 1,350,050 14 4,649,950 46 2,000,000 20 $(49,375)
Issuance of
common stock-
Gearon merger... 5,333,333 53
Reduction of
common stock
redemption
obligation...... 383,750 4
Issuance of
common stock-ATC
merger.......... 28,782,386 287
Issuance of
common stock-
Wauka merger.... 1,430,881 14
Exercise of
options......... 899,504 9 203,709 2
Repayment stock
purchase
agreement
notes........... 49,375
ATC Separation
tax liability...
ATC Separation
working capital
adjustment......
ATC Separation
share
conversion...... 111,761 1 (347,159) (3)
Issuance of
common stock--
July offering,
net of issuance
costs of
$29,806......... 27,861,987 279
Share class
exchanges....... 469,576 5 (176,066) (2) (293,510) (3)
Accretion of
redeemable
stock...........
Tax liability
from conversion
of CBS
securities......
Tax benefit of
stock options...
Net loss........
----------- ------ --------- --- --------- --- -------- ------- --------
BALANCE,
DECEMBER 31,
1998............ 96,291,111 963 9,001,060 90 3,002,008 30
========
Cash
contributions
from ARS........
Adjustment to
ATC separation
tax liability...
Transfers/payments
to ARS/CBS......
Issuance of
common stock--
Omni merger..... 16,750,554 168
Issuance of
common stock--
TeleCom merger.. 3,940,874 39
Wauka escrow
release--
treasury stock.. (76,403) $(1,528)
Issuance of
common stock--
February
offerings....... 26,200,000 262
Expiration of
redeemable
common stock.... 336,250 3
Issuance of
options--
acquisition.....
Exercise of
options......... 254,480 3
Share class
exchanges....... 1,192,354 12 (613,150) (6) (579,204) (6)
Tax benefit of
stock options...
Net loss........
----------- ------ --------- --- --------- --- -------- -------
BALANCE,
DECEMBER 31,
1999............ 144,965,623 $1,450 8,387,910 $84 2,422,804 $24 (76,403) $(1,528)
=========== ====== ========= === ========= === ======== =======
<CAPTION>
Additional
Paid-in Accumulated
Capital Deficit Total
----------- ----------- -----------
<S> <C> <C> <C>
BALANCE, JANUARY
1, 1997......... $ 30,318 $ (590) $ 29,728
Contributions
from ARS:
Cash............ 143,073 143,073
Non-cash........ 51 51
Transfers to
ARS:
Cash............ (16,650) (16,650)
Non-cash........ (724) (724)
Recapitalization
(Note 10)....... (357)
Net loss........ (2,270) (2,270)
----------- ----------- -----------
BALANCE,
DECEMBER 31,
1997............ 155,711 (2,860) 153,208
Contributions
from ARS:
Cash............ 56,918 56,918
Non-cash........ 6,489 6,489
Transfers to
ARS:
Cash............ (51,858) (51,858)
Issuance of
common stock
under stock
purchase
agreement, net
of issuance
costs of $630... 79,290 29,995
Issuance of
common stock-
Gearon merger... 47,947 48,000
Reduction of
common stock
redemption
obligation...... 9,740 9,744
Issuance of
common stock-ATC
merger.......... 297,192 297,479
Issuance of
common stock-
Wauka merger.... 28,603 28,617
Exercise of
options......... 2,727 2,738
Repayment stock
purchase
agreement
notes........... 49,375
ATC Separation
tax liability... (61,715) (61,715)
ATC Separation
working capital
adjustment...... (50,000) (50,000)
ATC Separation
share
conversion...... 2
Issuance of
common stock--
July offering,
net of issuance
costs of
$29,806......... 624,672 624,951
Share class
exchanges.......
Accretion of
redeemable
stock........... (1,555) (1,555)
Tax liability
from conversion
of CBS
securities...... (5,021) (5,021)
Tax benefit of
stock options... 1,223 1,223
Net loss........ (46,842) (46,842)
----------- ----------- -----------
BALANCE,
DECEMBER 31,
1998............ 1,140,365 (49,702) 1,091,746
Cash
contributions
from ARS........ 507 507
Adjustment to
ATC separation
tax liability... 12,003 12,003
Transfers/payments
to ARS/CBS...... (1,070) (1,070)
Issuance of
common stock--
Omni merger..... 364,020 364,188
Issuance of
common stock--
TeleCom merger.. 82,015 82,054
Wauka escrow
release--
treasury stock.. (1,528)
Issuance of
common stock--
February
offerings....... 630,889 631,151
Expiration of
redeemable
common stock.... 9,937 9,940
Issuance of
options--
acquisition..... 1,794 1,794
Exercise of
options......... 3,573 3,576
Share class
exchanges.......
Tax benefit of
stock options... 1,449 1,449
Net loss........ (50,727) (50,727)
----------- ----------- -----------
BALANCE,
DECEMBER 31,
1999............ $2,245,482 $(100,429) $2,145,083
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1999, 1998 and 1997
(In thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------
1999 1998 1997
----------- --------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................... $ (50,727) $ (46,842) $ (2,270)
Adjustments to reconcile net loss to cash
provided by operating activities:
Depreciation and amortization.............. 132,539 52,064 6,326
Minority interest in net earnings of
subsidiaries.............................. 142 287 193
Amortization of deferred financing costs... 1,466 1,629 188
Provision for losses on accounts
receivable................................ 2,639 1,136 124
Extraordinary losses....................... 2,286 14,813 1,157
Amortization of debt discount.............. 2,642 261
Dividends on preferred stock............... 3,117
Deferred income taxes...................... (2,054) (10,412) (316)
Changes in assets and liabilities, net of
acquisitions:
Accounts receivable....................... (17,368) (11,042) (3,156)
Costs in excess of billings on uncompleted
contracts and unbilled receivables....... (5,919) (1,185)
Prepaid and other current assets.......... (5,503) (1,553) 159
Inventories............................... (6,210)
Accounts payable and accrued expenses..... 31,516 13,577 5,080
Accrued interest.......................... 5,436 (47) 914
Billings in excess of costs on uncompleted
contacts and unearned revenue............ 3,981 1,311 1,500
Other long-term liabilities............... 2,145 1,315 14
----------- --------- --------
Cash provided by operating activities....... 97,011 18,429 9,913
----------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for purchase of property and
equipment and construction activities..... (294,242) (126,455) (20,614)
Payments for acquisitions, (net of cash
acquired)................................. (588,384) (208,717) (184,076)
Advances of notes receivable............... (119,282) (12,140) (10,962)
Proceeds from notes receivable............. 1,587 2,001
Deposits, investments and other long-term
assets.................................... (137,379) (5,066) (1,131)
----------- --------- --------
Cash used for investing activities.......... (1,137,700) (350,377) (216,783)
----------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under notes payable and credit
facilities................................ 224,779 205,500 151,000
Repayments of notes payable and credit
facilities................................ (512,856) (156,667) (65,359)
Proceeds from issuance of debt securities.. 600,063
Net proceeds from equity offerings and
stock options............................. 634,727 707,059
Cash transfers to CBS...................... (50,000) (221,665)
Cash transfers from CBS.................... 1,248
Net proceeds from preferred stock.......... 300,000
Redemption of preferred stock.............. (303,117)
Contributions from ARS..................... 507 56,918 143,073
Cash transfers to ARS...................... (51,858) (16,650)
Distributions to minority interest......... (396) (393) (419)
Deferred financing costs................... (18,346) (22,250) (2,553)
----------- --------- --------
Cash provided by financing activities....... 879,726 513,527 209,092
----------- --------- --------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS................................ (160,963) 181,579 2,222
CASH AND CASH EQUIVALENTS, BEGINNING OF
YEAR....................................... 186,175 4,596 2,374
----------- --------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR...... $ 25,212 $ 186,175 $ 4,596
=========== ========= ========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business and Corporate Structure--American Tower Corporation and subsidiaries
(collectively, ATC or the Company) was a wholly-owned subsidiary of American
Radio Systems Corporation (ARS, American Radio or the Former Parent) until
consummation of the spin-off of the Company from American Radio on June 4,
1998 (the ATC Separation). American Tower, Inc. (ATI), which is a direct
wholly-owned subsidiary of the Company, and American Tower, L.P. (ATLP), an
indirect wholly-owned subsidiary of the Company, held substantially all of the
operating assets and liabilities of the business. ATI and ATLP are
collectively referred to as the Borrower Subsidiaries. The Company was
incorporated on July 17, 1995 (Incorporation) for the purpose of acquiring,
developing, marketing, managing and operating wireless communications sites
throughout the United States for use by wireless communications providers and
television and radio broadcasters.
The Company is a leading independent owner, operator and developer of
broadcast and wireless communications sites in North America. As of December
31, 1999, the Company owned and operated approximately 5,100 multi-user tower
sites. Assuming consummation of all pending transactions, the Company operates
more than 10,400 multi-user sites across the United States, Mexico and Canada.
Of the 10,400 multi-user sites, 9,000 are owned or leased towers and 1,400 are
managed or lease sub-lease sites. The Company's network spans 48 states and
the District of Columbia, with tower clusters in 43 of the 50 largest U.S.
metropolitan statistical areas. The Company's sites also include approximately
300 broadcast tower sites in the United States and Mexico. Based in Boston,
the Company has regional hub offices in Boston, Atlanta, Chicago, Houston, San
Francisco and Mexico City. The Company's primary business is the leasing of
antenna space to a diverse range of wireless communications industries,
including PCS cellular, ESMR, SMR, paging, fixed microwave and fixed wireless.
The Company is also a leading provider of network development services and
components for both wireless service providers and broadcasters. The Company
offers full turnkey network development solutions to its customers, consisting
of radio frequency engineering, network design, site acquisition and
construction, zoning and other regulatory approvals, tower construction,
component part sales and antenna installation. The Company is also a leading
Internet, voice, data and video (IVDV) transmission company, providing
services to both land and sea worldwide. As of December 31, 1999, the Company
owned and operated approximately 160 satellite antennas in various locations
across the United States, with major facilities in New York, Washington, D.C.,
Dallas and San Francisco.
ATC Separation: On June 4, 1998, the merger of American Radio and a subsidiary
of CBS Corporation (CBS) was consummated. As a result of the merger, all of
the outstanding shares of the Company's common stock owned by American Radio
were distributed to American Radio common stockholders, and the Company ceased
to be a subsidiary of, or to be otherwise affiliated with American Radio.
Furthermore, from that day forward the Company began operating as an
independent publicly traded company.
As part of the ATC Separation, the Company was required to reimburse CBS for
certain tax liabilities incurred by American Radio as a result of the
transaction. As of December 31, 1999 the Company had made estimated tax
payments to CBS of approximately $212.0 million. Upon completion of the final
American Radio tax filings, a calculation of the total tax payments due to CBS
was performed and approved by both the Company and CBS. Such calculation
reflected a refund to the Company of amounts previously paid of approximately
$7.0 million. Such amount (net of $1.3 million of payments already received)
along with the Company's previously provided security deposit of $9.8 million
are recorded as Due from CBS in the accompanying December 31, 1999
consolidated balance sheet. The Company continues to be obligated to indemnify
CBS and American Radio for certain tax matters affecting American Radio prior
to the ATC Separation. As of December 31, 1999, no matters covered under this
indemnification have been brought to the Company's attention.
F-6
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Principles of Consolidation and Basis of Presentation--The accompanying
consolidated financial statements include the accounts of the Company and its
subsidiaries. All significant intercompany accounts and transactions have been
eliminated. Investments in those entities where the Company owns less than
twenty percent of the voting stock of the individual entity are accounted for
using the cost method. Investments in those entities where the Company owns
more than twenty percent of the voting stock of the individual entity, but not
in excess of fifty percent, are accounted for using the equity method. The
Company consolidates those entities in which it owns greater than fifty
percent of the entity's voting stock.
Through June 4, 1998, the Company effectively operated as a stand-alone
entity, with its own corporate staff and headquarters, and received minimal
assistance from personnel of American Radio. Accordingly, the accompanying
consolidated financial statements do not include any corporate general and
administrative cost allocations from American Radio. The consolidated
financial statements may not reflect the results of operations or financial
position of the Company had it been an independent public company during the
periods presented prior to June 4, 1998.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results may differ from those estimates, and
such differences could be material to the accompanying consolidated financial
statements.
Revenue Recognition--Rental and management revenues are recognized when
earned. Escalation clauses and other incentives present in lease agreements
with the Company's customers are recognized on a straight-line basis over the
term of the lease.
Service revenues from site selection, construction and construction management
activities are derived under service contracts with customers that provide for
billings on a time and materials or fixed price basis. Revenues are recognized
as services are performed with respect to the time and materials contracts.
Revenues are recognized using the percentage-of-completion method for fixed
price contracts and are measured by the percentage of contract costs incurred
to date compared to estimated total contract costs. Costs in excess of
billings on uncompleted contracts represent revenues recognized in excess of
amounts billed. Billings in excess of costs on uncompleted contracts represent
billings in excess of revenues recognized. Changes to total estimated contract
costs or losses, if any, are recognized in the period in which they are
determined.
Internet, voice, data and video transmission revenues are recognized as such
services are provided. Amounts billed or received prior to services being
performed are deferred until such time as the revenue is earned.
Development Expense--Development expense consists primarily of costs incurred
in connection with the integration of acquisitions and the development of new
business initiatives. Such costs are expensed as incurred.
Tower Separation Expense--Tower separation expense consists of one-time costs
incurred in connection with the separation of the Company from its former
parent. Specifically, it includes legal, accounting, financial advisory and
consent solicitation fees. Such costs were expensed as incurred.
Corporate General and Administrative Expense--Corporate general and
administrative expense consists of corporate overhead costs not specifically
allocable to any of the Company's individual business segments.
Concentrations of Credit Risk--Financial instruments that potentially subject
the Company to concentrations of credit risk are primarily cash and cash
equivalents, notes receivable and trade receivables. The Company mitigates its
risk with respect to cash and cash equivalents by maintaining such deposits at
high quality credit financial institutions and monitoring the credit ratings
of those institutions.
F-7
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company mitigates its concentrations of credit risk with respect to notes
and trade receivables by actively monitoring the creditworthiness of its
borrowers and customers. Historically, the Company has not incurred any
significant credit related losses. The Company derives the largest portion of
its revenues from customers in the wireless telecommunications industry. In
addition, the Company has concentrations of operations in certain geographic
areas (primarily California, Florida and Texas). One customer accounted for
approximately 17% of the Company's 1999 consolidated revenues. No single
customer accounted for more than 10% of consolidated revenues during 1998 and
1997.
Accounts receivable are reported net of allowances for doubtful accounts of
$3,386,000 and $1,230,000 as of December 31, 1999 and 1998, respectively.
Amounts charged against the allowance for doubtful accounts for the years
ended December 31, 1999, 1998 and 1997 approximated $721,000, $206,000, and
$46,000, respectively.
Discount on Convertible Notes--The Company amortizes the discount on its
convertible notes using the effective interest method over the term of the
obligation. Such amortization is recorded as interest expense in the
accompanying consolidated financial statements.
Derivative Financial Instruments--The Company uses derivative financial
instruments as a means of managing interest-rate risk associated with its
current debt or anticipated debt transactions that have a high probability of
execution. The Company's interest rate protection agreements generally consist
of interest rate swap and interest rate cap agreements. These instruments are
matched with either fixed or variable rate debt, and payments thereon are
recorded on a settlement basis as an adjustment to interest expense. Premiums
paid to purchase interest rate cap agreements are amortized as an adjustment
of interest expense over the life of the contract. Derivative financial
instruments are not held for trading purposes.
Cash and Cash Equivalents--Cash and cash equivalents include cash on hand,
demand deposits and short-term investments with remaining maturities (when
purchased) of three months or less.
Inventories--Inventories, which consist primarily of finished goods and raw
material component parts, are stated at the lower of cost or market, with cost
being determined on the first-in, first-out (FIFO) basis. The components of
inventories as of December 31, 1999 are as follows (in thousands):
<TABLE>
<S> <C>
Raw materials........................ $ 859
Work in process...................... 303
Finished goods....................... 10,100
-------
Total $11,262
=======
</TABLE>
Property and Equipment--Property and equipment are recorded at cost or at
estimated fair value (in the case of acquired properties). Cost for self-
constructed towers includes direct materials and labor, indirect costs
directly associated with construction and capitalized interest. Approximately
$3,379,000, $1,403,000 and $458,000 of interest was capitalized for the years
ended December 31, 1999, 1998 and 1997, respectively. Depreciation is provided
using the straight-line method over the assets' estimated useful lives ranging
from three to thirty-two years. Property and equipment acquired through
capitalized leases are amortized utilizing the straight-line method over the
shorter of the lease term or the estimated useful life of the asset.
Goodwill and Other Intangible Assets--Goodwill and other intangible assets
represent principally the excess of purchase price over the estimated fair
value of net assets acquired, as well as the value of existing site rental
customer contracts, deferred financing costs, deferred acquisition costs and
non-competition agreements. Goodwill and site rental customer contracts are
amortized over an estimated aggregate useful life of fifteen years using the
straight-line method. The consolidated financial statements reflect the
preliminary allocation of certain
F-8
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
purchase prices, as the appraisals for some acquisitions have not yet been
finalized. The portion of intangible assets relating to deferred financing
costs and non-competition agreements is being amortized on a straight-line
basis over the related estimated useful lives, ranging from five to ten years.
(See note 4).
Income Taxes--The consolidated financial statements reflect provisions for
federal, state, local and foreign income taxes on current income. However, the
tax costs of repatriating foreign subsidiary business earnings to the
Company's domestic subsidiaries has not been reflected in the tax provision
since the Company intends to permanently reinvest the profits of its foreign
subsidiaries within those entities.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured 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 of a change in tax rates is recognized in income in the period
that includes the enactment date.
Through January 1998, the Company participated in a tax sharing agreement with
ARS. The Company and its subsidiaries now prepare and file income tax returns
on a consolidated basis, separate from ARS. (See note 9).
Loss Per Common Share--Basic and diluted income or loss per common share have
been determined in accordance with Statement of Financial Accounting Standards
(FAS) No. 128, "Earnings Per Share" whereby basic income or loss per common
share is computed by dividing net income or loss by the weighted average
number of common shares outstanding during the period. Diluted per share
amounts are computed by adjusting the weighted average number of common shares
for dilutive potential common shares during the period, if any. In computing
diluted per share amounts, the Company uses the treasury stock method, whereby
unexercised options are assumed to be exercised at the beginning of the period
or at issuance, if later. The assumed proceeds are then used to purchase
common shares at the average market price during the period. Shares
outstanding upon the consummation of the ATC Separation are assumed to be
outstanding for all of 1997 and prior to June 4, 1998. Shares issuable upon
exercise of options and other dilutive securities have been excluded from the
computation of diluted loss per common share as the effect is anti-dilutive.
Had these options and other dilutive securities been included in the
computation, shares for the diluted computation would have increased by
approximately 11.5 and 3.9 million for the years ended December 31, 1999 and
1998, respectively.
Impairment of Long-Lived Assets--Recoverability of long-lived assets is
determined periodically by comparing the forecasted, undiscounted net cash
flows of the operations to which the assets relate to their carrying amounts,
including associated intangible assets of such operations.
Stock-Based Compensation--Compensation related to equity grants or awards to
employees is measured using the intrinsic value method prescribed by
Accounting Principles Board Opinion No. 25 "Accounting For Stock Issued To
Employees." In addition, the Company provides the required disclosures under
FAS No. 123, "Accounting For Stock Based Compensation" as if the fair-value
based method (defined in FAS No. 123) had been applied. (See note 10).
Fair Value of Financial Instruments--The Company believes that the carrying
value of all financial instruments is a reasonable estimate of the fair value
as of December 31, 1999 and 1998.
Retirement Plan--The Company has a 401(k) plan covering substantially all
employees who meet certain age and employment requirements. Under the plan,
the Company matches 30% of participants' contributions up to 5% of
compensation. Prior to the ATC Separation, employees of the Company
participated in a similar plan sponsored by ARS. The Company contributed
approximately $461,000, $207,700 and $16,800 to the plans for the years ended
December 31, 1999, 1998 and 1997, respectively.
F-9
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Recent Accounting Pronouncement--In June 1998, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards
(FAS) No. 133, Accounting for Derivative Instruments and Hedging Activities,
as amended in May 1999 by FAS No. 137 "Accounting for Derivative Instruments
and Hedging Activities -- Deferral of the Effective Date of FASB Statement No.
133 -- An Amendment of FASB Statement No. 133." This statement establishes
accounting and reporting standards for derivative instruments. It requires
that an entity recognize all derivatives as either assets or liabilities in
the statement of financial position, and measure those instruments at fair
value. The accounting for changes in the fair value of a derivative (that is,
gains and losses) will depend on the entity's intended use of the derivative
and its resulting designation (as defined in the statement). FAS No. 133, as
amended, will be effective for the Company on January 1, 2001. The Company is
currently in the process of evaluating the impact FAS No. 133 will have on the
Company and its consolidated financial statements.
Reclassifications--Certain reclassifications have been made to the 1998 and
1997 financial statements to conform with the 1999 presentation.
2. COSTS IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS AND UNBILLED
RECEIVABLES
The Company derives a portion of its Services revenue from customer contracts
that provide for billing only after certain milestones within the contract
have been achieved. As the Company recognizes revenue on these contracts using
the percentage-of-completion methodology, such contracts give rise to revenue
which has been earned, but as of a certain point in time remains unbilled.
Such amounts (along with unbilled rental revenue) are included in costs in
excess of billings on uncompleted contracts and unbilled receivables in the
accompanying consolidated balance sheets.
Within its Services segment the Company also enters into contracts that
provide for progress billings as the Company fulfills its obligation under
certain contracts. These contracts may give rise to billings that are in
excess of amounts actually earned as of a certain point in time. The excess of
amounts billed over the amount earned on these contracts is reflected (along
with customer rent received in advance) in billings in excess of costs on
uncompleted contracts and unearned revenue in the accompanying consolidated
balance sheets.
F-10
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following are the components of costs in excess of billings on uncompleted
contracts, unbilled receivables, billings in excess of costs on uncompleted
contracts and unearned revenue as of December 31, 1999 and 1998 (in
thousands):
<TABLE>
<CAPTION>
1999 1998
---------- --------
<S> <C> <C>
Costs incurred on uncompleted contracts.............. $ 20,783
Estimated earnings................................... 13,228
Unbilled receivables................................. 3,664 $ 1,344
Less billings to date................................ (41,827) (6,610)
---------- --------
$ (4,152) $ (5,266)
========== ========
Included in the accompanying consolidated balance
sheets:
Costs and estimated earnings in excess of billings
on uncompleted contracts and unbilled
receivables....................................... $ 13,363 $ 1,344
Billings in excess of costs and estimated earnings
on uncompleted contracts and unearned revenue..... (17,515) (6,610)
---------- --------
$ (4,152) $ (5,266)
========== ========
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following as of December 31 (in
thousands):
<CAPTION>
1999 1998
---------- --------
<S> <C> <C>
Land and improvements................................ $ 61,007 $ 38,242
Buildings and improvements........................... 156,005 59,447
Towers............................................... 672,039 289,334
Technical equipment.................................. 29,591 9,381
Transmitter equipment................................ 75,488 29,290
Office equipment, furniture, fixtures and other
equipment........................................... 43,535 14,863
Construction in progress............................. 127,171 31,926
---------- --------
Total............................................ 1,164,836 472,483
Less accumulated depreciation and amortization....... (72,490) (23,007)
---------- --------
Property and equipment, net.......................... $1,092,346 $449,476
========== ========
4. GOODWILL AND OTHER INTANGIBLE ASSETS
The Company's intangible assets consist of the following as of December 31
(in thousands):
<CAPTION>
1999 1998
---------- --------
<S> <C> <C>
Goodwill and site rental customer contracts.......... $1,491,569 $739,933
Deferred financing costs............................. 24,269 8,891
Non-compete agreements............................... 6,615 6,018
Deferred acquisition costs and other................. 5,027 2,513
---------- --------
Total............................................ 1,527,480 757,355
Less accumulated amortization........................ (123,583) (38,780)
---------- --------
Goodwill and other intangible assets, net............ $1,403,897 $718,575
========== ========
</TABLE>
F-11
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5. NOTES RECEIVABLE AND AMOUNTS DUE FROM RELATED PARTY
In December 1999, the Company signed definitive agreements to loan up to
$120.0 million to TV Azteca S.A. de C.V. (TV Azteca), the owner of a major
national television broadcast network in Mexico. The loan, of which $100.0
million was advanced in February 2000, earns net interest at approximately
11.6%, payable quarterly. An executive officer and director of the Company
also became a director of TV Azteca in December 1999. The Company also assumed
marketing responsibility for approximately 190 broadcasting towers owned by TV
Azteca. Under the terms of the marketing agreement, the Company will be
entitled to receive 100% of the revenues generated by third party leases and
will be responsible for any incremental operating expenses associated with
those leases during the term of the loan. The initial term of the loan, twenty
years, may be extended by TV Azteca for an additional fifty years. The Company
had no amounts receivable under the note as of December 31, 1999.
In anticipation of the loan described above, the Company made an interim loan
of $60.0 million to TV Azteca in September 1999. The interim loan, which bore
interest at approximately 11%, matured at the closing of the loan described
above and was partially collateralized by the stock of TV Azteca. As of
December 31, 1999 the amount due to the Company in connection with this
interim loan was $60.0 million and interest income aggregated $1.9 million for
the year ended December 31, 1999.
As of December 31, 1999, the Company also has several notes receivable
outstanding totaling approximately $58.8 million. Such notes were issued in
connection with a number of acquisitions entered into in 1999 and 1998. These
notes bear interest at rates ranging from 5% to 16% and mature in periods
ranging from the earlier of two to three years or upon consummation of the
applicable transaction.
6. FINANCING ARRANGEMENTS
Outstanding amounts under the Company's long-term financing arrangements
consisted of the following as of December 31 (in thousands):
<TABLE>
<CAPTION>
1999 1998
-------- ---------
<S> <C> <C>
Convertible notes....................................... $602,259
Credit facilities....................................... 90,000 $ 275,000
Notes and mortgage payable.............................. 43,785 5,854
Capital leases and other obligations.................... 4,778 275
-------- ---------
Total................................................... 740,822 281,129
Less current portion.................................... (4,736) (1,652)
-------- ---------
Long-term debt.......................................... $736,086 $ 279,477
======== =========
</TABLE>
The following is a description of the Company's outstanding long-term debt as
of December 31, 1999:
Convertible Notes--On October 4, 1999, the Company completed a private
placement of $300.0 million 6.25% Convertible Notes (6.25% Notes), issued at
100% of their face amount and $425.5 million 2.25% Convertible Notes (2.25%
Notes), issued at 70.52% of their face amount (collectively, the Notes). The
yield to maturity on the 2.25% Notes is 6.25%, giving effect to the accrued
original issue discount and accrued interest. The Notes mature on October 15,
2009. Interest on the Notes is payable semiannually on April 15 and October 15
of each year, beginning April 15, 2000.
The 6.25% Notes and 2.25% Notes are convertible at any time, at the option of
the holder, into the Company's Class A common stock at a conversion price of
$24.40 per share and $24.00 per share, respectively, subject to adjustment in
certain events. The Company may redeem the Notes at any time on or after
October 22, 2002. The
F-12
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
initial redemption price on the 6.25% Notes is 103.125% of the principal
amount, subject to ratable declines immediately after October 15 of each
following year to 100% of the principal amount in 2005. The 2.25% Notes are
redeemable incrementally at increasing prices designed to reflect the accrued
original issue discount. The holders have the option of requiring the Company
to repurchase all or a portion of the 6.25% Notes on October 22, 2006 at their
principal amount, together with accrued and unpaid interest, and all or a
portion of the 2.25% Notes on October 22, 2003 at $802.93, plus accrued and
unpaid interest. The Company may elect to pay the repurchase price on the
Notes in cash or shares of Class A common stock. The Notes rank equally with
one another and are junior to indebtedness outstanding under the Company's
credit facilities.
Total net proceeds from the Notes were approximately $584.0 million, of which
approximately $368.0 million were used to pay off borrowings under the
Company's then existing credit facility. The remaining portion of the proceeds
has and will be used to finance acquisitions and construction.
Credit Facilities--In June 1998, the Company and the Borrower Subsidiaries
entered into loan agreements (the Credit Facilities) which increased the
Company's maximum borrowing capacity from $400.0 million to $925.0 million.
The Credit Facilities consist of a term loan to the Company for $150.0
million, revolving credit facilities to the Borrower Subsidiaries totaling
$650.0 million and a term loan to the Borrower Subsidiaries of $125.0 million.
In October 1999, following the issuance of the Notes, the Company's borrowing
capacity under the Credit Facilities was reduced to $483.0 million. The
reduction was a result of the repayment of the Company's term loan and
provisions in the credit facilities, which required commitment reductions
should the Company issue additional debt securities. Interest rates under the
Credit Facilities were determined, at the option of the Company, at either the
London Interbank Offering Rate (LIBOR) plus margin (as defined) or the Base
Rate plus applicable margin (as defined). For the years ended December 31,
1999, 1998 and 1997, the combined weighted average interest rate of the
Company's various credit agreements was 7.94%, 7.97% and 7.40%, respectively.
The Company's term loan was initially due in quarterly installments commencing
June 30, 2001. The Borrower Subsidiaries' revolving credit facility and term
loan, of which approximately $90.0 million was outstanding as of December 31,
1999, was initially due in quarterly installments, commencing June 30, 2001 in
amounts varying from 2.5% to 11.25% of outstanding principal, with ultimate
maturity on June 30, 2006. However, all amounts outstanding were repaid in
January 2000 in connection with the amendment and restatement to the credit
facility described below and in note 14. As of December 31, 1999, the interest
rate in effect for the outstanding principal balance was 9.25%.
Under the Credit Facilities, the Company was required to pay quarterly
commitment fees depending on the consolidated financial leverage on the
aggregate unused portion of the aggregate commitment. Commitment fees paid by
the Company related to the various credit facility agreements aggregated
approximately $1,504,000, $1,172,000 and $416,000 for the years ended December
31, 1999, 1998 and 1997, respectively. In addition, the Credit Facilities
existing at December 31, 1999 required maintenance of various financial
covenants and ratios, none of which the Company believed were restrictive to
its present or planned business activities. Amounts outstanding under the
Credit Facilities were cross-guaranteed and cross-collateralized by
substantially all of the assets of the Company.
In January 2000, the Company amended and restated its credit facilities
pursuant to which the Company's maximum borrowing capacity increased to $2.0
billion. (See note 14).
As a result of the reduction in borrowing capacity in October 1999, the
Company recognized an extraordinary loss on extinguishment of debt for the
year ended December 31, 1999 of approximately $1.4 million, net of an income
tax benefit of $0.9 million. The Company also incurred extraordinary losses on
extinguishment of debt of approximately $1.4 million and $0.7 million, net of
income tax benefits of $0.9 million and $0.4 million, in 1998 and 1997,
respectively, as a result of refinancings to previously existing credit
facilities.
F-13
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Notes Payable--In connection with a number of acquisitions consummated during
1999, 1998 and 1997, the Company issued or assumed several notes payable. Such
notes approximated $43.8 million as of December 31, 1999. These notes bear
interest at rates ranging from 8.0% to 12.0% and mature in periods ranging
from less than one year to approximately six years.
Capital Leases and Other Obligations--The Company's capital lease obligations
bear interest at an average rate of 7.5% and mature in periods ranging from
less than one year to approximately five years.
Future minimum capital lease payments for the next five years are as follows
(in thousands):
<TABLE>
<CAPTION>
Year Ending:
<S> <C>
2000................................................................. $1,491
2001................................................................. 1,417
2002................................................................. 1,044
2003................................................................. 925
2004................................................................. 501
------
Total minimum lease payments......................................... 5,378
Less amounts representing interest................................... (875)
------
Present value of capital lease obligations........................... $4,503
======
</TABLE>
Derivative Positions--Under the terms of the Credit Facilities, the Company
was required, under certain conditions, to enter into interest rate protection
agreements. The Company's exposure under these agreements is limited to the
impact of variable interest rate fluctuations and the periodic settlement of
amounts due under these agreements if the other parties fail to perform. As of
December 31, 1999, the Company had interest rate cap agreements outstanding
with total notional amounts of $21.5 million (expiring in January 2000), $23.8
million (expiring in April 2000) and $21.6 million (expiring in July 2000)
with interest rates capped at 8.5%, 8.5% and 9.5%, respectively.
Aggregate principal payments of long-term debt, including capital leases, for
the next five years and thereafter are estimated to be (in thousands):
<TABLE>
<CAPTION>
Year Ending:
<S> <C>
2000................................................................ $ 4,736
2001................................................................ 8,484
2002................................................................ 13,141
2003................................................................ 14,948
2004................................................................ 19,122
Thereafter.......................................................... 680,391
--------
Total............................................................. $740,822
========
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
Lease Obligations--The Company leases certain land, office, tower and
satellite space under operating leases that expire over various terms. Many of
the leases also contain renewal options with specified increases in lease
payments upon exercise of the renewal option.
F-14
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Future minimum rental payments under noncancelable operating leases in effect
at December 31, 1999 are as follows (in thousands):
<TABLE>
<S> <C>
Year Ending:
2000................................................................ $ 27,828
2001................................................................ 24,956
2002................................................................ 16,911
2003................................................................ 11,921
2004................................................................ 6,565
Thereafter.......................................................... 44,049
--------
Total............................................................. $132,230
========
</TABLE>
Aggregate rent expense under operating leases for the years ended December 31,
1999, 1998 and 1997 approximated $23,211,000, $10,818,000 and $2,110,000,
respectively.
Customer Leases--The Company's lease agreements with its customers vary
depending upon the industry user. Leases with television and radio
broadcasters are typically long-term leases, while leases to wireless
communications providers typically incorporate shorter lease terms with
multiple renewal options. Leases of all lengths are generally renewed by the
lessees due to the costs and disruption associated with reconfiguring a
wireless network or broadcast location. Most leases have escalator provisions
(annual automatic increases based on specified estimated cost measures or on
increases in the consumer price index). The Company also subleases space on
communications towers under the same terms and conditions, including
cancellation rights, as those found in its own lease contracts.
Future minimum rental receipts expected from customers under noncancelable
operating lease agreements in effect at December 31, 1999 are as follows (in
thousands):
<TABLE>
<S> <C>
Year Ending:
2000................................................................ $ 92,432
2001................................................................ 86,179
2002................................................................ 74,255
2003................................................................ 57,381
2004................................................................ 38,611
Thereafter.......................................................... 161,524
--------
Total............................................................. $510,382
========
</TABLE>
Rental revenues under the Company's sub-leases approximated $2,896,000,
$1,072,000 and $978,000 for the years ended December 31, 1999, 1998 and 1997,
respectively.
Acquisition Commitments--See notes 11 and 14.
ATC Separation--See note 1.
Litigation--The Company periodically becomes involved in various claims and
lawsuits that are incidental to its business. In the opinion of management,
after consultation with counsel, there are no matters currently pending which
would, in the event of adverse outcome, have a material impact on the
Company's consolidated financial position, the results of operations or
liquidity.
F-15
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
8. RELATED PARTY TRANSACTIONS
1999
Chase Manhattan Bank (Chase) was a lender with a 6.67% participation under the
Company's Credit Facilities. Chase also has a 5.20% participation under the
Credit Facilities for the Borrower Subsidiaries. Chase is an affiliate of
Chase Capital Partners (CCP), which indirectly controls Chase Equity
Associates LLC (CEA). A director of the Company (and formerly a director of
American Radio), is a general partner of CCP. CEA is a stockholder of the
Company. At December 31, 1999, the aggregate principal amount outstanding
under the Credit Facilities was approximately $90.0 million. Chase's
approximate share of interest and fees paid by the Company pursuant to its
various credit arrangements was $1.2 million, $0.8 million and $0.2 million in
1999, 1998 and 1997, respectively.
The Company purchases certain structural and broadcast tower steel products
from Kline Iron and Steel Co. (Kline). The Company owns 33 1/3% of the
outstanding equity of Kline. During the year ended December 31, 1999, the
Company purchased approximately $7.4 million of such products from Kline.
In 1999, an executive officer of the Company received demand loans aggregating
$0.8 million. At December 31, 1999, such interest-bearing loans remain
outstanding. In addition, the Company has a loan outstanding to another
executive officer. Such loan was issued in 1998 and has an outstanding balance
at December 31, 1999 of approximately $0.3 million.
An executive officer and director of the Company became a director of TV
Azteca in December 1999. (See note 5).
1998
In June 1998, American Radio contributed the majority of its corporate fixed
assets to the Company (with an American Radio net book value of approximately
$1.4 million). During the period that the Company was a majority owned
subsidiary of American Radio, the Company received revenues of approximately
$565,000 and $389,000 from American Radio for tower rentals at Company-owned
sites for the period ending June 4, 1998 (date of the ATC Separation) and year
ended December 31, 1997.
In January 1998, American Radio contributed to the Company 19 communications
sites used by American Radio and various third parties (with an American Radio
aggregate net book value of approximately $4.7 million), and American Radio
and the Company entered into leases or subleases of space on the transferred
towers. In May 1998, two additional communications sites were transferred and
leases were entered into following acquisition by American Radio of the sites
from third parties. These sites were contributed to the Company at an
aggregate ARS net book value of approximately $0.3 million.
In January 1998, the Company consummated the transactions contemplated by a
stock purchase agreement with certain related parties. (See note 10).
F-16
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
9. INCOME TAXES
The income tax (provision) benefit from continuing operations was comprised of
the following for the years ended December 31 (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
------- --------- ----
<S> <C> <C> <C>
Current:
Federal........................................ $(116,322) $444
State.......................................... (18,866) 175
Foreign........................................
Deferred:
Federal........................................ $ 1,029 (8,407) (125)
State.......................................... 148 (841) (21)
Foreign........................................ 58
Less:
Deferred tax assets related to corporate tax
restructuring................................. 150,150
Benefit from disposition of stock options
recorded to additional paid-in capital........ (1,449) (1,223)
------- --------- ----
Income tax (provision) benefit................... $ (214) $ 4,491 $473
======= ========= ====
A reconciliation between the U.S. statutory rate from continuing operations
and the effective rate was as follows for the years ended December 31:
<CAPTION>
1999 1998 1997
------- --------- ----
<S> <C> <C> <C>
Statutory tax rate............................... 35% 35% 34%
State taxes, net of federal benefit.............. 5 4 6
Non-deductible tower separation expenses......... (11)
Nondeductible goodwill and intangible
amortization.................................... (42) (16) (17)
Other............................................ 2 (1)
------- --------- ----
Effective tax rate............................... --% 11% 23%
======= ========= ====
</TABLE>
Significant components of the Company's deferred tax assets and liabilities
were composed of the following as of December 31 (in thousands):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Current assets:
Allowances and accruals made for financial reporting
purposes which are currently nondeductible........... $ 1,718 $ 495
======== ========
Long-term items:
Assets:
Tax basis step-up from corporate tax restructuring
and tax planning strategies........................ $133,380 $142,642
Allowances and accruals made for financial reporting
purposes which are currently non-deductible........ 32
Charitable contribution carry-forwards.............. 23
Foreign tax credit carry-forwards................... 97
Net operating loss carry-forwards................... 63,070 25,477
Liabilities:
Property and equipment and intangible assets,
principally due to amortization methods and carry-
over basis differences............................. (82,350) (58,701)
-------- --------
Net long-term deferred tax assets..................... $114,252 $109,418
======== ========
</TABLE>
F-17
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
At December 31, 1999, the Company has net operating loss carry-forwards
available to reduce future taxable income of $157.7 million for federal and
state purposes. These loss carry-forwards expire through 2013. In the opinion
of management, deferred tax assets are more likely than not recoverable,
therefore a valuation allowance has not been provided in the accompanying
consolidated financial statements.
10. STOCKHOLDERS' EQUITY
The following is a summary of the Company's principal equity offerings during
the years ended December 31, 1999, 1998 and 1997. See note 11 of the
consolidated financial statements for issuances of common stock in connection
with the Company's acquisitions consummated during the years ended December
31, 1999, 1998 and 1997.
Public Offering--In February 1999, the Company completed a public offering of
25,700,000 shares of Class A common stock, $.01 par value per share (including
1,700,000 shares sold by the Company pursuant to the exercise in full of the
underwriters' over-allotment option) at $25.00 per share. Certain selling
stockholders sold an additional 1,300,000 shares in the offering. The
Company's net proceeds of the offering (after deduction of the underwriting
discount and offering expenses) were approximately $618.0 million. The Company
used such proceeds, together with borrowings under its existing credit
facilities, to fund acquisitions and construction activities.
Private Placement--In February 1999, the Company consummated the sale of
500,000 shares of Class A common stock to Credit Suisse First Boston
Corporation at $26.31 per share. In connection with such sale, Credit Suisse
First Boston Corporation was granted certain registration rights. The
Company's net proceeds of the offering were approximately $13.2 million. The
Company used such proceeds, together with borrowings under its existing credit
facilities, to fund acquisitions and construction activities.
Initial Public Offering--On July 8, 1998, the Company completed a public
offering of 27,861,987 shares of Class A common stock, $.01 par value per
share, (including 2,361,987 shares sold by the Company pursuant to the
exercise in full of the underwriters' over-allotment option) at $23.50 per
share. Certain selling stockholders sold an additional 3,874,911 shares in the
offering. The Company's net proceeds of the offering (after deduction of the
underwriting discount and estimated offering expenses) were approximately
$625.0 million. On July 9, 1998, the Company used approximately $306.1 million
of the net proceeds from the offering to redeem all of the outstanding shares
of the Interim Preferred Stock described below. The balance was used, together
with borrowings under the Credit Facilities, to fund acquisitions and
construction activities.
Redeemable Common Stock--In June 1998, the Company merged with a company
owning a broadcasting tower in the Boston, Massachusetts area and issued
720,000 shares of Class A common stock valued at approximately $18.0 million.
Under a put agreement that was executed in connection with the merger, the
sellers had the right to require the Company to purchase, at any time prior to
June 5, 1999, any or all shares of Class A common stock received pursuant to
consummation of the merger for a purchase price equal to the then current
market price. On June 5, 1999, the sellers' right to require the Company to
purchase shares of common stock expired. Accordingly, all unsold shares as of
that date (336,250) were reclassified from Redeemable Class A common stock to
common stock and additional paid in capital.
Preferred Stock Financing--On June 4, 1998, the Company entered into a stock
purchase agreement (the Interim Financing Agreement) with respect to a
preferred stock financing, which provided for the issuance and sale by the
Company of up to $400.0 million of Series A Redeemable Pay-In-Kind Preferred
Stock (the Interim Preferred Stock) to finance the Company's obligation to CBS
with respect to tax reimbursement. The Company issued $300.0 million of
Interim Preferred Stock, which accrued dividends at a rate equal to the three-
month
F-18
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
LIBOR then in effect (approximately 5.69%) plus an agreed upon adjustable
spread (5.0% for the period in which the obligation was outstanding). Due to
the short term nature of the issue, accrued dividends were recorded as
interest expense in the accompanying consolidated financial statements. Such
interest expense approximated $3.1 million for the year ended December 31,
1998. The Interim Preferred Stock was redeemed on July 9, 1998 at a redemption
price equal to $1,010 per share plus accrued and unpaid dividends for an
aggregate redemption value of $306.1 million. The Company incurred an
extraordinary loss of approximately $7.5 million, net of a tax benefit of $5.0
million, during the third quarter of 1998, representing the write-off of
certain commitment, deferred financing and redemption fees.
Stock Purchase Agreement--On January 22, 1998, the Company consummated the
transactions contemplated by the stock purchase agreement (the ATC Stock
Purchase Agreement), dated as of January 8, 1998, with Steven B. Dodge,
Chairman of the Board, President and Chief Executive Officer of American Radio
and the Company, and certain other officers and directors of American Radio
(or their affiliates or family members or family trusts), pursuant to which
those persons purchased 8.0 million shares of the Company's common stock at a
purchase price of $10.00 per share for an aggregate purchase price of
approximately $80.0 million, including 4.0 million shares by Mr. Dodge for
$40.0 million. Payment of the purchase price was in the form of cash
aggregating approximately $30.6 million and in the form of notes aggregating
approximately $49.4 million which were repaid upon the consummation of the ATC
Separation.
Recapitalization--In November 1997, the Company effected a recapitalization,
pursuant to which each share of the Company's existing common stock was
cancelled and the Company was recapitalized with 29,667,883 shares of Class A
common stock, 4,670,626 shares of Class B common stock and 1,295,518 shares of
Class C common stock.
During the years ended December 31, 1999 and 1998, holders of Class B common
stock and Class C common stock exchanged 1,192,354 and 469,576 of their shares
respectively, for shares of the Company's Class A common stock.
Other Changes to Stockholders' Equity--See note 11 of the consolidated
financial statements for issuances of common stock in connection with the
Company's acquisitions consummated during the years ended December 31, 1999,
1998 and 1997.
Voting Rights--The Class A and B common stock entitle the holders to one and
ten votes, respectively, per share. The Class C common stock is non-voting.
Stock Option Plans--Effective November 5, 1997, the Company instituted the
1997 Stock Option Plan, as amended and restated on April 27, 1998 (the Plan),
which is administered by the Compensation Committee of the Company's Board of
Directors.
The option pool under the Plan consists of an aggregate of 15,000,000 shares
of common stock that may consist of shares of Class A common stock, shares of
Class B common stock or some combination thereof. The Plan was amended in June
1998 to provide that all future grants of options under the Plan must be to
purchase shares of Class A common stock. In addition to the 15,000,000 shares
authorized under the Plan, options to purchase an aggregate of 2,894,358
shares of Class A common stock and Class B common stock were outstanding as of
December 31, 1999 outside of the Plan. These options are the result of the
exchange of certain American Radio options that occurred pursuant to the ATC
Separation and the assumption of certain options that occurred pursuant to the
mergers of OmniAmerica, Inc. (Omni) and American Tower Corporation (Old ATC)
as described in note 11. Each unexercised option to purchase shares of
American Radio, Omni and Old ATC common stock held by persons who became
directors or employees of the Company were exchanged or converted into the
Company's options. All options were exchanged or converted in a manner that
preserved the spread in such options between the option exercise price and the
fair market value of the common stock and the ratio of the spread to the
exercise price prior to such conversion.
F-19
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Exercise prices in the case of incentive stock options are not less than the
fair value of the underlying common stock on the date of grant. Exercise
prices in the case of non-qualified stock options are set at the discretion of
the Company's Board of Directors. Options vest ratably over various periods,
generally five years, commencing one year from the date of grant. There have
been no option grants at exercise prices less than fair value.
The following table summarizes the Company's option activity for the periods
presented:
<TABLE>
<CAPTION>
Weighted Weighted
Average Average
Exercise Options Remaining
Options Price Exercisable Life (Years)
---------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Outstanding as of January 1,
1997........................ 550,000 $ 5.00 160,000 8.71
Granted...................... 172,000 7.50-8.00
Cancellations................ (40,000) 5.00
---------- ---------- --------- ----
Outstanding as of December
31, 1997.................... 682,000(a) 5.68 160,000 8.89
---------- ---------- --------- ----
Options converted from ATI to
ATC Plan.................... 931,332(a) 4.16 252,640
Options transferred from
American Radio.............. 1,862,806 6.21 723,660
Options transferred in
connection with ATC Merger
(See note 11)............... 1,252,364 2.29 537,339 8.00
---------- ---------- --------- ----
Subtotal..................... 4,046,502 4.53 1,513,639 7.44
---------- ---------- --------- ----
Granted...................... 8,371,700 16.16
Exercised.................... (1,103,213) 2.48
Cancellations................ (226,894) 8.80
---------- ---------- --------- ----
Outstanding as of December
31, 1998.................... 11,088,095 13.43 1,513,639 8.85
---------- ---------- --------- ----
Granted...................... 5,391,450 22.72
Options transferred in
connection with the
OmniAmerica merger (See note
11)......................... 971,850 13.83 581,455
Exercised.................... (314,305) 13.43
Cancellations................ (419,848) 20.72
---------- ---------- --------- ----
Outstanding as of December
31, 1999.................... 16,717,242 $ 16.23 4,132,562 8.41
========== ========== ========= ====
</TABLE>
- --------
(a) ATI options outstanding as of December 31, 1997 were converted to 931,332
Company options.
The following table sets forth information regarding options outstanding at
December 31, 1999:
<TABLE>
<CAPTION>
Outstanding Weighted Average
Number of Options Range of Exercise Weighted Average Remaining Life
Options Exercisable Price Per Share Exercise Price Per Share (Years)
- ----------- ----------- ----------------- ------------------------ ----------------
<S> <C> <C> <C> <C>
1,903,065 1,573,170 $ 2.05-$ 7.64 $ 3.62 6.20
921,514 410,766 8.04- 9.09 8.77 6.92
2,866,003 561,360 10.00- 10.00 10.00 8.01
1,963,560 782,460 10.91- 15.91 13.28 8.12
1,122,700 80,400 15.94- 21.00 18.64 9.37
2,239,200 447,846 21.13- 21.13 21.13 8.47
2,952,950 276,060 21.19- 23.75 22.79 9.12
2,403,150 23.81- 23.81 23.81 9.86
344,300 500 24.31- 29.63 25.78 9.70
800 31.94- 31.94 31.94 9.97
- ---------- --------- ------------- ------ ----
16,717,242 4,132,562 $ 2.05-$31.94 $16.23 8.41
========== ========= ============= ====== ====
</TABLE>
Pro Forma Disclosure--As described in note 1, the Company uses the intrinsic
value method to measure compensation expense associated with grants of stock
options or awards to employees. Accordingly, there is no
F-20
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
compensation cost related to option grants reflected in the accompanying
consolidated financial statements. Had the Company used the fair value method
to measure compensation for grants under all plans made in 1999, 1998 and
1997, the reported net loss and basic and diluted loss per common share would
have been as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- -------
<S> <C> <C> <C>
Net loss....................................... $(87,221) $(62,439) $(2,492)
Basic and diluted earnings per share........... $ (0.58) $ (0.78) $ (0.05)
</TABLE>
The "fair value" of each option grant is estimated on the date of grant using
the Black/Scholes option pricing model. Key assumptions used to apply this
pricing model are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Approximate risk-free interest rate............... 5.7% 5.5% 6.3%
Expected life of option grants.................... 5 years 5 years 5 years
Expected volatility of underlying stock........... 72.0% 177.5% N/A
Expected dividends................................ N/A N/A N/A
</TABLE>
ATC Teleports Stock Option Plan--During 1999, the ATC Teleports Inc.'s Board
of Directors approved the formation of the ATC Teleports Stock Option Plan
(ATC Teleports Plan) which provides for the issuance of options to officers,
employees, directors and consultants of the Company's wholly owned subsidiary
ATC Teleports, Inc. The ATC Teleports Plan limits the number of shares of
common stock which may be granted to an aggregate of 1,000,000 shares. As of
December 31, 1999, there were no options outstanding under the ATC Teleports
Plan. Options granted under the ATC Teleports Plan will be at no less than
fair value, as determined by an independent appraisal of ATC Teleports, Inc.,
and will generally vest over a five year period. The option term under the ATC
Teleports Plan will generally be 10 years from the date of grant.
11. ACQUISITIONS
General--The acquisitions consummated during 1999, 1998 and 1997 have been
accounted for by the purchase method of accounting. The purchase prices have
been allocated to the net assets acquired, principally tangible and intangible
assets, and the liabilities assumed based on their estimated fair values at
the date of acquisition. The excess of purchase price over the estimated fair
value of the net assets acquired has been recorded as goodwill and other
intangible assets. For certain acquisitions the financial statements reflect
the preliminary allocation of purchase prices as the appraisals of the assets
acquired have not been finalized. The Company does not expect any changes in
depreciation and amortization as a result of such appraisals to be material to
the consolidated results of operations.
1999 Acquisitions--During the year ended December 31, 1999, the Company
consummated more than 60 transactions involving the acquisition of various
communications sites, service providers and teleports for an estimated
purchase price of $1.2 billion. This purchase price includes the issuance of
approximately 20.7 million shares of Class A common stock valued (at the time
of the relevant agreement) at $430.8 million. The principal transactions were
as follows:
OmniAmerica merger--In February 1999, the Company consummated the Agreement
and Plan of Merger (the Omni Merger) with Omni. Omni owned or co-owned 223
towers in 24 states. Omni also offered nationwide turnkey tower construction
and installation services and manufactured wireless infrastructure components.
Total merger consideration was $462.0 million, consisting of the issuance of
16.8 million shares of Class A common stock and the assumption of $96.6
million of debt. The Company also assumed certain Omni employee stock options
that were converted into options to purchase approximately 1.0 million shares
of the Company's Class A common stock.
F-21
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Telecom merger--In February 1999, the Company consummated the Agreement and
Plan of Merger with Telecom Towers, LLC (Telecom). Telecom owned or co-owned
approximately 271 towers and managed 121 revenue-generating sites in 27
states. The aggregate merger consideration was $194.6 million, consisting of
the payment of $63.1 million in cash, the issuance of 3.9 million shares of
Class A common stock and the assumption of $48.4 million in debt.
Triton PCS acquisition--In September 1999, the Company acquired 187 wireless
communications towers from Triton PCS for $70.7 million in cash. In addition,
the Company will develop a minimum of 100 build-to-suit towers for Triton PCS
and provide turnkey services to Triton PCS for co-location sites through 2001.
ICG transaction--In December 1999, the Company acquired all of the stock of
ICG Satellite Services and its subsidiary, Maritime Telecommunications
Network, Inc., for $100.0 million in cash. The acquisition involved a major
around-the-clock teleport facility in New Jersey and a global maritime
telecommunications network headquartered in Miami, Florida. The acquired
company provides Internet, voice, data and compressed video satellite services
to major cruise lines, the U.S. military, Internet-related companies and
international telecommunications customers.
1998 Acquisitions--During the year ended December 31, 1998, the Company
acquired various communications sites and a major site acquisition business
for an aggregate purchase price of approximately $853.8 million, including the
issuance of approximately 36.3 million shares of Class A common stock valued
at approximately $382.6 million. The principal transactions were as follows:
Gearon Merger--In January 1998, the Company acquired all of the outstanding
stock of Gearon & Co. Inc. (Gearon), for an aggregate purchase price of
approximately $80.0 million. Gearon was engaged in site acquisition,
development and construction and facility management of wireless network
communication facilities. The purchase price consisted of approximately $32.0
million in cash, assumed liabilities and the issuance of approximately 5.3
million shares of Class A common stock .
OPM Merger--In January 1998, the Company acquired all the outstanding stock of
OPM-USA-INC. (OPM), a company that owned and developed communications towers,
for approximately $70.0 million. The final price included a total of more than
150 towers and a right of first refusal granted to the Company with respect to
any towers that the former owner of OPM develops. The final payment due to OPM
of approximately $21.9 million was recorded as accrued acquisition purchase
price in the accompanying 1998 consolidated financial statements.
ATC Merger--On June 8, 1998, the Company consummated the American Tower
Corporation Merger (ATC Merger) pursuant to which that entity was merged into
the Company. The total purchase price was approximately $425.8 million. At the
time of closing, the acquired company owned approximately 775 communications
towers and managed approximately 125 communications towers. In conjunction
with the ATC Merger, the Company issued 28.8 million shares of Class A common
stock valued at approximately $287.8 million (excluding 1,252,364 shares of
common stock reserved for options held by former employees of the acquired
company valued at approximately $9.7 million) and assumed approximately $4.5
million of redeemable preferred stock (which was paid at closing) and $122.7
million of debt (of which approximately $118.3 million, including interest and
associated fees, was paid at closing). Upon consummation of the ATC Merger,
the Company changed its name from American Tower Systems Corporation to
American Tower Corporation.
Grid/Wauka/Other Transactions--In October 1998, the Company acquired
approximately 300 towers and certain tower related assets in six transactions
for an aggregate purchase price of approximately $100.2 million. These
transactions included the acquisition of all the outstanding stock of Wauka
Communications, Inc. and the assets of Grid Site Services, Inc. The
consideration in these related transactions included the issuance of 1,430,881
shares of Class A common stock, subject to certain escrow adjustments.
F-22
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
1997 Acquisitions--During the year ended December 31, 1997, the Company
acquired various communications sites, the assets of several affiliated site
acquisition businesses and two tower site management businesses for an
aggregate purchase price of approximately $180.4 million. The principal
transactions were as follows:
In October 1997, the Company acquired two affiliated entities operating
approximately 110 tower sites and a tower site management business located
principally in northern California for approximately $45.0 million.
In October 1997, the Company acquired 128 tower sites and certain video,
voice, data and Internet transport operations for approximately $70.25
million.
In July 1997, the Company acquired the assets of three affiliated entities
which owned and operated approximately fifty towers and a tower site
management business for an aggregate purchase price of approximately $33.5
million.
Unaudited Pro Forma Operating Results--The operating results of these
acquisitions have been included in the Company's consolidated results of
operations from the date of acquisition. The following unaudited pro forma
summary presents the consolidated results of operations as if the acquisitions
had occurred as of January 1, 1998 after giving effect to certain adjustments,
including depreciation and amortization of assets and interest expense on debt
incurred to fund the acquisitions. These unaudited pro forma results have been
prepared for comparative purposes only and do not purport to be indicative of
what would have occurred had the acquisitions been made as of January 1 of
each of the periods presented or results which may occur in the future.
<TABLE>
<CAPTION>
1999 1998
--------- ---------
(In thousands,
except per share
data-unaudited)
<S> <C> <C>
Operating revenues..................................... $ 346,760 $ 307,740
Loss before extraordinary losses....................... (69,248) (98,769)
Net loss............................................... (70,620) (107,661)
Basic and diluted loss per common share................ (0.46) (0.94)
</TABLE>
F-23
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
12. SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental cash flow information and noncash investing and financing
activities are as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- ------
<S> <C> <C> <C>
Supplemental cash flow information:
Cash paid during the period for interest (including
amounts capitalized)............................... $22,160 $23,011 $2,398
Cash paid during the period for income taxes
(including amounts paid to CBS).................... 2,242 212,196 125
Noncash investing and financing activities:
Property, equipment and other assets transferred
from American Radio................................ 6,489 51
Property and equipment transferred to American
Radio.............................................. (724)
Issuance of common stock and assumption of options
for acquisitions................................... 448,036 392,226
Purchase of treasury stock.......................... (1,528)
Increase in deferred tax assets from corporate tax
restructuring...................................... 150,150
(Decrease) increase in due to CBS Corporation from
estimated remaining tax liabilities................ (12,003) 5,021
Adjustment to equity for CBS tax liability.......... 61,715
Accrual for final payment for OPM merger............ 21,914
Tax benefit from disposition of stock options
recorded to additional paid in capital............. 1,449 1,223
</TABLE>
13. BUSINESS SEGMENTS
The Company operates in three business segments: Rental and Management (RM),
Services, and Internet, voice, data and video transmission services (IVDV).
The RM segment provides for the leasing and subleasing of antennae sites on
multi-tenant towers for a diverse range of wireless communication industries,
including personal communication services, paging, cellular, enhanced
specialized mobile radio, specialized mobile radio and fixed microwave, as
well as radio and television broadcasters. The Services segment offers a broad
range of network development services, including radio frequency engineering,
network design, site acquisition and construction, zoning and other regulatory
approvals, tower construction, component part sales and antennae installation.
The IVDV segment offers Internet, voice, data and video transmission services
both on land and sea worldwide.
The accounting policies applied in compiling segment information below are
similar to those described in note 1. In evaluating financial performance,
management focuses on Operating Profit (Loss), excluding depreciation and
amortization, tower separation, development and corporate general and
administrative expenses. This measure of Operating Profit (Loss) is also
before interest and other income, interest expense, minority interest in net
earnings of subsidiaries, income taxes and extraordinary items.
The Company's reportable segments are strategic business units that offer
different services. They are managed separately because each segment requires
different resources, skill sets and marketing strategies. Summarized financial
information concerning the Company's reportable segments as of and for the
years ended December 1999, 1998 and 1997 is shown in the following table. The
"Other" column below represents amounts excluded
F-24
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
from specific segments, such as income taxes, extraordinary losses, corporate
general and administrative expenses, tower separation expense, development
expense, depreciation and amortization and interest. In addition, the Other
column also includes corporate assets such as cash and cash equivalents,
tangible and intangible assets, and income tax accounts which have not been
allocated to specific segments (in thousands).
<TABLE>
<CAPTION>
RM Services IVDV Other Total
--------- -------- ------- --------- ----------
<S> <C> <C> <C> <C> <C>
1999
Revenues.................... $ 135,303 $90,416 $32,362 $ 258,081
Operating profit (loss)..... 72,862 21,098 8,264 $(152,951) (50,727)
Assets...................... 1,764,385 505,018 229,260 520,203 3,018,866
Capital expenditures........ 236,070 39,749 15,835 2,588 294,242
Depreciation and
amortization............... 92,264 25,991 7,264 7,020 132,539
1998
Revenues.................... $ 60,505 $23,315 $19,724 $ 103,544
Operating profit (loss)..... 31,050 3,836 6,907 $ (88,635) (46,842)
Assets...................... 979,349 91,444 64,359 367,191 1,502,343
Capital expenditures........ 118,926 61 3,405 4,063 126,455
Depreciation and
amortization............... 37,698 7,038 4,887 2,441 52,064
1997
Revenues.................... $ 13,302 $ 2,122 $ 2,084 $ 17,508
Operating profit (loss)..... 7,222 762 811 $ (11,065) (2,270)
Assets...................... 223,202 12,032 13,549 6,574 255,357
Capital expenditures........ 20,145 19 69 381 20,614
Depreciation and
amortization............... 4,583 1,073 556 114 6,326
</TABLE>
Summarized geographical information of the Company's operating revenues and
long-lived assets as of and for the year ended December 31, 1999 are as
follows:
<TABLE>
<S> <C>
Operating Revenues:
United States.................................................. $ 258,081
Mexico.........................................................
----------
Total operating revenues...................................... $ 258,081
==========
Long-Lived Assets:
United States.................................................. $2,489,870
Mexico......................................................... 6,373
----------
Total long-lived assets....................................... $2,496,243
==========
</TABLE>
The Company had no international operations for the years ended December 31,
1998 and 1997.
F-25
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
14. OTHER TRANSACTIONS
The following is a description of significant transactions consummated by the
Company subsequent to December 31, 1999:
Consummated Transactions:
AirTouch transaction--In August 1999, the Company agreed to lease on a long-
term basis up to 2,100 towers from AirTouch Communications, Inc. (AirTouch).
The Company's cumulative lease payments, based on 2,100 towers, aggregate
$800.0 million in cash payable in part upon each closing, and a five-year
warrant to purchase 3.0 million shares of Class A common stock at $22.00 per
share. At the first three closings in January and February 2000, the Company
leased 1,180 towers, paid AirTouch $449.5 million in cash and issued a warrant
for 3.0 million shares of Class A common stock. The remaining closings are
expected to occur in the first half of 2000. In addition, the Company has
entered into a three-year build-to-suit agreement that is expected to provide
400-500 new communications towers.
AT&T transaction--In September 1999, the Company agreed to purchase up to
1,942 towers from AT&T. These towers are located throughout the United States
and were constructed by AT&T for its microwave operations. The purchase price
is $260.0 million in cash, subject to adjustment if all towers are not
purchased. The Company also entered into a build-to-suit agreement with AT&T
Wireless Services. This agreement requires AT&T Wireless Services to present
1,200 sites nationwide from which the Company will select and be required to
build 1,000 towers. At the first two closings in January and February 2000,
the Company acquired 863 towers and paid AT&T $177.2 million. The remaining
closings are expected to occur during the first half of 2000.
UNIsite merger--In January 2000, the Company consummated its merger with
UNIsite, Inc. (UNIsite). The purchase price was approximately $196.4 million,
which includes a payment of $147.7 million in cash and the assumption of $48.7
million of debt. At closing, UNIsite had more than 600 towers then completed
or under construction. In February 2000, the Company repaid the debt assumed
in connection with the UNIsite transaction. Such repayment was at a premium of
the outstanding principal balance. Accordingly, the Company will recognize an
extraordinary loss from extinguishment of debt in the first quarter of 2000.
Credit Facilities--In January 2000, the Company completed its amended and
restated credit facilities (the New Credit Facilities) with its senior
lenders. The New Credit Facilities increased the borrowing capacity of the
Company and its Subsidiaries (Borrowers) to $2.0 billion, subject to certain
borrowing base restrictions, such as operating cash flow and construction cost
levels. The New Credit Facilities provide for a $650.0 million revolving
credit facility maturing on June 30, 2007, an $850.0 million multi-draw term
loan maturing on June 30, 2007 and a $500.0 million term loan maturing on
December 31, 2007. Subject to lender approval, the Borrowers may request the
New Credit Facilities to be increased up to an additional $500.0 million.
The New Credit Facilities are scheduled to amortize quarterly commencing on
March 31, 2003 based on defined percentages of outstanding commitment and
principal balances. Interest rates for the revolving credit facility and the
multi-draw term loan are determined, at the option of the Borrowers, at either
1.5% to 2.75% above the defined LIBOR Rate or 0.5% to 1.75% above the defined
Base Rate. Interest rates for the term loan are determined at either 3.0% to
3.25% LIBOR or 2.0% to 2.25% above the defined Base Rate. The Borrowers are
required to pay quarterly commitment fees equal to 0.5% to 1.0% per annum,
depending on the level of facility usage. In addition, the New Credit
Facilities require maintenance of various financial covenants and ratios and
are cross-guaranteed and cross-collateralized by substantially all of the
assets of the Company. In connection
F-26
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
with the repayment of existing borrowings with proceeds from the New Credit
Facilities, the Company recognized an extraordinary loss on extinguishment of
debt of approximately $3.0 million, net of a tax benefit of $2.0 million, in
January 2000.
February 2000 Convertible Note Issue--In February 2000, the Company completed
a private notes placement of $450.0 million 5% Convertible Notes (5% Notes),
issued at 100% of their face amount. The 5% Notes mature on February 15, 2010.
Interest on the 5% Notes is payable semiannually on February 15 and August 15,
commencing August 15, 2000. The indenture governing the 5% Notes does not
contain any restrictions on the payment of dividends, the incurrence of debt
or the repurchase of the Company's equity securities or any financial
covenants.
The 5% Notes are convertible at any time into shares of the Company's Class A
common stock at a conversion price of $51.50 per share. The Company cannot
redeem the 5% Notes prior to February 20, 2003 and the Company may be required
to repurchase all or any of the 5% Notes on February 20, 2007 at their
principal amount, together with accrued and unpaid interest. The Company may,
at its option, elect to pay the repurchase price in cash or shares of Class A
common stock or any combination thereof. Total net proceeds from the 5% Notes
were approximately $438.7 million. A portion of the proceeds was used to pay
off amounts outstanding under the Company's New Credit Facilities. The
remaining proceeds will be used to finance acquisitions and construction.
Canadian Joint Venture--In March 2000, the Company entered into a joint
venture with Telemedia Corporation, a privately held Canadian
telecommunications company, to form Canadian Tower, L.P. (Canadian Tower).
Under the terms of the agreement, Canadian Tower, which will be both Canadian
controlled and operated, will develop and acquire both wireless and broadcast
towers throughout Canada. The joint venture's initial assets include more than
20 broadcast towers contributed by Telemedia. These broadcast towers are
located in major metropolitan areas, including Toronto, Montreal, Quebec City,
Edmonton and Hamilton. The Company committed to advance $18.0 million
(Canadian), for which we will initially own 45% of the joint venture.
Pending Transactions:
USEI transaction--In December 1999, the Company agreed to merge with U.S.
Electrodynamics (USEI). The purchase price of $60.0 million is payable through
the issuance of shares of Class A common stock and cash. The purchase price
will be subject to adjustment based on the net working capital and the long-
term debt of USEI at closing. The USEI transaction is expected to close in the
second quarter of 2000, subject to the satisfaction of customary conditions.
The Company is also pursuing the acquisitions of other properties and
businesses in new and existing locations, although there are no definitive
material agreements with respect thereto.
F-27
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
15. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data for the years ended December 31, 1999 and
1998 is as follows:
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------------
March 31, June 30, September 30, December 31,
--------- -------- ------------- ------------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
1999:
Operating revenues............. $42,408 $ 59,153 $ 67,539 $ 88,981
Gross profit(1) ............... (9,271) (10,136) (10,332) (11,319)
Loss before extraordinary
losses........................ (9,500) (9,883) (13,091) (16,881)
Net loss....................... (9,500) (9,883) (13,091) (18,253)
Basic and diluted per common
share:(2)
Loss before extraordinary
losses...................... ($0.07) ($0.06) ($0.08) ($0.11)
Net loss..................... ($0.07) ($0.06) ($0.08) ($0.12)
1998:
Operating revenues............. $17,925 $ 23,082 $ 30,478 $ 32,059
Gross profit(1)................ 87 (2,293) (5,018) (8,146)
Loss before extraordinary
losses........................ (1,527) (18,417) (5,958) (12,048)
Net loss....................... (1,527) (19,799) (13,468) (12,048)
Basic and diluted per common
share:(2)
Loss before extraordinary
losses...................... ($0.03) ($0.33) ($0.06) ($0.11)
Net loss..................... ($0.03) ($0.35) ($0.13) ($0.11)
</TABLE>
- --------
(1) Represents operating revenues less operating expenses excluding tower
separation expense.
(2) Prior to June 4, 1998 (the ATC Separation), basic and diluted loss per
common share information is computed using the 48,732,000 shares that
were outstanding upon consummation of the ATC Separation.
* * * *
F-28
<PAGE>
EXHIBIT INDEX
Listed below are the exhibits which are filed as part of this Form 10-K
(according to the number assigned to them in Item 601 of Regulation S-K). Each
exhibit marked by a (*) is incorporated by reference to ATC's Registration
Statement on Form S-4 (File No. 333-46025) filed on February 10, 1998. Each
exhibit marked by a (**) is incorporated to the filing of ATC's Current Report
on Form 8-K filed on November 30, 1998. Each exhibit marked by a (***) is
incorporated by reference to the filing of ATC's Current Report on Form 8-K
filed on January 8, 1999. Each exhibit marked by a (****) is incorporated by
reference to the filing of ATC's Current Report on Form 8-K/A filed on March
18, 1999. Each exhibit marked by a (*****) is incorporated by reference to
ATC's Current Report on Form 8-K filed on July 16, 1999. Each exhibit marked
by a (******) is incorporated by reference to the filing of ATC's Current
Report on Form 8-K filed on January 28, 2000. Each exhibit marked by (*******)
is incorporated by reference to ATC's Quarterly Report on Form 10-Q (File No.
001-14195) filed on August 16, 1999. Each exhibit marked by a (+) is
incorporated by reference to the filing of ATC's Registration Statement on
Form S-3 (File No. 333-89345) on October 20, 1999. Each exhibit marked by a
(++) is incorporated by reference to the filing of ATC's Current Report on
Form 8-K filed on February 24, 2000. Each exhibit marked by a (+++) is
incorporated by reference to the filing of ATC's Registration Statement on
Form S-1 (File No. 333-50111) filed on May 8, 1998. Each exhibit marked by a
(++++) is incorporated by reference to the filing of Amendment No. 2 to ATC's
Registration Statement on Form S-1 (File No. 333-52481) filed on June 30,
1998. Each exhibit marked by a (+++++) is incorporated by reference to the
filing of ATC's Registration Statement on Form S-4 (File No. 333-76083) on
January 15, 1999. Each exhibit marked by a (++++++) is incorporated by
reference to the filing of ATC's Annual Report on Form 10-K (File No. 001-
14195) filed on March 19, 1999. Exhibit numbers in parenthesis refer to the
exhibit number in the applicable filing.
<TABLE>
<CAPTION>
Exhibit Exhibit
No. Description of Document File No.
------- ----------------------- ---------
<C> <S> <C>
2.1 Agreement and Plan of Merger, dated as of November 21,
1997, by and among American Tower Systems Corporation
("ATS"), American Tower Systems, Inc., a Delaware
corporation ("ATSI"), Gearon & Co., Inc., a Georgia
corporation ("Gearon") and J. Michael Gearon, Jr. (the
"Gearon Stockholder"). (Schedules and Exhibits omitted).... (*2.1)
2.2 Amendment No. 1 to Agreement and Plan of Merger, dated as
of January 22, 1998, among ATS, American Tower Systems
(Delaware), Inc., a Delaware corporation (formerly known as
American Tower Systems, Inc.), Gearon and the Gearon
Stockholder................................................ (*2.2)
2.3 Agreement and Plan of Merger, dated as of December 12,
1997, by and among ATS and American Tower Corporation, a
Delaware corporation. (Schedules and Exhibits omitted)..... (*2.3)
2.4 Agreement and Plan of Merger, dated as of November 16,
1998, by and among ATC, American Towers, Inc., a wholly
owned subsidiary of ATC and a Delaware corporation ("ATI"),
and OmniAmerica, Inc., a Delaware corporation. (Schedules
and Exhibits omitted)...................................... (**2.1)
2.5 Agreement and Plan of Merger, dated as of November 16,
1998, by and among ATC, ATI and TeleCom Towers, L.L.C., a
Delaware limited liability company ("TeleCom"). (Schedules
and Exhibits omitted)...................................... (**2.2)
2.6 Amended and Restated Agreement and Plan of Merger, dated as
of December 18, 1998, by and among ATC, ATI, ATC Merger
Corporation, a Delaware corporation ("ATMC"), and TeleCom.
(Schedules and Exhibits omitted)........................... (***2.1)
2.7 Amendment to the Amended and Restated Agreement and Plan of
Merger, dated as of December 23, 1998, by and among ATC,
ATI, ATMC, and TeleCom..................................... (***2.2)
2.8 Amendment to the Amended and Restated Agreement and Plan of
Merger, dated as of February 26, 1999, by and among ATC,
ATI, ATMC, and TeleCom..................................... (****2.1)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description of Document Exhibit File No.
------- ----------------------- -----------------
<C> <S> <C>
2.9 Agreement and Plan of Merger, dated as of June 28,
1999, by and among American Tower Corporation, a
Delaware corporation, ATI Merger Corporation, a
Delaware corporation and UniSite, Inc., a Delaware
corporation....................................... (*****2.1)
2.10 Amendment No. 1 to Agreement and Plan of Merger by
and among American Tower Corporation, ATI Merger
Corporation and UniSite, Inc...................... (******2.2)
2.11 Amendment No. 2 to Agreement and Plan of Merger by
and among American Tower Corporation, ATI Merger
Corporation and UniSite, Inc...................... (******2.4)
3(i) Restated Certificate of Incorporation, as amended,
as filed with the Secretary of State of the State
of Delaware on June 4, 1999....................... (*******3(i))
3(ii) By-Laws of ATC.................................... (++++++ 3(ii).1)
4.1 Indenture, by and between ATC and The Bank of New
York as Trustee, for the 6.25% Notes, dated as of
October 4, 1999, including form of 6.25% Note..... (+4.1)
4.2 Indenture by and between ATC and The Bank of New
York as Trustee, for the 2.25% Notes, dated as of
October 4, 1999, including the form of 2.25%
Note.............................................. (+4.2)
4.3 Form of 6.25% Note (included in Exhibit 4.1)...... Filed as part of
Exhibit 4.1(+)
4.4 Form of 2.25% Note (included in Exhibit 4.2) ..... Filed as part of
Exhibit 4.2(+)
4.5 Registration Rights Agreement, by and between ATC
and the Initial Purchasers named therein, dated as
of October 4, 1999................................ (+4.5)
4.6 Indenture by and between the Company and The Bank
of New York as Trustee, for the 5.0% Notes due
2010, dated as of February 15, 2000............... (++4.1)
4.7 Form of 5.0% Notes due 2010 (included in Exhibit Filed as part of
4.6).............................................. Exhibit 4.6 (++)
4.8 Registration Rights Agreement by and among the
Company and the Initial Purchasers named therein,
dated as of February 15, 2000..................... (++4.3)
10.1 American Tower Systems Corporation 1997 Stock
Option Plan, dated as of November 5, 1997, as
amended and restated on April 27, 1998............ (+++10.26)/1/
10.1A Amendment to the Amended and Restated American
Tower Corporation 1997
Stock Option Plan as Amended and Restated on April Filed herewith as
27, 1998.......................................... Exhibit 10.1A/1/
10.2 American Tower Systems Corporation Stock Purchase
Agreement, dated as of January 8, 1998, by and
among ATC and the Purchasers...................... (*10.27)
10.3 Employment Agreement, dated as of January 22,
1998, by and between ATC by and between ATI and J.
Michael Gearon, Jr................................ (*10.28)/2/
10.4 Letter of Agreement, dated as of April 13, 1998,
by and between ATC and Douglas Wiest.............. (+++++10.22)/2/
10.5 ARS-ATS Separation Agreement, dated as of June 4,
1998 by and among American Radio Systems
Corporation, a Delaware Corporation ("ARS"), ATC
and CBS Corporation............................... (++++10.30)
10.6 Securities Purchase Agreement, dated as of June 4,
1998 by and among ATC, Credit Suisse First Boston
Corporation and each of the Purchasers named
therein........................................... (++++10.31)
10.7 Registration Rights Agreement, dated June 4, 1998,
by and among ATC, Credit Suisse First Boston
Corporation and each of the Parties named
therein........................................... (++++10.32)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description of Document Exhibit File No.
------- ----------------------- -------------------------
<C> <S> <C>
10.8 Registration Rights Agreement, dated as Incorporated by reference
of January 22, 1998, by and among ATC to Exhibit 10.3 of the
and each of the Parties named therein... Company's Quarterly
Report on Form 10-Q (File
No. 001-14194) dated
August 14, 1998
10.9 Stock Purchase Agreement, dated as of
February 4, 1999, by and among ATC and
Credit Suisse First Boston Corporation.. (++++++10.12)
10.10 Registration Rights Agreement, dated as
of February 4, 1999, by and among ATC
and Credit Suisse First Boston
Corporation............................. (++++++10.13)
10.11 Amended and Restated Registration Rights
Agreement, dated as of February 25,
1999, by and among ATC and each of the
Parties named therein................... (++++++10.14)
10.12 Agreement to Sublease, dated as of
August 6, 1999, by and between AirTouch
Communications, Inc., the other parties
named therein as Sublessors, ATC and
ATLP.................................... (*******10.1)
10.13 Stock Purchase Agreement, dated as of
August 11, 1999, between ATC Teleports,
Inc., ICG Holdings, Inc. and ICG
Satellite Services...................... (*******10.2)
10.14 Purchase and Sale Agreement, dated as of Incorporated by reference
September 10, 1999, by and among ATC and to Exhibit 10.1 of the
AT&T Corp., a New York corporation...... Company's Current Report
on Form 8-K dated
September 17, 1999
10.15 Amended and Restated Loan Agreement,
dated as of January 6, 2000, among
American Tower, L.P., American Towers,
Inc. and ATC Teleports, Inc., as
Borrowers and Toronto Dominion (Texas)
Inc., as Administrative Agent, and the
Bank Parties thereto.................... (******10.1)
10.16 ATC Teleports Corporation 1999 Stock Filed herewith as Exhibit
Option Plan............................. 10.16/1/
10.17 Kline Iron & Steel Co., Inc. 2000 Stock Filed herewith as Exhibit
Option Plan............................. 10.17/1/
10.18 American Tower Corporation 2000 Employee Filed herewith as Exhibit
Stock Purchase Plan..................... 10.18/1/
12 Statement Regarding Computation of Filed herewith as Exhibit
Ratios of Earnings to Fixed Charges..... 12
21 Subsidiaries of ATC..................... Filed herewith as Exhibit
21
23 Independent Auditors' Consent--Deloitte Filed herewith as Exhibit
& Touche LLP............................ 23
27 Financial Data Schedule................. Filed herewith as Exhibit
27
</TABLE>
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1 Compensatory Plan
2 Management Contract
<PAGE>
Exhibit 10.1A
-------------
AMENDMENT TO THE
AMERICAN TOWER SYSTEMS CORPORATION
1997 STOCK OPTION PLAN
(AS AMENDED AND RESTATED ON APRIL 27, 1998)
---------------------------------
As adopted by resolution of the
Board of Directors on March 9, 2000
---------------------------------
1. Section 3 of the American Tower Systems Corporation 1997 Stock Option Plan
(as amended and restated on April 27, 1998) (the "1997 Plan") is amended by
deleting the number "15,000,000" and inserting the number "24,000,000."
2. Except as hereinabove amended, the provisions of the 1997 Plan shall remain
in full force and effect.
<PAGE>
EXHIBIT 10.16
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ATC TELEPORTS, INC.
1999 Stock Option Plan
================================================================================
<PAGE>
Table of Contents
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Page
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1. PURPOSE................................................................ 1
2. ADMINISTRATION OF THE PLAN............................................. 1
3. OPTION SHARES.......................................................... 2
4. AUTHORITY TO GRANT OPTIONS............................................. 2
5. WRITTEN AGREEMENT...................................................... 2
6. ELIGIBILITY............................................................ 2
7. OPTION PRICE........................................................... 3
8. DURATION OF OPTIONS.................................................... 3
9. VESTING PROVISIONS..................................................... 3
10. EXERCISE OF OPTIONS.................................................... 4
11. TRANSFERABILITY OF OPTIONS............................................. 5
12. TERMINATION OF EMPLOYMENT OR INVOLVEMENT OF OPTIONEE WITH THE
COMPANY................................................................ 5
13. REQUIREMENTS OF LAW.................................................... 6
14. NO RIGHTS AS STOCKHOLDER............................................... 6
15. EMPLOYMENT OBLIGATION.................................................. 6
16. FORFEITURE AS A RESULT OF TERMINATION FOR CAUSE........................ 7
17. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE............................. 7
18. AMENDMENT OR TERMINATION OF PLAN....................................... 8
19. CERTAIN RIGHTS OF THE COMPANY.......................................... 9
20. GOVERNING LAW.......................................................... 10
21. EFFECTIVE DATE AND DURATION OF THE PLAN................................ 10
i
<PAGE>
ATC TELEPORTS, INC.
1999 STOCK OPTION PLAN
1. PURPOSE
The purpose of this 1999 Stock Option Plan (the "Plan") is to encourage
directors, officers and employees of and consultants and other persons providing
services to ATC Teleports, Inc. (the "Company") and its Affiliates (as
hereinafter defined) to continue their association with the Company and its
Subsidiaries, by providing opportunities for such persons to participate in the
ownership of the Company and in its future growth through the granting of stock
options (the "Options") which may be options designed to qualify as incentive
stock options (within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code") (an "ISO"), or Options not intended to qualify for
any special tax treatment under the Code (a "NQO"). The term "Affiliate" as
used in the Plan means a corporation or other business organization which owns
in the Company, or in which the Company or any such corporation or other
business entity owns, directly or indirectly through an unbroken chain of
ownership, fifty percent (50%) or more of the total combined voting power of all
classes of stock.
2. ADMINISTRATION OF THE PLAN
The Plan shall be administered by a committee (the "Committee") consisting
of two or more members of the Company's Board of Directors (the "Board"). The
Committee shall from time to time determine to whom options or other rights
shall be granted under the Plan, whether options granted shall be ISOs or NQOs,
the terms of the options or other rights, and the number of shares that may be
granted under options. The Committee shall report to the Board the names of
individuals to whom stock or options or other rights are to be granted, the
number of shares covered, and the terms and conditions of each grant. The
determinations described in this Section 2 may be made by the Committee or by
the Board, as the Board shall direct in its sole and absolute discretion, and
references in the Plan to the Committee shall be understood to refer to the
Board in any such case.
The Committee shall select one of its members as Chairman and shall hold
meetings at such times and places as it may determine. A majority of the
Committee shall constitute a quorum, and acts of the Committee at which a quorum
is present, or acts reduced to or approved in writing by all the members of the
Committee, shall be the valid acts of the Committee. The Committee shall have
the authority to adopt, amend, and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of the Plan. All questions of
interpretation and application of such rules and regulations, of the Plan and of
Options, shall be subject to the determination of the Committee, which shall be
final and binding. The Plan shall be administered in such a manner as to permit
those Options granted hereunder and specially designated under Section 5 as ISOs
to qualify as incentive stock options as described in Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
For so long as Section 16 of the Securities Exchange Act of 1934, as
amended from time to time (the "Exchange Act"), is applicable to the Company,
each member of the Committee shall be a "non-employee director" or the
equivalent within the meaning of Rule 16b-3 under the Exchange Act, and, for so
long as Section 162(m) of the Code is applicable to the Company, an "outside
director" within the meaning of Section 162 of the Code and the regulations
thereunder. If, however, the Committee is not comprised of two or more "outside
directors," then, although the Committee may still administer the Plan, the
Compensation Committee of the Board of Directors of American Tower Corporation,
so long as it is the parent of the Company, or such other committee that makes
grants pursuant to the parent's stock option or similar plan, shall make grants
of options or other rights under the Plan (if the Compensation Committee or such
committee consists of two or more members who are "outside directors").
<PAGE>
With respect to persons subject to Section 16 of the Exchange Act
("Insiders"), transactions under the Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successor under the Exchange Act. To
the extent any provision of the Plan or action by the Committee fails to so
comply, it shall be deemed to be modified so as to be in compliance with such
Rule, or, if such modification is not possible, it shall be deemed to be null
and void, to the extent permitted by law and deemed advisable by the Committee.
3. OPTION SHARES
The stock subject to Options under the Plan shall be shares of Common
Stock, par value $.01 per share (the "Stock"). The total amount of the Stock
with respect to which Options may be granted (the "Option Pool"), shall not
exceed in the aggregate 1,000,000 shares; provided, however, such aggregate
number of shares shall be subject to adjustment in accordance with the
provisions of Section 17. If an outstanding Option shall expire for any reason
or shall terminate by reason of the death or severance of employment of the
Optionee, the surrender of any such Option, or any other cause, the shares of
Stock allocable to the unexercised portion of such Option may again be subject
to an option under the Plan. The maximum number of shares of Stock subject to
Options that may be granted to any Optionee in the aggregate in any calendar
year shall not exceed 500,000 shares, subject to adjustment in accordance with
the provisions of Section 17.
4. AUTHORITY TO GRANT OPTIONS
The Committee may determine, from time to time, which employees of the
Company or any Affiliate or other persons shall be granted Options under the
Plan, the terms of the Options (including without limitation whether an Option
shall be an ISO or a NQO) and the number of shares which may be purchased under
the Option or Options. Without limiting the generality of the foregoing, the
Committee may from time to time grant: (a) to such employees (other than
employees of an Affiliate which is not a corporation) as it shall determine an
Option or Options to buy a stated number of shares of Stock under the terms and
conditions of the Plan which Option or Options will to the extent so designated
at the time of grant constitute an ISO; and (b) to such eligible directors,
employees or other persons as it shall determine an Option or Options to buy a
stated number of shares of Stock under the terms and conditions of the Plan
which Option or Options shall constitute a NQO. Subject only to any applicable
limitations set forth elsewhere in the Plan, the number of shares of Stock to be
covered by any Option shall be as determined by the Committee.
5. WRITTEN AGREEMENT
Each Option granted hereunder shall be embodied in an option agreement (the
"Option Agreement") substantially in the form of Exhibit 1, which shall be
signed by the Optionee and by the Chief Executive Officer, the Chief Operating
Officer, Chief Financial Officer, the General Counsel or the Corporate
Controller of the Company for and in the name and on behalf of the Company. An
Option Agreement may contain such restrictions on exercisability and such other
provisions not inconsistent with the Plan as the Committee in its sole and
absolute discretion shall approve.
6. ELIGIBILITY
The individuals who shall be eligible for grant of Options under the Plan
shall be employees (including officers who may be members of the Board),
directors who are not employees and other individuals, whether or not employees,
who render services of special importance to the management, operation or
development of the Company or an Affiliate, and who have contributed or may be
expected to contribute to the success of the Company or an Affiliate. An
employee, director or other person to
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<PAGE>
whom an Option has been granted pursuant to an Option Agreement is hereinafter
referred to as an "Optionee."
7. OPTION PRICE
The price at which shares of Stock may be purchased pursuant to an Option
shall be specified by the Committee at the time the Option is granted, but shall
in no event be less than the par value of such shares and, in the case of an
ISO, except as set forth in the following sentence, one hundred percent (100%)
of the fair market value of the Stock on the date the ISO is granted. In the
case of an employee who owns (or is considered under Section 424(d) of the Code
as owning) stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any Affiliate, the price
at which shares of Stock may be so purchased pursuant to an ISO shall be not
less than one hundred and ten percent (110%) of the fair value of the Stock on
the date the ISO is granted.
For purposes of the Plan, the "fair market value" of a share of Stock on
any date specified herein, shall mean (a) the last reported sales price, regular
way, or, in the event that no sale takes place on such day, the average of the
reported closing bid and asked prices, regular way, in either case (i) as
reported on the New York Stock Exchange Composite Tape, or (ii) if the Stock is
not listed or admitted to trading on the New York Stock Exchange, on the
principal national securities exchange on which such security is listed or
admitted to trading, or (iii) if not then listed or admitted to trading on any
national securities exchange, on the NASDAQ National Market System; or (b) if
the Stock is not quoted on such National Market System, (i) the average of the
closing bid and asked prices on each such day in the over-the-counter market as
reported by NASDAQ, or (ii) if bid and asked prices for such security on each
such day shall not have been reported through NASDAQ, the average of the bid and
asked prices for such day as furnished by any New York Stock Exchange member
firm regularly making a market in such security selected for such purpose by the
Committee; or (c) if the Stock is not then listed or admitted to trading on any
national exchange or quoted in the over-the-counter market, the fair value
thereof determined in good faith by the Committee (which shall be entitled to
take into account that the Stock may be illiquid, may be subject to restrictions
on transfer or may constitute a minority interest in the Company); provided,
however, that any method of determining fair market value employed by the
Committee with respect to an ISO shall be consistent with any applicable laws or
regulations pertaining to "incentive stock options."
8. DURATION OF OPTIONS
The duration of any Option shall be specified by the Committee in the
Option Agreement, but no Option shall be exercisable after the expiration of ten
(10) years from the date such Option is granted. In the case of any employee
who owns (or is considered under Section 424(d) of the Code as owning) stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or any Affiliate, no ISO shall be exercisable
after the expiration of five (5) years from the date such Option is granted.
The Committee, in its sole and absolute discretion, may extend any Option
theretofore granted.
9. VESTING PROVISIONS
Each Option may be exercised so long as it is valid and outstanding from
time to time, in part or as a whole, in such manner and subject to such
conditions as the Committee, in its sole and absolute discretion, may provide in
the Option Agreement. The Committee may, in its sole and absolute discretion,
accelerate Options, in whole or in part, on such terms and conditions as the
Committee may, in its sole and absolute discretion, determine.
-3-
<PAGE>
10. EXERCISE OF OPTIONS
Options shall be exercised by the delivery of written notice to the Company
setting forth the number of shares of Stock with respect to which the Option is
to be exercised, accompanied by payment of the option price of such shares,
which payment shall be made, subject to the alternative provisions of this
Section, in cash or by such cash equivalents, payable to the order of the
Company in an amount in United States dollars equal to the option price of such
shares, as the Committee in its sole and absolute discretion shall consider
acceptable. Such notice shall be delivered in person to the Secretary of the
Company or shall be sent by registered mail, return receipt requested, to the
Secretary of the Company, in which case delivery shall be deemed made on the
date such notice is deposited in the mail.
Alternatively, if the Option Agreement so specifies, and subject to such
rules as may be established by the Committee, payment of the option price may be
made through a so-called "cashless exercise" procedure, under which the Optionee
shall deliver irrevocable instructions to a broker to sell shares of Stock
acquired upon exercise of the Option and to remit promptly to the Company a
sufficient portion of the sale proceeds to pay the option price and any tax
withholding resulting from such exercise.
Alternatively, payment of the option price may be made, in whole or in
part, in shares of Stock owned by the Optionee; provided, however, that the
Optionee may not make payment in shares of Stock that he acquired upon the
earlier exercise of any ISO (or other "incentive stock option"), unless and
until he has held the shares until at least two (2) years after the date the ISO
(or such other incentive stock option) was granted and at least one (1) year
after the date the ISO (or such other option) was exercised. If payment is made
in whole or in part in shares of Stock, then the Optionee shall deliver to the
Company in payment of the option price of the shares with respect of which such
Option is exercised (a) certificates registered in the name of such Optionee
representing a number of shares of Stock legally and beneficially owned by such
Optionee, free of all liens, claims and encumbrances of every kind, and having a
fair market value on the date of delivery of such notice equal to the option
price of the shares of Stock with respect to which such Option is to be
exercised, such certificates to be accompanied by stock powers duly endorsed in
blank by the record holder of the shares of Stock represented by such
certificates; and (b) if the option price of the shares with respect to which
such Option is to be exercised exceeds such fair market value, cash or such cash
equivalents payable to the order to the Company, in an amount in United States
dollars equal to the amount of such excess, as the Committee in its sole and
absolute discretion shall consider acceptable. Notwithstanding the foregoing
provisions of this Section, the Committee, in its sole and absolute discretion,
(i) may refuse to accept shares of Stock in payment of the option price of the
shares of Stock with respect to which such Option is to be exercised and, in
that event, any certificates representing shares of Stock which were delivered
to the Company with such written notice shall be returned to such Optionee
together with notice by the Company to such Optionee of the refusal of the
Committee to accept such shares of Stock and (ii) may accept, in lieu of actual
delivery of stock certificates, an attestation by the Optionee substantially in
the form attached herewith as Exhibit C or such other form as may be deemed
acceptable by the Committee that he or she owns of record the shares to be
tendered free and clear of all liens, claims and encumbrances of every kind.
Alternatively, if the Option Agreement so specifies, payment of the option
price may be made in part by a full recourse promissory note executed by the
Optionee and containing the following terms and conditions (and such others as
the Committee shall, in its sole and absolute discretion, determine from time to
time): (a) it shall be collaterally secured by the shares of Stock obtained
upon exercise of the Option; (b) repayment shall be made on demand by the
Company and, in any event, no later than three (3) years from the date of
exercise; and (c) the note shall bear interest at a rate as determined by the
Committee, payable monthly out of a payroll deduction provision; provided,
however, that notwithstanding the foregoing (i) an amount not less than the par
value of the shares of Stock with respect to which the Option is being exercised
must be paid in cash, cash equivalents, or shares of Stock in accordance with
this Section, and (ii) the payment of such exercise price by promissory note
does not
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<PAGE>
violate any applicable laws or regulations, including, without limitation,
Delaware corporate law or applicable margin lending rules. The decision as to
whether to permit partial payment by a promissory note for shares of Stock to be
issued upon exercise of any Option granted shall rest entirely in the sole and
absolute discretion of the Committee.
As promptly as practicable after the receipt by the Company of (a) written
notice from the Optionee setting forth the number of shares of Stock with
respect to which such Option is to be exercised and (b) payment of the option
price of such shares in the form required by the foregoing provisions of this
Section, the Company shall cause to be delivered to such Optionee certificates
representing the number of shares with respect to which such Option has been so
exercised (less a number of shares equal to the number of shares as to which
ownership was attested under the procedure described in clause (ii) of the next
preceding paragraph).
11. TRANSFERABILITY OF OPTIONS
Options shall not be transferable by the Optionee otherwise than by will or
under the laws of descent and distribution, and shall be exercisable during his
or her lifetime only by the Optionee, except that the Committee may, subject to
such conditions as it shall, in its sole and absolute discretion, determine,
specify in an Option Agreement that pertains to an NQO that the Optionee may
transfer such NQO to a member of the Immediate Family of the Optionee, to a
trust solely for the benefit of the Optionee and the Optionee's Immediate
Family, or to a partnership or limited liability company whose only partners or
members are the Optionee and members of the Optionee's Immediate Family.
"Immediate Family" shall mean, with respect to any Optionee, such Optionee's
child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, and shall include adoptive relationships.
12. TERMINATION OF EMPLOYMENT OR INVOLVEMENT OF OPTIONEE WITH THE COMPANY
For purposes of this Section, employment by or involvement with (in the
case of an Optionee who is not an employee) an Affiliate shall be considered
employment by or involvement with the Company. Except as otherwise set forth in
the Option Agreement, after the Optionee's termination of employment with the
Company other than by reason of death or disability, including his retirement in
good standing from the employ of the Company for reasons of age under the then
established rules of the Company, the Option shall terminate on the earlier of
the date of its expiration or three (3) months after the date of such
termination or retirement. After the death of the Optionee, his or her
executors, administrators or any persons to whom his or her Option may be
transferred by will or by the laws of descent and distribution shall have the
right to exercise the Option to the extent to which the Optionee was entitled to
exercise the Option. The Committee may, subject to such conditions as it shall,
in its sole and absolute discretion, determine, specify in an Option Agreement
that, in the event that such termination is a result of disability, the Optionee
shall have the right to exercise the Option pursuant to its terms as if such
Optionee continued as an employee; provided, however, that any such Option that
is an ISO shall, in order to preserve its status as such, be required to be
exercised with twelve (12) months of such termination.
Authorized leave of absence or absence on military or government service
shall not constitute severance of the employment relationship between the
Company and the Optionee for purposes of the Plan, provided that either (a) such
absence is for a period of no more than ninety (90) days or (b) the Employee's
right to re-employment after such absence is guaranteed either by statute or by
contract.
-5-
<PAGE>
For Optionees who are not employees of the Company, options shall be
exercisable for such periods following the termination of the Optionee's
involvement with the Company as may be set forth in the Option Agreement.
13. REQUIREMENTS OF LAW
The Company shall not be required to sell or issue any shares of Stock upon
the exercise of any Option if the issuance of such shares shall constitute or
result in a violation by the Optionee or the Company of any provisions of any
law, statute or regulation of any governmental authority. Specifically, in
connection with the Securities Act of 1933, as amended (the "Securities Act"),
and any applicable state securities or "blue sky" law (a "Blue Sky Law"), upon
exercise of any Option the Company shall not be required to issue such shares
unless the Committee has received evidence satisfactory to it to the effect that
the holder of such Option will not transfer such shares except pursuant to a
registration statement in effect under the Securities Act and Blue Sky Laws or
unless an opinion of counsel satisfactory to the Company has been received by
the Company to the effect that such registration and compliance is not required.
Any determination in this connection by the Committee shall be final, binding
and conclusive. The Company shall not be obligated to take any action in order
to cause the exercise of an Option or the issuance of shares of Stock pursuant
thereto to comply with any law or regulations of any governmental authority,
including, without limitation, the Securities Act or applicable Blue Sky Law.
Notwithstanding any other provision of the Plan to the contrary, the
Company may refuse to permit transfer of shares of Stock if in the opinion of
its legal counsel such transfer would violate federal or state securities laws
or subject the Company to liability thereunder. Any sale, assignment, transfer,
pledge or other disposition of shares of Stock received upon exercise of any
Option (or any other shares or securities derived therefrom) which is not in
accordance with the provisions of this Section shall be void and of no effect
and shall not be recognized by the Company.
Legend on Certificates. The Committee may cause any certificate
----------------------
representing shares of Stock acquired upon exercise of an Option (and any other
shares or securities derived therefrom) to bear a legend to the effect that the
securities represented by such certificate have not been registered under the
Securities Act of 1933, as amended, or any applicable state securities laws, and
may not be sold, assigned, transferred, pledged or otherwise disposed of except
in accordance with the Plan and applicable agreements binding the holder and the
Company or any of its stockholders.
14. NO RIGHTS AS STOCKHOLDER
No Optionee shall have any rights as a stockholder with respect to shares
covered by his or her Option until the date of issuance of a stock certificate
for such shares; except as otherwise provided in Section 17, no adjustment for
dividends or otherwise shall be made if the record date therefor is prior to the
date of issuance of such certificate.
15. EMPLOYMENT OBLIGATION
The granting of any Option shall not impose upon the Company or any
Affiliate any obligation to employ or continue to employ any Optionee, or to
engage or retain the services of any person, and the right of the Company or any
Affiliate to terminate the employment or services of any person shall not be
diminished or affected by reason of the fact that an Option has been granted to
him or her. The existence of any Option shall not be taken into account in
determining any damages relating to termination of employment or services for
any reason.
-6-
<PAGE>
16. FORFEITURE AS A RESULT OF TERMINATION FOR CAUSE
Notwithstanding any provision of the Plan to the contrary, if the Committee
determines, after full consideration of the facts presented on behalf of the
Company and an Optionee, that
(a) the Optionee has been engaged in fraud, embezzlement, theft,
commission of a felony or dishonesty in the course of his or her employment
by or involvement with the Company or an Affiliate, which damaged the
Company or an Affiliate, or has made unauthorized disclosure of trade
secrets or other proprietary information of the Company or an Affiliate or
of a third party who has entrusted such information to the Company or an
Affiliate, or
(b) the Optionee's employment or involvement was otherwise terminated
for "cause," as defined in any employment agreement with the Optionee, if
applicable, or if there is no such agreement, as determined by the
Committee, which may determine that "cause" includes among other matters
the willful failure or refusal of the Optionee to perform and carry out his
or her assigned duties and responsibilities diligently and in a manner
satisfactory to the Committee, or the material breach by the Optionee of
any rules of conduct, policies or regulations of the Company or any
Affiliate,
then the Optionee's right to exercise an Option shall terminate as of the date
of such act (in the case of (a)) or such termination (in the case of (b)) and
the Optionee shall forfeit all unexercised Options. If an Optionee whose
behavior the Company asserts falls within the provisions of (a) or (b) above has
exercised or attempts to exercise an Option prior to a decision of the
Committee, the Company shall not be required to recognize such exercise until
the Committee has made its decision and, in the event of any exercise shall have
taken place, it shall be of no force and effect (and void ab initio) if the
Committee makes an adverse determination; provided, however, if the Committee
finds in favor of the Optionee then the Optionee will be deemed to have
exercised such Option retroactively as of the date he or she originally gave
written notice of his or her attempt to exercise or actual exercise, as the case
may be. The decision of the Committee as to the cause of an Optionee's
discharge and the damage done to the Company or an Affiliate shall be final,
binding and conclusive. No decision of the Committee, however, shall affect in
any manner the finality of the discharge of such Optionee by the Company or an
Affiliate.
17. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE
The existence of outstanding Options shall not affect in any way the right
or power of the Company or its stockholders to make or authorize any or all
adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business or any merger or consolidation of
the Company or any issue of bonds, debentures, preferred or preference stock,
whether or not convertible into the Stock or other securities, ranking prior to
the Stock or affecting the rights thereof, or warrants, rights or options to
acquire the same, or the dissolution or liquidation of the Company or any sale
or transfer of all or any part of its assets or business or any other corporate
act or proceeding, whether of a similar character or otherwise.
The number of shares of Stock in the Option Pool (less the number of shares
theretofore delivered upon exercise of Options) and the number of shares of
Stock covered by any outstanding Option and the price per share payable upon
exercise thereof (provided that in no event shall the option price be less than
the par value of such shares) shall be proportionately adjusted for any increase
or decrease in the number of issued and outstanding shares of Stock resulting
from any subdivision, split, combination or consolidation of shares of Stock or
the payment of a dividend in shares of stock or other securities of the Company
on the Stock. The decision of the Board as to the adjustment, if any, required
by the provisions of this Section shall be final, binding and conclusive.
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<PAGE>
If the Company merges or consolidates with a wholly-owned subsidiary for
the purpose of reincorporating itself under the laws of another jurisdiction,
the Optionees will be entitled to acquire shares of Stock of the reincorporated
Company upon the same terms and conditions as were in effect immediately prior
to such reincorporation (unless such reincorporation involves a change in the
number of shares or the capitalization of the Company, in which case
proportional adjustments shall be made as provided above) and the Plan, unless
otherwise rescinded by the Board, will remain the Plan of the reincorporated
Company.
Except as otherwise provided in the preceding paragraph, if the Company is
merged or consolidated with another corporation, whether or not the Company is
the surviving entity, or if the Company is liquidated or sells or otherwise
disposes of all or substantially all of its assets to another entity while
unexercised Options remain outstanding under the Plan, or if other circumstances
occur in which the Board in its sole and absolute discretion deems it
appropriate for the provisions of this paragraph to apply (in each case, an
"Applicable Event"), then (a) each holder of an outstanding Option shall be
entitled, upon exercise of such Option, to receive in lieu of shares of Stock,
such stock or other securities or property as he or she would have received had
he exercised such option immediately prior to the Applicable Event; (b) the
Board may, in its sole and absolute discretion, waive, generally or in one or
more specific cases, any limitations imposed pursuant to Section 9 so that some
or all Options from and after a date prior to the effective date of such
Applicable Event, specified by the Board, in its sole and absolute discretion,
shall be exercisable in full or in part; (c) the Board may, in its sole and
absolute discretion, cancel all outstanding and unexercised Options as of the
effective date of any such Applicable Event; (d) the Board may, in its sole
discretion, convert some or all Options into options to purchase the stock or
other securities of the surviving corporation pursuant to an Applicable Event;
or (e) the Board may, in its sole and absolute discretion, assume the
outstanding and unexercised options to purchase stock or other securities of any
corporation and convert such options into Options to purchase Stock, whether
pursuant to this Plan or not, pursuant to an Applicable Event; provided,
however, notice of any such cancellation pursuant to clause (c) shall be given
to each holder of an Option not less than thirty (30) days preceding the
effective date of such Applicable Event, and provided further, however, that the
Board may, in its sole and absolute discretion, waive, generally or in one or
more specific instances, any limitations imposed pursuant to Section 9 with
respect to any Option so that such Option shall be exercisable in full or in
part, during such thirty (30) day period.
Except as expressly provided herein, the issue by the Company of shares of
Stock or other securities of any class or series or securities convertible into
or exchangeable or exercisable for shares of Stock or other securities of any
class or series for cash or property or for labor or services either upon direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number, class or price of shares of Stock then
subject to outstanding Options.
18. AMENDMENT OR TERMINATION OF PLAN
The Board may, in its sole and absolute discretion, modify, revise or
terminate the Plan at any time and from time to time; provided, however, that
without the further approval of the holders of at least a majority of the
outstanding shares of Stock, the Board may not change the aggregate number of
shares of Stock which may be issued under Options pursuant to the provisions of
the Plan either to any one person or in the aggregate; or change the class of
persons eligible to receive ISOs. Notwithstanding the preceding sentence, the
Board shall in all events have the power and authority to make such changes in
the Plan and in the regulations and administrative provisions hereunder or in
any outstanding Option as, in the opinion of counsel for the Company, may be
necessary or appropriate from time to time to enable any Option granted pursuant
to the Plan to qualify as an incentive stock option or such other stock option
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<PAGE>
as may be defined under the Code, as amended from time to time, so as to receive
preferential federal income tax treatment.
19. CERTAIN RIGHTS OF THE COMPANY
Voluntary or Involuntary Transfers of Stock. Except as may be set forth in
-------------------------------------------
any applicable Optionee/Stockholder Agreement, shares of Stock acquired by an
Optionee pursuant to the exercise of an Option or Options granted under the Plan
shall not be voluntarily transferred by the Optionee without the prior written
consent of the Committee, which consent may be withheld or conditioned as the
Committee, in its sole and absolute discretion, determine. If such shares of
Stock are subject to an involuntary transfer, including by reason of death, a
divorce settlement or judicial proceeding, the Company shall have the assignable
right to repurchase all or any such shares (including any shares of other
securities of the Company derived therefrom) at a price equal to the Repurchase
Price at the time of the involuntary transfer event. The Company may exercise
its repurchase right no earlier than one hundred eighty (180) days after the
exercise of the Option (or one or more such exercises) and no later than three
hundred and sixty-five (365) days following the later of (a) the date of such
involuntary transfer of such shares of Stock, and (b) the Committee's receipt of
written notice of the occurrence of such transfer event. Any such shares of
Stock (or other shares or securities) as to which the Company does not exercise
its repurchase rights within such period shall thereafter be free of the
foregoing restrictions.
Termination of Employment or Involvement. If the Optionee's employment by
----------------------------------------
or involvement with the Company (including, for this purpose, any Affiliate)
shall terminate for any reason other than the Optionee's death or a Justifiable
Termination (as defined below) or Optionee's retirement for reasons of age or
disability in accordance with the then policy of the Company, the Company shall
have the right to repurchase all or any of such shares of Stock (or other shares
or securities derived therefrom) at a price equal to the Repurchase Price at the
time of such repurchase. In addition, if at the time of such termination an
Optionee holds an Option granted under the Plan which is by its terms
exercisable after such termination, the Company shall have the assignable right
to repurchase all or any part of the shares of Stock acquired pursuant to the
exercise of such Option, at the Repurchase Price at the time of such repurchase.
In the case of a termination on account of any circumstance listed in Section
16(a) or (b) (a "Justifiable Termination"), the Company shall have the right to
repurchase all or any of such shares of Stock at the lesser of (i) the exercise
price per share or (ii) the Repurchase Price at the time of such repurchase. If
the option price for any repurchased shares has been paid by the Optionee's
promissory note pursuant to Section 10, then the repurchase price for such
shares of Stock shall be first applied to the repayment of the outstanding
amount, if any, due under such note in respect of the repurchased shares, and
any accrued but unpaid interest thereon. The Company's right to repurchase
shares of Stock (or other shares or securities) may be exercised at any time no
later than three hundred and sixty-five (365) days following the date of the
Optionee's termination of employment or involvement. Any such shares of Stock
(or other shares or securities) as to which the Company does not exercise its
repurchase rights within such period shall thereafter be free of the foregoing
restrictions.
Repurchase Price. As used herein the term "Repurchase Price" shall mean
----------------
the fair market value of a share of Stock (or other shares or securities) as
determined in accordance with the provisions of Section 7, except that in making
its determination of fair market value of a share of Stock the Committee shall
be entitled to take into account that the shares of Stock (or other shares and
securities) may be illiquid, may be subject to restrictions on transfer or may
constitute a minority interest in the Company.
Stockholder Agreement. Unless the Committee shall, in its sole and
---------------------
absolute discretion otherwise determine, it shall be a condition of each
Optionee receiving any shares of Stock upon any exercise of an Option that he or
she shall enter into the Optionee/Stockholder Agreement, a copy of which has
heretofore been delivered to the Optionee.
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<PAGE>
Other Provisions. The Committee may, in its sole and absolute discretion,
----------------
require a key employee, as a condition to receiving any option, to enter into a
noncompetition agreement in such form as the Committee may, from time to time in
its sole and absolute discretion, determine.
20. GOVERNING LAW
The Plan shall be governed by and construed and enforced in accordance with
the applicable laws of the United States of America and the law (other than the
law governing conflict of law questions) of The Commonwealth of Massachusetts
except to the extent the laws of any other jurisdiction are mandatorily
applicable.
21. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall become effective and shall be deemed to have been adopted on
November 10, 1999. Unless the Plan shall have terminated earlier, the Plan
shall terminate on the tenth (10th) anniversary of its effective date, and no
Option shall be granted pursuant to the Plan after the day preceding the tenth
(10th) anniversary of its effective date.
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<PAGE>
EXHIBIT 10.17
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KLINE IRON & STEEL CO., INC.
2000 Stock Option Plan
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<PAGE>
Table of Contents
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Page
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1. PURPOSE................................................................ 1
2. ADMINISTRATION OF THE PLAN............................................. 1
3. OPTION SHARES.......................................................... 2
4. AUTHORITY TO GRANT OPTIONS............................................. 2
5. WRITTEN AGREEMENT...................................................... 2
6. ELIGIBILITY............................................................ 2
7. OPTION PRICE........................................................... 3
8. DURATION OF OPTIONS.................................................... 3
9. VESTING PROVISIONS..................................................... 3
10. EXERCISE OF OPTIONS.................................................... 3
11. TRANSFERABILITY OF OPTIONS............................................. 5
12. TERMINATION OF EMPLOYMENT OR INVOLVEMENT OF OPTIONEE WITH THE COMPANY.. 5
13. REQUIREMENTS OF LAW.................................................... 6
14. NO RIGHTS AS STOCKHOLDER............................................... 6
15. EMPLOYMENT OBLIGATION.................................................. 6
16. FORFEITURE AS A RESULT OF TERMINATION FOR CAUSE........................ 6
17. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE............................. 7
18. AMENDMENT OR TERMINATION OF PLAN....................................... 8
19. CERTAIN RIGHTS OF THE COMPANY.......................................... 8
20. GOVERNING LAW.......................................................... 9
21. EFFECTIVE DATE AND DURATION OF THE PLAN................................ 10
i
<PAGE>
KLINE IRON & STEEL CO., INC.
2000 STOCK OPTION PLAN
1. PURPOSE
The purpose of this 2000 Stock Option Plan (the "Plan") is to encourage
directors, officers and employees of and consultants and other persons providing
services to Kline Iron & Steel Co., Inc. (the "Company") and its Affiliates (as
hereinafter defined) to continue their association with the Company and its
Subsidiaries, by providing opportunities for such persons to participate in the
ownership of the Company and in its future growth through the granting of stock
options (the "Options") which may be options designed to qualify as incentive
stock options (within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code")) (an "ISO"), or Options not intended to qualify
for any special tax treatment under the Code (a "NQO"). The term "Affiliate" as
used in the Plan means a corporation or other business organization which owns
in the Company, or in which the Company or any such corporation or other
business entity owns, directly or indirectly through an unbroken chain of
ownership, fifty percent (50%) or more of the total combined voting power of all
classes of stock.
2. ADMINISTRATION OF THE PLAN
The Plan shall be administered by a committee (the "Committee") consisting
of two or more members of the Company's Board of Directors (the "Board"). The
Committee shall from time to time determine to whom options or other rights
shall be granted under the Plan, whether options granted shall be ISOs or NQOs,
the terms of the options or other rights, and the number of shares that may be
granted under options. The Committee shall report to the Board the names of
individuals to whom stock or options or other rights are to be granted, the
number of shares covered, and the terms and conditions of each grant. The
determinations described in this Section 2 may be made by the Committee or by
the Board, as the Board shall direct in its sole and absolute discretion, and
references in the Plan to the Committee shall be understood to refer to the
Board in any such case.
The Committee shall select one of its members as Chairman and shall hold
meetings at such times and places as it may determine. A majority of the
Committee shall constitute a quorum, and acts of the Committee at which a quorum
is present, or acts reduced to or approved in writing by all the members of the
Committee, shall be the valid acts of the Committee. The Committee shall have
the authority to adopt, amend, and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of the Plan. All questions of
interpretation and application of such rules and regulations, of the Plan and of
Options, shall be subject to the determination of the Committee, which shall be
final and binding. The Plan shall be administered in such a manner as to permit
those Options granted hereunder and specially designated under Section 5 as ISOs
to qualify as incentive stock options as described in Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
For so long as Section 16 of the Securities Exchange Act of 1934, as
amended from time to time (the "Exchange Act"), is applicable to the Company,
each member of the Committee shall be a "non-employee director" or the
equivalent within the meaning of Rule 16b-3 under the Exchange Act, and, for so
long as Section 162(m) of the Code is applicable to the Company, an "outside
director" within the meaning of Section 162 of the Code and the regulations
thereunder. If, however, the Committee is not comprised of two or more "outside
directors," then, although the Committee may still administer the Plan, the
Compensation Committee of the Board of Directors of American Tower Corporation,
so long as it is the parent of the Company, or such other committee that makes
grants pursuant to the parent's stock option or similar plan, shall make grants
of options or other rights under the Plan (if the Compensation Committee or such
committee consists of two or more members who are "outside directors").
<PAGE>
With respect to persons subject to Section 16 of the Exchange Act
("Insiders"), transactions under the Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successor under the Exchange Act. To
the extent any provision of the Plan or action by the Committee fails to so
comply, it shall be deemed to be modified so as to be in compliance with such
Rule, or, if such modification is not possible, it shall be deemed to be null
and void, to the extent permitted by law and deemed advisable by the Committee.
3. OPTION SHARES
The stock subject to Options under the Plan shall be shares of Common
Stock, par value $.01 per share (the "Stock"). The total amount of the Stock
with respect to which Options may be granted (the "Option Pool"), shall not
exceed in the aggregate 500,000 shares; provided, however, such aggregate number
of shares shall be subject to adjustment in accordance with the provisions of
Section 17. If an outstanding Option shall expire for any reason or shall
terminate by reason of the death or severance of employment of the Optionee, the
surrender of any such Option, or any other cause, the shares of Stock allocable
to the unexercised portion of such Option may again be subject to an option
under the Plan. The maximum number of shares of Stock subject to Options that
may be granted to any Optionee in the aggregate in any calendar year shall not
exceed 100,000 shares, subject to adjustment in accordance with the provisions
of Section 17.
4. AUTHORITY TO GRANT OPTIONS
The Committee may determine, from time to time, which employees of the
Company or any Affiliate or other persons shall be granted Options under the
Plan, the terms of the Options (including without limitation whether an Option
shall be an ISO or a NQO) and the number of shares which may be purchased under
the Option or Options. Without limiting the generality of the foregoing, the
Committee may from time to time grant: (a) to such employees (other than
employees of an Affiliate which is not a corporation) as it shall determine an
Option or Options to buy a stated number of shares of Stock under the terms and
conditions of the Plan which Option or Options will to the extent so designated
at the time of grant constitute an ISO; and (b) to such eligible directors,
employees or other persons as it shall determine an Option or Options to buy a
stated number of shares of Stock under the terms and conditions of the Plan
which Option or Options shall constitute a NQO. Subject only to any applicable
limitations set forth elsewhere in the Plan, the number of shares of Stock to be
covered by any Option shall be as determined by the Committee.
5. WRITTEN AGREEMENT
Each Option granted hereunder shall be embodied in an option agreement (the
"Option Agreement") substantially in the form of Exhibit 1, which shall be
signed by the Optionee and by the Chief Executive Officer, the Chief Operating
Officer, Chief Financial Officer, the General Counsel or the Corporate
Controller of the Company for and in the name and on behalf of the Company. An
Option Agreement may contain such restrictions on exercisability and such other
provisions not inconsistent with the Plan as the Committee in its sole and
absolute discretion shall approve.
6. ELIGIBILITY
The individuals who shall be eligible for grant of Options under the Plan
shall be employees (including officers who may be members of the Board),
directors who are not employees and other individuals, whether or not employees,
who render services of special importance to the management, operation or
development of the Company or an Affiliate, and who have contributed or may be
expected to contribute to the success of the Company or an Affiliate. An
employee, director or other person to
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<PAGE>
whom an Option has been granted pursuant to an Option Agreement is hereinafter
referred to as an "Optionee."
7. OPTION PRICE
The price at which shares of Stock may be purchased pursuant to an Option
shall be specified by the Committee at the time the Option is granted, but shall
in no event be less than the par value of such shares and, in the case of an
ISO, except as set forth in the following sentence, one hundred percent (100%)
of the fair market value of the Stock on the date the ISO is granted. In the
case of an employee who owns (or is considered under Section 424(d) of the Code
as owning) stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any Affiliate, the price
at which shares of Stock may be so purchased pursuant to an ISO shall be not
less than one hundred and ten percent (110%) of the fair value of the Stock on
the date the ISO is granted.
For purposes of the Plan, the "fair market value" of a share of Stock on
any date specified herein, shall mean (a) the last reported sales price, regular
way, or, in the event that no sale takes place on such day, the average of the
reported closing bid and asked prices, regular way, in either case (i) as
reported on the New York Stock Exchange Composite Tape, or (ii) if the Stock is
not listed or admitted to trading on the New York Stock Exchange, on the
principal national securities exchange on which such security is listed or
admitted to trading, or (iii) if not then listed or admitted to trading on any
national securities exchange, on the NASDAQ National Market System; or (b) if
the Stock is not quoted on such National Market System, (i) the average of the
closing bid and asked prices on each such day in the over-the-counter market as
reported by NASDAQ, or (ii) if bid and asked prices for such security on each
such day shall not have been reported through NASDAQ, the average of the bid and
asked prices for such day as furnished by any New York Stock Exchange member
firm regularly making a market in such security selected for such purpose by the
Committee; or (c) if the Stock is not then listed or admitted to trading on any
national exchange or quoted in the over-the-counter market, the fair value
thereof determined in good faith by the Committee (which shall be entitled to
take into account that the Stock may be illiquid, may be subject to restrictions
on transfer or may constitute a minority interest in the Company); provided,
however, that any method of determining fair market value employed by the
Committee with respect to an ISO shall be consistent with any applicable laws or
regulations pertaining to "incentive stock options."
8. DURATION OF OPTIONS
The duration of any Option shall be specified by the Committee in the
Option Agreement, but no Option shall be exercisable after the expiration of ten
(10) years from the date such Option is granted. In the case of any employee
who owns (or is considered under Section 424(d) of the Code as owning) stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or any Affiliate, no ISO shall be exercisable
after the expiration of five (5) years from the date such Option is granted.
The Committee, in its sole and absolute discretion, may extend any Option
theretofore granted.
9. VESTING PROVISIONS
Each Option may be exercised so long as it is valid and outstanding from
time to time, in part or as a whole, in such manner and subject to such
conditions as the Committee, in its sole and absolute discretion, may provide in
the Option Agreement. The Committee may, in its sole and absolute discretion,
accelerate Options, in whole or in part, on such terms and conditions as the
Committee may, in its sole and absolute discretion, determine.
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<PAGE>
10. EXERCISE OF OPTIONS
Options shall be exercised by the delivery of written notice to the Company
setting forth the number of shares of Stock with respect to which the Option is
to be exercised, accompanied by payment of the option price of such shares,
which payment shall be made, subject to the alternative provisions of this
Section, in cash or by such cash equivalents, payable to the order of the
Company in an amount in United States dollars equal to the option price of such
shares, as the Committee in its sole and absolute discretion shall consider
acceptable. Such notice shall be delivered in person to the Secretary of the
Company or shall be sent by registered mail, return receipt requested, to the
Secretary of the Company, in which case delivery shall be deemed made on the
date such notice is deposited in the mail.
Alternatively, if the Option Agreement so specifies, and subject to such
rules as may be established by the Committee, payment of the option price may be
made through a so-called "cashless exercise" procedure, under which the Optionee
shall deliver irrevocable instructions to a broker to sell shares of Stock
acquired upon exercise of the Option and to remit promptly to the Company a
sufficient portion of the sale proceeds to pay the option price and any tax
withholding resulting from such exercise.
Alternatively, payment of the option price may be made, in whole or in
part, in shares of Stock owned by the Optionee; provided, however, that the
Optionee may not make payment in shares of Stock that he acquired upon the
earlier exercise of any ISO (or other "incentive stock option"), unless and
until he has held the shares until at least two (2) years after the date the ISO
(or such other incentive stock option) was granted and at least one (1) year
after the date the ISO (or such other option) was exercised. If payment is made
in whole or in part in shares of Stock, then the Optionee shall deliver to the
Company in payment of the option price of the shares with respect of which such
Option is exercised (a) certificates registered in the name of such Optionee
representing a number of shares of Stock legally and beneficially owned by such
Optionee, free of all liens, claims and encumbrances of every kind, and having a
fair market value on the date of delivery of such notice equal to the option
price of the shares of Stock with respect to which such Option is to be
exercised, such certificates to be accompanied by stock powers duly endorsed in
blank by the record holder of the shares of Stock represented by such
certificates; and (b) if the option price of the shares with respect to which
such Option is to be exercised exceeds such fair market value, cash or such cash
equivalents payable to the order to the Company, in an amount in United States
dollars equal to the amount of such excess, as the Committee in its sole and
absolute discretion shall consider acceptable. Notwithstanding the foregoing
provisions of this Section, the Committee, in its sole and absolute discretion,
(i) may refuse to accept shares of Stock in payment of the option price of the
shares of Stock with respect to which such Option is to be exercised and, in
that event, any certificates representing shares of Stock which were delivered
to the Company with such written notice shall be returned to such Optionee
together with notice by the Company to such Optionee of the refusal of the
Committee to accept such shares of Stock and (ii) may accept, in lieu of actual
delivery of stock certificates, an attestation by the Optionee substantially in
the form attached herewith as Exhibit C or such other form as may be deemed
acceptable by the Committee that he or she owns of record the shares to be
tendered free and clear of all liens, claims and encumbrances of every kind.
Alternatively, if the Option Agreement so specifies, payment of the option
price may be made in part by a full recourse promissory note executed by the
Optionee and containing the following terms and conditions (and such others as
the Committee shall, in its sole and absolute discretion, determine from time to
time): (a) it shall be collaterally secured by the shares of Stock obtained
upon exercise of the Option; (b) repayment shall be made on demand by the
Company and, in any event, no later than three (3) years from the date of
exercise; and (c) the note shall bear interest at a rate as determined by the
Committee, payable monthly out of a payroll deduction provision; provided,
however, that notwithstanding the foregoing (i) an amount not less than the par
value of the shares of Stock with respect to which the Option is being exercised
must be paid in cash, cash equivalents, or shares of Stock in accordance with
this Section, and (ii) the payment of such exercise price by promissory note
does not violate any applicable laws or regulations, including, without
limitation, Delaware corporate law or applicable margin lending rules. The
decision as to whether to permit partial payment by a promissory
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<PAGE>
note for shares of Stock to be issued upon exercise of any Option granted shall
rest entirely in the sole and absolute discretion of the Committee.
As promptly as practicable after the receipt by the Company of (a) written
notice from the Optionee setting forth the number of shares of Stock with
respect to which such Option is to be exercised and (b) payment of the option
price of such shares in the form required by the foregoing provisions of this
Section, the Company shall cause to be delivered to such Optionee certificates
representing the number of shares with respect to which such Option has been so
exercised (less a number of shares equal to the number of shares as to which
ownership was attested under the procedure described in clause (ii) of the next
preceding paragraph).
11. TRANSFERABILITY OF OPTIONS
Options shall not be transferable by the Optionee otherwise than by will or
under the laws of descent and distribution, and shall be exercisable during his
or her lifetime only by the Optionee, except that the Committee may, subject to
such conditions as it shall, in its sole and absolute discretion, determine,
specify in an Option Agreement that pertains to an NQO that the Optionee may
transfer such NQO to a member of the Immediate Family of the Optionee, to a
trust solely for the benefit of the Optionee and the Optionee's Immediate
Family, or to a partnership or limited liability company whose only partners or
members are the Optionee and members of the Optionee's Immediate Family.
"Immediate Family" shall mean, with respect to any Optionee, such Optionee's
child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, and shall include adoptive relationships.
12. TERMINATION OF EMPLOYMENT OR INVOLVEMENT OF OPTIONEE WITH THE COMPANY
For purposes of this Section, employment by or involvement with (in the
case of an Optionee who is not an employee) an Affiliate shall be considered
employment by or involvement with the Company. Except as otherwise set forth in
the Option Agreement, after the Optionee's termination of employment with the
Company other than by reason of death or disability, including his retirement in
good standing from the employ of the Company for reasons of age under the then
established rules of the Company, the Option shall terminate on the earlier of
the date of its expiration or three (3) months after the date of such
termination or retirement. After the death of the Optionee, his or her
executors, administrators or any persons to whom his or her Option may be
transferred by will or by the laws of descent and distribution shall have the
right to exercise the Option to the extent to which the Optionee was entitled to
exercise the Option. The Committee may, subject to such conditions as it shall,
in its sole and absolute discretion, determine, specify in an Option Agreement
that, in the event that such termination is a result of disability, the Optionee
shall have the right to exercise the Option pursuant to its terms as if such
Optionee continued as an employee; provided, however, that any such Option that
is an ISO shall, in order to preserve its status as such, be required to be
exercised with twelve (12) months of such termination.
Authorized leave of absence or absence on military or government service
shall not constitute severance of the employment relationship between the
Company and the Optionee for purposes of the Plan, provided that either (a) such
absence is for a period of no more than ninety (90) days or (b) the Employee's
right to re-employment after such absence is guaranteed either by statute or by
contract.
For Optionees who are not employees of the Company, options shall be
exercisable for such periods following the termination of the Optionee's
involvement with the Company as may be set forth in the Option Agreement.
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<PAGE>
13. REQUIREMENTS OF LAW
The Company shall not be required to sell or issue any shares of Stock upon
the exercise of any Option if the issuance of such shares shall constitute or
result in a violation by the Optionee or the Company of any provisions of any
law, statute or regulation of any governmental authority. Specifically, in
connection with the Securities Act of 1933, as amended (the "Securities Act"),
and any applicable state securities or "blue sky" law (a "Blue Sky Law"), upon
exercise of any Option the Company shall not be required to issue such shares
unless the Committee has received evidence satisfactory to it to the effect that
the holder of such Option will not transfer such shares except pursuant to a
registration statement in effect under the Securities Act and Blue Sky Laws or
unless an opinion of counsel satisfactory to the Company has been received by
the Company to the effect that such registration and compliance is not required.
Any determination in this connection by the Committee shall be final, binding
and conclusive. The Company shall not be obligated to take any action in order
to cause the exercise of an Option or the issuance of shares of Stock pursuant
thereto to comply with any law or regulations of any governmental authority,
including, without limitation, the Securities Act or applicable Blue Sky Law.
Notwithstanding any other provision of the Plan to the contrary, the
Company may refuse to permit transfer of shares of Stock if in the opinion of
its legal counsel such transfer would violate federal or state securities laws
or subject the Company to liability thereunder. Any sale, assignment, transfer,
pledge or other disposition of shares of Stock received upon exercise of any
Option (or any other shares or securities derived therefrom) which is not in
accordance with the provisions of this Section shall be void and of no effect
and shall not be recognized by the Company.
Legend on Certificates. The Committee may cause any certificate
----------------------
representing shares of Stock acquired upon exercise of an Option (and any other
shares or securities derived therefrom) to bear a legend to the effect that the
securities represented by such certificate have not been registered under the
Securities Act of 1933, as amended, or any applicable state securities laws, and
may not be sold, assigned, transferred, pledged or otherwise disposed of except
in accordance with the Plan and applicable agreements binding the holder and the
Company or any of its stockholders.
14. NO RIGHTS AS STOCKHOLDER
No Optionee shall have any rights as a stockholder with respect to shares
covered by his or her Option until the date of issuance of a stock certificate
for such shares; except as otherwise provided in Section 17, no adjustment for
dividends or otherwise shall be made if the record date therefor is prior to the
date of issuance of such certificate.
15. EMPLOYMENT OBLIGATION
The granting of any Option shall not impose upon the Company or any
Affiliate any obligation to employ or continue to employ any Optionee, or to
engage or retain the services of any person, and the right of the Company or any
Affiliate to terminate the employment or services of any person shall not be
diminished or affected by reason of the fact that an Option has been granted to
him or her. The existence of any Option shall not be taken into account in
determining any damages relating to termination of employment or services for
any reason.
16. FORFEITURE AS A RESULT OF TERMINATION FOR CAUSE
Notwithstanding any provision of the Plan to the contrary, if the Committee
determines, after full consideration of the facts presented on behalf of the
Company and an Optionee, that
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<PAGE>
(a) the Optionee has been engaged in fraud, embezzlement, theft,
commission of a felony or dishonesty in the course of his or her employment
by or involvement with the Company or an Affiliate, which damaged the
Company or an Affiliate, or has made unauthorized disclosure of trade
secrets or other proprietary information of the Company or an Affiliate or
of a third party who has entrusted such information to the Company or an
Affiliate, or
(b) the Optionee's employment or involvement was otherwise terminated
for "cause," as defined in any employment agreement with the Optionee, if
applicable, or if there is no such agreement, as determined by the
Committee, which may determine that "cause" includes among other matters
the willful failure or refusal of the Optionee to perform and carry out his
or her assigned duties and responsibilities diligently and in a manner
satisfactory to the Committee, or the material breach by the Optionee of
any rules of conduct, policies or regulations of the Company or any
Affiliate,
then the Optionee's right to exercise an Option shall terminate as of the date
of such act (in the case of (a)) or such termination (in the case of (b)) and
the Optionee shall forfeit all unexercised Options. If an Optionee whose
behavior the Company asserts falls within the provisions of (a) or (b) above has
exercised or attempts to exercise an Option prior to a decision of the
Committee, the Company shall not be required to recognize such exercise until
the Committee has made its decision and, in the event of any exercise shall have
taken place, it shall be of no force and effect (and void ab initio) if the
Committee makes an adverse determination; provided, however, if the Committee
finds in favor of the Optionee then the Optionee will be deemed to have
exercised such Option retroactively as of the date he or she originally gave
written notice of his or her attempt to exercise or actual exercise, as the case
may be. The decision of the Committee as to the cause of an Optionee's
discharge and the damage done to the Company or an Affiliate shall be final,
binding and conclusive. No decision of the Committee, however, shall affect in
any manner the finality of the discharge of such Optionee by the Company or an
Affiliate.
17. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE
The existence of outstanding Options shall not affect in any way the right
or power of the Company or its stockholders to make or authorize any or all
adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business or any merger or consolidation of
the Company or any issue of bonds, debentures, preferred or preference stock,
whether or not convertible into the Stock or other securities, ranking prior to
the Stock or affecting the rights thereof, or warrants, rights or options to
acquire the same, or the dissolution or liquidation of the Company or any sale
or transfer of all or any part of its assets or business or any other corporate
act or proceeding, whether of a similar character or otherwise.
The number of shares of Stock in the Option Pool (less the number of shares
theretofore delivered upon exercise of Options) and the number of shares of
Stock covered by any outstanding Option and the price per share payable upon
exercise thereof (provided that in no event shall the option price be less than
the par value of such shares) shall be proportionately adjusted for any increase
or decrease in the number of issued and outstanding shares of Stock resulting
from any subdivision, split, combination or consolidation of shares of Stock or
the payment of a dividend in shares of stock or other securities of the Company
on the Stock. The decision of the Board as to the adjustment, if any, required
by the provisions of this Section shall be final, binding and conclusive.
If the Company merges or consolidates with a wholly-owned subsidiary for
the purpose of reincorporating itself under the laws of another jurisdiction,
the Optionees will be entitled to acquire shares of Stock of the reincorporated
Company upon the same terms and conditions as were in effect immediately prior
to such reincorporation (unless such reincorporation involves a change in the
number of shares or the capitalization of the Company, in which case
proportional adjustments shall be made as
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provided above) and the Plan, unless otherwise rescinded by the Board, will
remain the Plan of the reincorporated Company.
Except as otherwise provided in the preceding paragraph, if the Company is
merged or consolidated with another corporation, whether or not the Company is
the surviving entity, or if the Company is liquidated or sells or otherwise
disposes of all or substantially all of its assets to another entity while
unexercised Options remain outstanding under the Plan, or if other circumstances
occur in which the Board in its sole and absolute discretion deems it
appropriate for the provisions of this paragraph to apply (in each case, an
"Applicable Event"), then (a) each holder of an outstanding Option shall be
entitled, upon exercise of such Option, to receive in lieu of shares of Stock,
such stock or other securities or property as he or she would have received had
he exercised such option immediately prior to the Applicable Event; (b) the
Board may, in its sole and absolute discretion, waive, generally or in one or
more specific cases, any limitations imposed pursuant to Section 9 so that some
or all Options from and after a date prior to the effective date of such
Applicable Event, specified by the Board, in its sole and absolute discretion,
shall be exercisable in full or in part; (c) the Board may, in its sole and
absolute discretion, cancel all outstanding and unexercised Options as of the
effective date of any such Applicable Event; (d) the Board may, in its sole
discretion, convert some or all Options into options to purchase the stock or
other securities of the surviving corporation pursuant to an Applicable Event;
or (e) the Board may, in its sole and absolute discretion, assume the
outstanding and unexercised options to purchase stock or other securities of any
corporation and convert such options into Options to purchase Stock, whether
pursuant to this Plan or not, pursuant to an Applicable Event; provided,
however, notice of any such cancellation pursuant to clause (c) shall be given
to each holder of an Option not less than thirty (30) days preceding the
effective date of such Applicable Event, and provided further, however, that the
Board may, in its sole and absolute discretion, waive, generally or in one or
more specific instances, any limitations imposed pursuant to Section 9 with
respect to any Option so that such Option shall be exercisable in full or in
part during such thirty (30) day period.
Except as expressly provided herein, the issue by the Company of shares of
Stock or other securities of any class or series or securities convertible into
or exchangeable or exercisable for shares of Stock or other securities of any
class or series for cash or property or for labor or services either upon direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number, class or price of shares of Stock then
subject to outstanding Options.
18. AMENDMENT OR TERMINATION OF PLAN
The Board may, in its sole and absolute discretion, modify, revise or
terminate the Plan at any time and from time to time; provided, however, that
without the further approval of the holders of at least a majority of the
outstanding shares of Stock, the Board may not change the aggregate number of
shares of Stock which may be issued under Options pursuant to the provisions of
the Plan either to any one person or in the aggregate, or change the class of
persons eligible to receive ISOs. Notwithstanding the preceding sentence, the
Board shall in all events have the power and authority to make such changes in
the Plan and in the regulations and administrative provisions hereunder or in
any outstanding Option as, in the opinion of counsel for the Company, may be
necessary or appropriate from time to time to enable any Option granted pursuant
to the Plan to qualify as an incentive stock option or such other stock option
as may be defined under the Code, as amended from time to time, so as to receive
preferential federal income tax treatment.
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<PAGE>
19. CERTAIN RIGHTS OF THE COMPANY
Voluntary or Involuntary Transfers of Stock. Except as may be set forth in
-------------------------------------------
any applicable Optionee/Stockholder Agreement, shares of Stock acquired by an
Optionee pursuant to the exercise of an Option or Options granted under the Plan
shall not be voluntarily transferred by the Optionee without the prior written
consent of the Committee, which consent may be withheld or conditioned as the
Committee, in its sole and absolute discretion, determine. If such shares of
Stock are subject to an involuntary transfer, including by reason of death, a
divorce settlement or judicial proceeding, the Company shall have the assignable
right to repurchase all or any such shares (including any shares of other
securities of the Company derived therefrom) at a price equal to the Repurchase
Price at the time of the involuntary transfer event. The Company may exercise
its repurchase right no earlier than one hundred eighty (180) days after the
exercise of the Option (or one or more such exercises) and no later than three
hundred and sixty-five (365) days following the later of (a) the date of such
involuntary transfer of such shares of Stock, and (b) the Committee's receipt of
written notice of the occurrence of such transfer event. Any such shares of
Stock (or other shares or securities) as to which the Company does not exercise
its repurchase rights within such period shall thereafter be free of the
foregoing restrictions.
Termination of Employment or Involvement. If the Optionee's employment by
----------------------------------------
or involvement with the Company (including, for this purpose, any Affiliate)
shall terminate for any reason other than the Optionee's death or a Justifiable
Termination (as defined below) or Optionee's retirement for reasons of age or
disability in accordance with the then policy of the Company, the Company shall
have the right to repurchase all or any of such shares of Stock (or other shares
or securities derived therefrom) at a price equal to the Repurchase Price at the
time of such repurchase. In addition, if at the time of such termination an
Optionee holds an Option granted under the Plan which is by its terms
exercisable after such termination, the Company shall have the assignable right
to repurchase all or any part of the shares of Stock acquired pursuant to the
exercise of such Option, at the Repurchase Price. In the case of a termination
on account of any circumstance listed in Section 16(a) or (b) (a "Justifiable
Termination"), the Company shall have the right to repurchase all or any of such
shares of Stock at the lesser of (i) the exercise price per share or (ii) the
Repurchase Price at the time of such repurchase. If the option price for any
repurchased shares has been paid by the Optionee's promissory note pursuant to
Section 10, then the repurchase price for such shares of Stock shall be first
applied to the repayment of the outstanding amount, if any, due under such note
in respect of the repurchased shares, and any accrued but unpaid interest
thereon. The Company's right to repurchase shares of Stock (or other shares or
securities) may be exercised at any time no later than three hundred and sixty-
five (365) days following the date of the Optionee's termination of employment
or involvement. Any such shares of Stock (or other shares or securities) as to
which the Company does not exercise its repurchase rights within such period
shall thereafter be free of the foregoing restrictions.
Repurchase Price. As used herein the term "Repurchase Price" shall mean
----------------
the fair market value of a share of Stock (or other shares or securities) as
determined in accordance with the provisions of Section 7, except that in making
its determination of fair market value of a share of Stock the Committee shall
be entitled to take into account that the shares of Stock (or other shares and
securities) may be illiquid, may be subject to restrictions on transfer or may
constitute a minority interest in the Company.
Stockholder Agreement. Unless the Committee shall, in its sole and
---------------------
absolute discretion otherwise determine, it shall be a condition of each
Optionee receiving any shares of Stock upon any exercise of an Option that he or
she shall enter into the Optionee/Stockholder Agreement, a copy of which has
heretofore been delivered to the Optionee.
Other Provisions. The Committee may, in its sole and absolute discretion,
----------------
require a key employee, as a condition to receiving any option, to enter into a
noncompetition agreement in such form as the Committee may, from time to time in
its sole and absolute discretion, determine.
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20. GOVERNING LAW
The Plan shall be governed by and construed and enforced in accordance with
the applicable laws of the United States of America and the law (other than the
law governing conflict of law questions) of The Commonwealth of Massachusetts
except to the extent the laws of any other jurisdiction are mandatorily
applicable.
21. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall become effective and shall be deemed to have been adopted on
March 28, 2000. Unless the Plan shall have terminated earlier, the Plan shall
terminate on the tenth (10th) anniversary of its effective date, and no Option
shall be granted pursuant to the Plan after the day preceding the tenth (10th)
anniversary of its effective date.
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Exhibit 10.18
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AMERICAN TOWER CORPORATION
2000 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE
The purpose of this 2000 Employee Stock Purchase Plan (the "Plan") is to
provide employees of American Tower Corporation (the "Company") and its
Subsidiaries the opportunity to acquire a proprietary interest in the Company by
providing favorable terms for them to purchase its stock. This Plan is intended
to qualify as an employee stock purchase plan within the meaning of Section 423
of the Code.
2. DEFINITIONS
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended. Any
reference to a particular Section shall include any successor and regulation
thereto.
(c) "Committee" shall have the meaning set forth in Section 3.
(d) "Common Stock" shall mean the shares of the Company's Class A Common
Stock, $0.01 par value per share.
(e) "Compensation" shall mean the amount reported (or to be reported) in Box 1
of Form W-2, or its equivalent, increased by any salary reduction elected
pursuant to Sections 402(g), 1321(f) or 125 of the Code.
(f) "Employee" shall mean any individual who has been employed at least 90
days by the Company or any Subsidiary. The term Employee shall not include: (i)
any individual who is not a common law employee of the Company or a Subsidiary;
(ii) any Employee who owns, directly or indirectly, as of the Offering Date five
percent or more of the total combined voting power or value of all class of
stock of the Company or a Subsidiary; (iii) any individual who is a common law
employee of a Subsidiary, none of the employees of which participate in the
Plan, as determined by the Committee; and (iv) any Employee who is a member of
a collective bargaining unit with which the Company or a Subsidiary has
bargained in good faith with respect to participation in the Plan and as a
result of such bargaining the labor organization made an affirmative decision
not to participate in the Plan.
(g) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
(h) "Exercise Date" shall mean the date(s) designated by the Committee from
time to time on which an Optionee may exercise an Option; provided, however,
that no Exercise Date shall be more than 12 months after the applicable Offering
Date; and provided, further, that if such date is not a business day, the
Exercise Date shall be the business day immediately preceding the applicable
date.
<PAGE>
(i) "Fair Market Value" shall be determined according to the following rules:
(i) if the Common Stock is not at the time listed or admitted to trading on a
stock exchange or the Nasdaq National Market, the fair market value shall be the
closing price of the Common Stock on the date in question in the over-the-
counter market, as such price is reported in a publication of general
circulation selected by the Board and regularly reporting the price of the
Common Stock in such market; provided, however, that if the price of the Common
Stock is not so reported, the fair market value shall be determined in good
faith by the Board, which may take into consideration (1) the price paid for the
Common Stock in the most recent trade of a substantial number of shares known to
the Board to have occurred at arm's length between willing and knowledgeable
investors, or (2) an appraisal by an independent party, or (3) any other method
of valuation undertaken in good faith by the Board, or some or all of the above
as the Board shall in its discretion elect; or (ii) if the Common Stock is at
the time listed or admitted to trading on any stock exchange or the Nasdaq
National Market, then the fair market value shall be the mean between the lowest
and highest reported sale prices (or the lowest reported bid price and the
highest reported asked price) of the Common Stock on the date in question on the
principal exchange on which the Common Stock is then listed or admitted to
trading. If no reported sale of Common Stock takes place on the date in question
on the principal exchange or the Nasdaq National Market, as the case may be,
then the reported closing sale price (or the reported closing asked price) of
the Common Stock on the prior trading date immediately preceding such date on
the principal exchange or the Nasdaq National Market, as the case may be, shall
be determinative of fair market value.
(j) "Insider" shall mean a person subject to Section 16 of the Exchange Act.
(k) "Offering" shall mean any offering of Common Stock in accordance with
Section 7.
(l) "Offering Date" shall mean the date(s) designated by the Committee from
time to time on which an Option is granted; provided, however, that there shall
be at least one Offering Date in any consecutive 12-month period while the Plan
remains in effect; and provided, further, that if such date is not a business
day, the Offering Date shall be the business day immediately preceding the
applicable date.
(m) "Option" shall mean the right of a Participant to purchase Common Stock
pursuant to an Offering.
(n) "Option Price" shall have the meaning set forth in Section 8.
(o) "Optionee" shall mean any individual who has been granted an Option that
remains outstanding under the terms of any Offering or who owns Common Stock as
a result of an Offering.
(p) "Participant" shall mean an Employee who has in effect a payroll deduction
authorization in accordance with Section 6.
(q) "Securities Act" shall mean the Securities Act of 1933, as amended.
(r) "Subsidiary" shall mean a corporation of which the Company owns, directly
or indirectly through an unbroken chain of ownership, fifty percent or more of
the total combined voting power of all classes of stock, whether or not such
corporation now exists or is hereafter organized or acquired by the Company or a
Subsidiary.
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<PAGE>
3. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Board or, in the discretion of the
Board, a committee composed of at least two individuals who may be members of
the Board or employees of the Company or a Subsidiary (the "Committee"). In the
event that a vacancy on the Committee occurs on account of the resignation of a
member or the removal of a member by vote of the Board, a successor member shall
be appointed by vote of the Board. No member of the Committee shall be liable
for any action or determination made in good faith with respect to the Plan.
All references in the Plan to the "Committee" shall be understood to refer to
the Committee or the Board, whoever shall administer the Plan.
The Committee shall select one of its members as Chairman and shall hold
meetings at such times and places as it may determine. A majority of the
Committee shall constitute a quorum, and acts of the Committee at which a quorum
is present, or acts reduced to or approved in writing by all the members of the
Committee, shall be the valid acts of the Committee. The Committee shall have
the authority to adopt, amend and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of the Plan. All questions of
interpretation and application of such rules and regulations, of the Plan and of
Options granted thereunder shall be subject to the determination of the
Committee, which shall be final and binding.
The Committee shall have the authority, without the need for further
approval, to establish a different Offering Date and/or Exercise Date, to modify
the amount of time between an Offering Date and an Exercise Date and to increase
or decrease the number of Offerings in a year.
With respect to Insiders, transactions under the Plan are intended to
comply with all applicable conditions of Rule 16b-3 or its successor under the
Exchange Act. To the extent any provision of the Plan or action by the
Committee fails to so comply, it shall be deemed to be modified so as to be in
compliance with such Rule or, if such modification is not possible, it shall be
deemed to be null and void, to the extent permitted by law and deemed advisable
by the Committee.
4. OPTION SHARES
The total amount of Common Stock with respect to which Options may be
granted under the Plan shall not exceed in the aggregate 5,000,000 shares from
either authorized but unissued shares or treasury shares; provided, however,
that such aggregate number of shares shall be subject to adjustment in
accordance with Section 15. If any outstanding Option expires for any reason,
including a withdrawal pursuant to Section 10, or terminates by reason of the
severance of employment of the Participant or any other cause, or is
surrendered, the shares of Common Stock allocable to the unexercised portion of
the Option may again be made subject to an Option under the Plan.
5. ELIGIBILITY
An Employee shall be eligible to become a Participant in the Plan on any
Offering Date on which the Employee is employed by the Company or a Subsidiary;
provided, however, that no Employee shall be granted an Option:
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<PAGE>
(i) if immediately after the grant the aggregate amount of stock the
Employee would be considered to own under Section 424(d) of the Code,
including stock that may be purchased with outstanding options, would
represent five percent or more of the total combined voting power or value of
all classes of capital stock of the Company or of any Subsidiary; or
(ii) that permits the Employee's right to purchase shares under all
employee stock purchase plans (within the meaning of Section 423 of the Code)
of the Company and its Subsidiaries to accrue at a rate that exceeds $25,000
for any calendar year, determined by reference to the Fair Market Value of
the shares at the time any option is granted.
6. PARTICIPATION
(a) An Employee may become a Participant in any Offering by completing an
authorization for payroll deductions in connection with the Offering at such
time (prior to the Offering Date) and in such manner as the Committee may
prescribe. Payroll deductions pursuant to an authorization shall commence with
the payroll period in which the Offering Date occurs and shall end with the last
payroll completed prior to the Exercise Date for the Offering to which the
authorization applies, unless the authorization is sooner terminated by the
Participant as provided in Section 10. The Committee may provide that in the
case of the first Offering, payroll deductions shall commence with the first
payroll period ending after the initial Offering Date. All payroll deductions
shall be made on an after-tax basis.
(b) A Participant shall elect in the authorization for payroll deduction to
have deductions made from his or her Compensation on each payday in an amount
equal to a whole percentage of from one to fifteen percent of his Compensation.
All payroll deductions made for a Participant shall be credited to a bookkeeping
account maintained for such Participant under the Plan. In no event shall
interest be paid to a Participant with respect to payroll deductions credited to
the Participant's account, whether such deductions are used in connection with
the exercise of an Option or are returned to the Participant or the
Participant's estate in cash.
(c) Except as may be required by law, a Participant may not make any
payments to the Participant's account other than by authorization for payroll
deduction. A Participant may elect to decrease the payroll deduction rate at
such time and in such manner as the Committee may prescribe. In no event shall a
Participant increase the amount of payroll deductions during an Offering. A
Participant may discontinue participation in the Offering as provided in Section
10.
7. GRANT OF OPTIONS
(a) Options under the Plan shall be granted in a series of Offerings, the
first of which shall begin on the first Offering Date designated by the
Committee. Successive Offerings shall begin on each Offering Date thereafter
until all of the shares of Common Stock available under the Plan are exhausted
or until the Plan is terminated pursuant to Section 18 or Section 19.
Participation by an Employee in any Offering shall neither limit nor require his
participation in any other Offering.
(b) Each Participant in an Offering shall be granted, as of the applicable
Offering Date, an Option to purchase that number of whole shares of Common Stock
that the accumulated payroll deductions credited to his account during the
Offering is able to purchase at the Option Price.
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<PAGE>
(c) If the total number of shares for which Options are to be granted as of
any Offering Date exceeds the number of shares then available under the Plan,
the Committee shall make a pro rata allocation of the available shares in a
manner as nearly uniform as practicable, and as it shall determine to be
equitable. In that event, the payroll deductions made or to be made pursuant to
authorizations for that Offering shall be reduced accordingly, and the Committee
shall give written notice of such reduction to each affected Participant.
(d) In no event shall a Participant be granted an Option in any Offering to
acquire more than that number of whole shares of Common Stock equal to $25,000
divided by the Fair Market Value of the shares as of the Offering Date;
provided, however, that such limit shall be subject to Section 5(ii) and to the
adjustment in accordance with Section 15.
8. OPTION PRICE
The Option Price of shares of Common Stock for any Offering shall be the
lesser of: (a) 85 percent of the Fair Market Value of the shares on the Offering
Date; or (b) 85 percent of the Fair Market Value of the shares on the Exercise
Date.
9. EXERCISE OF OPTIONS
(a) A Participant's Option for an Offering will be exercised automatically
as of the Exercise Date for the Offering to purchase that number of whole shares
of Common Stock equal to the accumulated payroll deductions credited to the
Participant's account as of the Exercise Date divided by the Option Price.
(b) As promptly as practicable after each Exercise Date the Company shall
deliver to each Participant in the Offering, in accordance with the
Participant's election, either (a) the shares purchased upon the exercise of the
Participant's Option, together with a cash payment equal to the balance of any
payroll deductions credited to the Participant's account during the Offering
that were not used for the purchase of shares, other than amounts representing
fractional shares, or (b) a cash payment equal to the total of the payroll
deductions credited to the Participant's account during the Offering. Amounts
representing fractional shares will, at the discretion of the Committee, either
be carried forward for use in the next Offering if the Participant will
participate in that Offering or paid to the Participant in cash.
(c) The shares purchased upon exercise of an Option shall be deemed to be
transferred to the Participant on the Exercise Date.
10. WITHDRAWAL FROM OFFERING
A Participant may at any time prior to the Exercise Date at such time and
in such manner as the Committee may prescribe withdraw from an Offering and
request payment of an amount in cash equal to the accumulated payroll deductions
credited to the Participant's account under the Plan. Such amount will be paid
to the Participant as promptly as practicable after receipt of
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<PAGE>
the Participant's request to withdraw, and no further payroll deductions will be
made from the Participant's Compensation with respect to the Offering then in
progress and any outstanding Option shall be cancelled. A Participant's
withdrawal from an Offering will have no effect upon his or her eligibility to
participate in any subsequent Offering or in any employee stock purchase plan
(within the meaning of Section 423 of the Code) that may hereafter be adopted by
the Company or a Subsidiary.
11. EXPIRATION OF OPTIONS ON TERMINATION OF EMPLOYMENT
Options shall not be transferable by a Participant and no amount credited
to a Participant's account may be assigned, transferred, pledged or otherwise
disposed of in any way by a Participant. An Option shall expire unexercised
immediately if a Participant ceases to satisfy the definition of the term
Employee for any reason other than death and the amount of the accumulated
payroll deductions then credited to the Participant's account under the Plan
will be paid in cash. Upon termination of the Participant's employment with the
Company or a Subsidiary for any reason other than death, an amount in cash equal
to the accumulated payroll deductions then credited to the Participant's account
under the Plan will be paid to the Participant. In the case of a Participant's
death, the provisions of Section 15 shall control.
An authorized leave of absence or absence on military or government service
shall not constitute severance of the employment relationship between the
Company or Subsidiary and the Participant for purposes of this Section 11,
provided that either (a) the absence is for a period of no more than 90 days
or (b) the Employee's right to be re-employed after the absence is guaranteed
either by statute or by contract.
12. REQUIREMENTS OF LAW
The Company shall not be required to sell or issue any shares of Common
Stock under the Plan if the issuance of such shares would constitute or result
in a violation by the Optionee or the Company of any provision of any law,
statute or regulation of any governmental authority. Specifically, in
connection with the Securities Act, upon the exercise of any Option the Company
shall not be required to issue shares unless the Board has received evidence
satisfactory to it to the effect that the Optionee will not transfer such shares
except pursuant to a registration statement in effect under the Securities Act
or unless an opinion of counsel satisfactory to the Company has been received by
the Company to the effect that such registration is not required. Any
determination in this connection by the Board shall be final, binding and
conclusive. The Company shall not be obligated to take any affirmative action
to cause the exercise of an Option or the issuance of shares pursuant to an
Option to comply with any laws or regulations of any governmental authority
including, without limitation, the Securities Act or applicable state securities
laws.
13. NO RIGHTS AS STOCKHOLDER
No Participant shall have rights as a stockholder with respect to shares
covered by his Option until the applicable Exercise Date and, except as
otherwise provided in Section 15, no adjustment shall be made for dividends of
which the record date precedes the applicable Exercise Date.
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<PAGE>
14. FORFEITURE FOR DISHONESTY
Notwithstanding anything to the contrary in the Plan, if the Board
determines, after full consideration of the facts presented on behalf of both
the Company and the individual, that a Participant or an Optionee has been
engaged in fraud, embezzlement, theft, commission of a felony or proven
dishonesty in the course of the individual's employment by the Company or a
Subsidiary, or has disclosed trade secrets or other proprietary information of
the Company or a Subsidiary, (a) such individual's participation in an Offering
shall terminate and the individual shall forfeit the right to receive any Common
Stock pursuant to an Offering that has not yet been delivered and (b) the
Company shall have the right to repurchase all or any part of the shares of
Common Stock acquired by an Optionee upon the earlier exercise of any Option, at
a price equal to the amount paid to the Company upon such exercise, increased by
an amount equal to the interest that would have accrued in the period between
the date of exercise of the Option and the date of such repurchase upon a debt
in the amount of the exercise price, at the prime rate(s) announced from time to
time during such period in the Federal Reserve Statistical Release Selected
Interest Rates. The decision of the Board as to the cause of a Participant's or
Optionee's discharge and the damage done to the Company or a Subsidiary shall be
final, binding and conclusive. No decision of the Board, however, shall affect
in any manner the finality of the discharge of a Participant or Optionee by the
Company or a Subsidiary.
15. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE
(a) If the outstanding shares of Common Stock are hereafter changed for a
different number or kind of shares or other securities of the Company, by reason
of a reorganization, recapitalization, exchange of shares, stock split,
combination of shares or dividend payable in shares or other securities, a
corresponding adjustment shall be made by the Committee in the number and kind
of shares or other securities, and in the Option Price, covered by outstanding
Options, and for which Options may be granted under the Plan; provided, however,
that no adjustment shall be made that would constitute a modification as defined
in Section 424 of the Code. Any such adjustment made by the Committee shall be
conclusive and binding upon all affected persons, including the Company and all
Participants and Optionees.
(b) If while unexercised Options remain outstanding under the Plan the
Company merges or consolidates with a wholly-owned subsidiary for the purpose of
reincorporating itself under the laws of another jurisdiction, the Optionees
will be entitled to acquire shares of common stock of the reincorporated Company
upon the same terms and conditions as were in effect immediately prior to such
reincorporation (unless such reincorporation involves a change in the number of
shares or the capitalization of the Company, in which case proportional
adjustments shall be made as provided above), and the Plan, unless otherwise
rescinded by the Board, will remain the Plan of the reincorporated company.
(c) Except as otherwise provided in (a) or (b) above, if while unexercised
Options remain outstanding under the Plan the Company merges or consolidates
with one or more corporations (whether or not the Company is the surviving
corporation), or is liquidated or sells or otherwise disposes of substantially
all of its assets to another entity, then the Committee, in its discretion,
shall provide that either:
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<PAGE>
(i) after the effective date of such merger, consolidation,
liquidation or sale, as the case may be, each Optionee shall be entitled,
upon exercise of an Option to receive in lieu of shares of Common Stock the
number and class of shares of such stock or other securities to which he
would have been entitled pursuant to the terms of the merger, consolidation,
liquidation or sale if he had been the holder of record of the number of
shares of Common Stock as to which the Option is being exercised immediately
prior to such merger consolidation, liquidation or sale; or
(ii) all outstanding Options shall be exercised as of the day
preceding the effective date of any such merger, consolidation, liquidation
or sale, which day shall be the Exercise Date for purposes of the Offering;
provided, however, that each Optionee shall be notified of the right to
withdraw from the Offering in accordance with the requirements of Section 10.
(d) Except as expressly provided to the contrary in this Section 15, the
issuance by the Company of shares of stock of any class for cash or property or
for services, either upon direct sale or upon the exercise of rights or
warrants, or upon conversion of shares or obligations of the Company convertible
into such shares or other securities, shall not affect the number, class or
price of shares of Common Stock then subject to outstanding Options.
16. DISPOSITION OF ACCOUNT AT DEATH
In the event that a Participant dies after the Exercise Date but before the
delivery of the stock certificates, such certificates when issued together with
any cash remaining in the Participant's account shall be transferred to the
Participant's estate. In the event that a Participant dies prior to the
Exercise Date, a payment shall be made to the Participant's estate of an amount
in cash equal to the accumulated payroll deductions credited to the
Participant's account under the Plan; provided, however, that the executor,
administrator or personal representative of the estate of the Participant may by
notice to the Committee in the form and manner prescribed by the Committee
request that the balance of the Participant's account shall be used to exercise
on the Exercise Date the outstanding Option granted prior to the Participant's
death. Any such election by the executor, administrator or personal
representative shall be made not later than the Exercise Date. The Company
shall transfer such shares and any cash remaining in the Participant's account
to the executor, administrator or personal representative of the estate of the
Participant.
17. MISCELLANEOUS
(a) Accumulated payroll deductions and the proceeds from the sale of shares
pursuant to the exercise of Options shall constitute general funds of the
Company.
(b) To the extent required by law, the Company or a Subsidiary shall
withhold or cause to be withheld income and other taxes with respect to any
income recognized by an Optionee by reason of the exercise of an Option. An
Optionee shall agree that if the amount payable to him by the Company and any
Subsidiary in the ordinary course is insufficient to pay such taxes, then he
shall upon request of the Company pay to the Company an amount sufficient to
satisfy its tax withholding obligations.
- 8 -
<PAGE>
(c) All notices or other communications by a Participant or Optionee to the
Company pursuant to the Plan shall be deemed to have been given when received in
the form specified by the Company at the location or by the person designated by
the Company for the receipt thereof.
(d) Neither the Plan nor the grant of an Option pursuant to the Plan shall
impose upon the Company or a Subsidiary any obligation to employ or continue to
employ any Participant, and the right of the Company or a Subsidiary to
terminate the employment of any person shall not be diminished or affected by
reason of the fact that an Option has been granted to him.
(e) The title of the sections of the Plan are included for convenience only
and shall not be construed as modifying or affecting their provisions. The
masculine gender shall include both sexes; the singular shall include the plural
and the plural the singular unless the context otherwise requires.
(f) The Plan shall be governed by and construed in accordance with the laws of
the Commonwealth of Massachusetts, without regard to the principles of conflicts
of law.
18. AMENDMENT OR TERMINATION OF PLAN
The Board may at any time terminate or from time to time amend, modify or
suspend this Plan (or any part thereof); provided, however, that without
approval by holders of a majority of the outstanding shares of common stock
present, or represented, and entitled to vote thereon (voting as a single class)
at a duly held meeting (or written consents in lieu thereof) of the shareholders
of the Company there shall be no: (a) change in the number of shares of Common
Stock that may be issued under the Plan, except by operation of the provisions
of Section 15; (b) change in the class of persons eligible to participate in the
Plan; or (c) other change in the Plan that requires stockholder approval under
applicable law. Notwithstanding the preceding sentence, the Board shall in all
events have the power to make such changes in the Plan and the Committee shall
in all events have the power to make such changes in the regulations and
administrative provisions under the Plan or in any outstanding Option as, in the
opinion of counsel for the Company, may be necessary or appropriate from time to
time to enable the Plan to qualify as an employee stock purchase plan as defined
in Section 423 of the Code, so as to enable any Option to receive preferential
federal income tax treatment. No amendment shall materially affect outstanding
Options without the consent of the Optionee and the termination of the Plan will
not terminate Options then outstanding, without the consent of the Optionee.
Notwithstanding the foregoing, at such time after the Company is not
required to file periodic reports under the Exchange Act, at its option, the
Company may terminate the Plan and, upon the termination, outstanding Options
shall be cancelled and each Participant shall receive in cash an amount equal to
the accumulated payroll deductions without interest credited to the
Participant's account under the Plan immediately prior to termination.
- 9 -
<PAGE>
19. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall be effective as of July 1, 2000, subject only to
ratification by the holders of a majority of the outstanding shares of common
stock present, or represented, and entitled to vote thereon (voting as a single
class) at a duly held meeting (or written consents in lieu thereof) of the
shareholders of the Company within 12 months before or after such date. Unless
the Plan shall have terminated earlier, the Plan shall terminate on the business
date as of which there are no longer any shares available pursuant to Section 4
to be offered and no Option shall be granted pursuant to the Plan after that
date.
- 10 -
<PAGE>
Exhibit 12
----------
Ratio of Earnings to Fixed Charges
American Tower Corporation
The following table reflects the computation of the ratio of earnings to fixed
charges for the periods presented.
<TABLE>
<CAPTION>
Period from July 17, 1995 Year ended December 31,
(Incorporation)
Computation of Earnings: to December 31, 1995 1996 1997 1998 1999
------------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Loss Before Income Taxes and
Extraordinary Loss............. $ (184) $ (434) $(2,049) $(42,441) $(49,141)
Add:
Interest Expense................. -- -- 3,040 23,229 27,492
Operating Leases................. 2 126 633 3,245 6,963
------- ------ ------- ------- --------
Earnings as Adjusted............. (182) (308) 1,624 (15,967) (14,686)
Computation of Fixed Charges:
Interest Expense................. -- -- 3,040 23,229 27,492
Interest Capitalized............. -- -- 458 1,403 3,379
Operating Leases................. 2 126 633 3,245 6,963
------- ------ ------- ------- --------
Fixed Charges.................... 2 126 4,131 27,877 37,834
Ratio of Earnings to Fixed
Charges........................ -- -- .39 -- --
Deficiency in Earnings Required
to Cover Fixed Charges......... $ 184 $ 434 $ 2,507 $ 43,844 $ 52,520
</TABLE>
(1) Interest expense includes amortization of deferred financing costs for the
years ended December 31, 1997, 1998 and 1999. Interest expense also includes
redeemable preferred stock dividends for the year ended December 31, 1998.
(2) For purposes of this calculation, "earnings" consist of loss before income
taxes, extraordinary losses and fixed charges (excluding interest
capitalized). "Fixed Charges" consist of interest expensed and capitalized,
amortization of debt discount and related issuance costs and the component
of rental expense associated with operating leases believed by management to
be representative of the interest factor thereon (30%).
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF AMERICAN TOWER CORPORATION
------------------------------------------
Information is as of March 21, 2000.
<TABLE>
<CAPTION>
Jurisdiction of Incorporation
Subsidiary or Organization
---------- -----------------------------
<S> <C>
American Tower (Canada) Corporation Delaware
- ------------------------------------------------------------------------------------------------------------
American Tower Delaware Corporation Delaware
- ------------------------------------------------------------------------------------------------------------
American Tower LLC Delaware
- ------------------------------------------------------------------------------------------------------------
American Tower Management, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
American Tower, L.P. (1) Delaware
- ------------------------------------------------------------------------------------------------------------
American Towers, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
ATC Broadcast GP, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
ATC Financing LLC Delaware
- ------------------------------------------------------------------------------------------------------------
ATC GP Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
ATC Holding, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
ATC LP Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
ATC Operating Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
ATC Realty Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
ATC Teleports, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
ATS Needham, LLC (2) Delaware
- ------------------------------------------------------------------------------------------------------------
ATS/PCS, LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Comm Site International, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
Commsite Towers, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
Haysville Towers, L.L.C. (3) Kansas
- ------------------------------------------------------------------------------------------------------------
Kline Acquisition Corp. Delaware
- ------------------------------------------------------------------------------------------------------------
Maritime Telecommunications Network, Inc. (4) Colorado
- ------------------------------------------------------------------------------------------------------------
Microwave Tower Service, Inc. Oregon
- ------------------------------------------------------------------------------------------------------------
National Wireless Infrastructure L.P. (5) Delaware
- ------------------------------------------------------------------------------------------------------------
Novak & Lackey Construction Co., Inc. Oklahoma
- ------------------------------------------------------------------------------------------------------------
OmniAmerica Development Corp. Nevada
- ------------------------------------------------------------------------------------------------------------
OmniAmerica Holdings Corporation Delaware
- ------------------------------------------------------------------------------------------------------------
OmniAmerica Towers, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
OmniTower, Ltd. (6) Florida
- ------------------------------------------------------------------------------------------------------------
Prestige Staffing, Inc. d/b/a Galaxy Engineering Delaware
- ------------------------------------------------------------------------------------------------------------
Prime Telecom Communications Co. (7) California
- ------------------------------------------------------------------------------------------------------------
RFM Facilities Management LP (8) Delaware
- ------------------------------------------------------------------------------------------------------------
South Atlantic Tower Corp. Delaware
- ------------------------------------------------------------------------------------------------------------
Specialty Combined Resources, Inc. Texas
- ------------------------------------------------------------------------------------------------------------
Specialty Constructors Coatings, Inc. Nevada
- ------------------------------------------------------------------------------------------------------------
Specialty Constructors, Inc. New Mexico
- ------------------------------------------------------------------------------------------------------------
Specialty Fortress, Inc. Nevada
- ------------------------------------------------------------------------------------------------------------
Specialty Management, Inc. Nevada
- ------------------------------------------------------------------------------------------------------------
Specialty Training Centers, Inc. Nevada
- ------------------------------------------------------------------------------------------------------------
TeleCom Towers, L.L.C. Delaware
- ------------------------------------------------------------------------------------------------------------
Towers of America LLLP (9) Delaware
- ------------------------------------------------------------------------------------------------------------
Towersites Monitoring, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
Unisite Alpha, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
Unisite, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
UniSite/OmniPoint FL Tower Venture LLC (10) Delaware
- ------------------------------------------------------------------------------------------------------------
UniSite/OmniPoint NE Tower Venture, LLC (11) Delaware
- ------------------------------------------------------------------------------------------------------------
Unisite/OmniPoint PA Tower Venture LLC (12) Delaware
- ------------------------------------------------------------------------------------------------------------
Unistar Technologies, Inc. Texas
- ------------------------------------------------------------------------------------------------------------
US Sitelease, Inc. Kansas
- ------------------------------------------------------------------------------------------------------------
Western Site Management, LLP (13) Colorado
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) 99% owned by ATC LP, Inc. and 1% owned by ATC GP, Inc.
(2) 45.23% owned by American Tower, L.P. and 34.77% owned by American Towers,
Inc.
(3) 67% owned by TeleCom Towers, L.L.C.
(4) 99.7% owned by ATC Teleorts, Inc.
(5) 49.9% owned by Unisite Alpha, Inc. and 50.1% owned by Unisite, Inc.
(6) 99% owned by OmniAmerica Towers, Inc. and 1% owned by South Atlantic Tower
Corp.
(7) 50% owned by TeleCom Towers, L.L.C. and 50% owned by American Towers, Inc.
(8) 99.9% owned by TeleCom Towers, L.L.C. and 0.1% owned by American Towers,
Inc.
(9) 51% owned by ATC GP, Inc.
(10) 95% owned by Unisite, Inc.
(11) 95% owned by Unisite, Inc.
(12) 95% owned by Unisite, Inc.
(13) 67% owned by TeleCom Towers, L.L.C. and 33% owned by American Towers, Inc.
<PAGE>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
333-72927, 333-56331 and 333-51959 each on Form S-8 and Registration Statement
No. 333-89345 on Form S-3 of American Tower Corporation of our report dated
March 1, 2000, appearing in this Annual Report on Form 10-K of American Tower
Corporation for the year ended December 31, 1999.
Deloitte & Touche LLP
Boston, Massachusetts
March 29, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 25,212
<SECURITIES> 0
<RECEIVABLES> 61,868
<ALLOWANCES> 3,386
<INVENTORY> 11,262
<CURRENT-ASSETS> 139,407
<PP&E> 1,164,836
<DEPRECIATION> 72,490
<TOTAL-ASSETS> 3,018,866
<CURRENT-LIABILITIES> 124,987
<BONDS> 740,822
0
0
<COMMON> 1,558
<OTHER-SE> 2,143,525
<TOTAL-LIABILITY-AND-EQUITY> 3,018,866
<SALES> 0
<TOTAL-REVENUES> 258,081
<CGS> 0
<TOTAL-COSTS> 288,396
<OTHER-EXPENSES> 10,743
<LOSS-PROVISION> 2,639
<INTEREST-EXPENSE> 27,492
<INCOME-PRETAX> (49,141)
<INCOME-TAX> (214)
<INCOME-CONTINUING> (49,355)
<DISCONTINUED> 0
<EXTRAORDINARY> 1,372
<CHANGES> 0
<NET-INCOME> (50,727)
<EPS-BASIC> (0.34)
<EPS-DILUTED> (0.34)
</TABLE>
