<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
Form 10-Q
----------------
(Mark One):
[X]Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. For the quarterly period ended June 30, 2000.
[_] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission File Number: 001-14195
----------------
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)
Telephone Number (617) 375-7500
(Registrant's telephone number, including area code)
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 [_]
<TABLE>
<CAPTION>
Outstanding at
Class of Common Stock August 1, 2000
--------------------- ------------------
<S> <C>
Class A Common Stock......................................... 168,331,558 shares
Class B Common Stock......................................... 8,232,303 shares
Class C Common Stock......................................... 2,267,813 shares
------------------
Total...................................................... 178,831,674 shares
==================
</TABLE>
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<PAGE>
AMERICAN TOWER CORPORATION
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets June 30, 2000 and December
31, 1999......................................................... 1
Condensed Consolidated Statements of Operations Three and Six
Months Ended June 30, 2000 and 1999.............................. 2
Condensed Consolidated Statements of Cash Flows Six Months Ended
June 30, 2000 and 1999........................................... 3
Notes to Condensed Consolidated Financial Statements.............. 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................ 10
Item 3. Quantitative and Qualitative Disclosures about Market Risk.... 19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................. 20
Item 2. Changes in Securities and Use of Proceeds..................... 20
Item 4. Submission of Matters to a Vote of Security Holders........... 20
Item 6. Exhibits and Reports on Form 8-K.............................. 22
Signatures............................................................ 23
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS--(Unaudited)
(in thousands, except share data)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
----------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......................... $ 518,758 $ 25,212
Accounts receivable, net of allowance for doubtful
accounts of $5,694 and $3,386, respectively....... 129,310 58,482
Prepaid and other current assets................... 31,289 13,835
Inventories........................................ 27,163 11,262
Cost in excess of billings on uncompleted contracts
and unbilled receivables.......................... 23,809 13,363
Deferred income taxes.............................. 1,829 1,718
Due from CBS Corporation........................... 7,943 15,535
----------- -----------
Total current assets............................... 740,101 139,407
----------- -----------
Property and equipment, net......................... 1,774,076 1,092,346
Goodwill and other intangible assets, net........... 2,208,288 1,403,897
Notes receivable (related party: $108,878 and
$60,000, respectively)............................. 116,021 118,802
Deposits and other long-term assets................. 63,613 134,568
Investments in unconsolidated subsidiaries.......... 45,885 15,594
Deferred income taxes............................... 140,360 114,252
----------- -----------
Total............................................. $ 5,088,344 $ 3,018,866
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt.................. $ 5,708 $ 4,736
Accounts payable................................... 38,814 25,564
Accrued expenses................................... 57,187 32,732
Accrued tower construction costs................... 41,425 37,671
Accrued interest................................... 29,238 6,769
Billings in excess of costs on uncompleted
contracts and unearned revenue.................... 32,904 17,515
----------- -----------
Total current liabilities.......................... 205,276 124,987
----------- -----------
Long-term debt:
Credit facilities.................................. 1,032,500 90,000
Convertible notes.................................. 916,929 602,259
Other.............................................. 60,133 43,827
Other long-term liabilities........................ 8,172 4,057
----------- -----------
Total liabilities.................................. 2,223,010 865,130
----------- -----------
Minority interest in subsidiaries................... 17,261 8,653
----------- -----------
COMMITMENTS AND CONTINGENCIES
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; 167,610,405 and 144,965,623
shares issued and 167,467,282 and 144,889,220
outstanding, respectively......................... 1,676 1,450
Class B Common Stock; $.01 par value; 50,000,000
shares authorized; 8,232,303 and 8,387,910 shares
issued and outstanding, respectively.............. 82 84
Class C Common Stock; $.01 par value; 10,000,000
shares authorized; 2,267,813 and 2,422,804 shares
issued and outstanding, respectively.............. 23 24
Additional paid-in capital......................... 3,051,631 2,245,482
Accumulated deficit................................ (201,059) (100,429)
Less: Treasury stock (143,123 and 76,403 shares at
cost, respectively)............................... (4,280) (1,528)
----------- -----------
Total stockholders' equity......................... 2,848,073 2,145,083
----------- -----------
Total............................................. $ 5,088,344 $ 3,018,866
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
1
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS--Unaudited
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Six Months Ended
Ended June 30, June 30,
----------------- -------------------
2000 1999 2000 1999
-------- ------- --------- --------
<S> <C> <C> <C> <C>
REVENUES:
Rental and management................ $ 63,233 $31,356 $ 116,940 $ 56,872
Services............................. 74,026 21,412 112,178 32,238
Internet, voice, data and video
transmission services............... 29,788 6,385 53,446 12,451
-------- ------- --------- --------
Total operating revenues......... 167,047 59,153 282,564 101,561
-------- ------- --------- --------
OPERATING EXPENSES:
Operating expenses excluding
depreciation and amortization,
development and corporate general
and administrative expenses:
Rental and management.............. 31,290 13,780 59,782 25,372
Services........................... 65,127 15,296 97,327 24,534
Internet, voice, data and video
transmission services............. 23,242 4,493 42,258 8,624
Depreciation and amortization........ 67,093 33,139 122,291 57,808
Development expense.................. 4,196 290 5,184 557
Corporate general and administrative
expense............................. 3,084 2,291 6,515 4,073
-------- ------- --------- --------
Total operating expenses......... 194,032 69,289 333,357 120,968
-------- ------- --------- --------
LOSS FROM OPERATIONS................... (26,985) (10,136) (50,793) (19,407)
-------- ------- --------- --------
OTHER (EXPENSE) INCOME:
Interest expense..................... (38,437) (5,538) (70,587) (11,539)
Interest income and other, net....... 3,851 5,788 6,437 10,737
Interest income, TV Azteca, net of
interest expense of $297 and $457,
respectively (related party)
(see note 7)........................ 3,155 5,463
Note conversion expense.............. (16,968) (16,968)
Minority interest in net (earnings)
losses of subsidiaries.............. (22) 82 (58) 79
-------- ------- --------- --------
TOTAL OTHER (EXPENSE) INCOME........... (48,421) 332 (75,713) (723)
-------- ------- --------- --------
LOSS BEFORE INCOME TAXES AND
EXTRAORDINARY LOSSES.................. (75,406) (9,804) (126,506) (20,130)
INCOME TAX BENEFIT (EXPENSE)........... 16,774 (79) 30,214 747
-------- ------- --------- --------
LOSS BEFORE EXTRAORDINARY LOSSES....... (58,632) (9,883) (96,292) (19,383)
EXTRAORDINARY LOSSES ON EXTINGUISHMENT
OF DEBT, NET OF INCOME TAX BENEFIT OF
$2,892................................ (4,338)
-------- ------- --------- --------
NET LOSS............................... $(58,632) $(9,883) $(100,630) $(19,383)
======== ======= ========= ========
BASIC AND DILUTED NET LOSS PER COMMON
SHARE AMOUNTS
Loss before extraordinary losses..... $ (0.36) $ (0.06) $ (0.60) $ (0.14)
Extraordinary losses................. (0.03)
-------- ------- --------- --------
NET LOSS............................... $ (0.36) $ (0.06) $ (0.63) $ (0.14)
======== ======= ========= ========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING........................... 161,021 155,604 158,768 143,503
======== ======= ========= ========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS--Unaudited
(In Thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------
2000 1999
---------- ---------
<S> <C> <C>
CASH FLOWS (USED FOR) PROVIDED BY OPERATING ACTIVITIES.. $ (42,708) $ 25,844
---------- ---------
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Payments for purchase of property and equipment and
construction activities.............................. (196,151) (111,943)
Payments for acquisitions, net of cash acquired....... (1,005,206) (162,151)
Advances of notes receivable.......................... (70,711) (5,421)
Repayment of notes receivable......................... 2,099 24
Deposits and other long-term assets................... (19,319) (21,296)
---------- ---------
Cash used for investing activities...................... (1,289,288) (300,787)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit facilities.................... 1,377,500
Proceeds from convertible notes offering.............. 450,000
Repayment of notes payable and credit facilities...... (495,829) (142,185)
Net proceeds from equity offerings and stock options.. 531,054 634,336
Cash payments from (to) CBS Corporation............... 7,592 (50,000)
Distributions to minority interest.................... (162) (162)
Deferred financing costs.............................. (44,613)
---------- ---------
Cash provided by financing activities................... 1,825,542 441,989
---------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS............... 493,546 167,046
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.......... 25,212 186,175
---------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD................ $ 518,758 $ 353,221
========== =========
CASH PAID FOR INCOME TAXES.............................. $ 1,271 $ 574
========== =========
CASH PAID FOR INTEREST.................................. $ 45,664 $ 12,493
========== =========
NON-CASH TRANSACTIONS:
Issuance of common stock, warrants and assumption of
options for acquisitions............................. $ 119,197 $ 448,037
Increase in due to CBS Corporation from estimated
remaining tax liabilities............................ $ $ 1,121
Treasury stock transactions........................... $ 2,752 $ 1,528
Note conversion transaction........................... $ 153,368
TV Azteca transaction................................. $ 25,819
Capital leases........................................ $ 3,448
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--Unaudited
1. Basis of Presentation and Accounting Policies
The accompanying condensed consolidated financial statements have been
prepared by American Tower Corporation (the Company or American Tower) without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission (SEC). The financial information included herein is unaudited;
however, the Company believes such information and the disclosures are
adequate to make the information presented not misleading. In addition, the
Company believes such information reflects all adjustments (consisting only of
normal recurring adjustments) that are necessary for a fair presentation of
financial position and results of operations for the periods presented.
Results of interim periods may not be indicative of results for the full year.
These condensed consolidated financial statements and related notes should be
read in conjunction with the Company's 1999 Annual Report on Form 10-K filed
with the SEC on March 29, 2000 and quarterly report on Form 10-Q for the three
months ended March 31, 2000 filed on May 15, 2000.
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 condensed consolidated
financial statements and accompanying notes. Actual results may differ from
those estimates, and such differences could be material to the accompanying
condensed consolidated financial statements.
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 outstanding during the period, if
any. In computing diluted per share amounts, the Company uses the treasury
stock method, whereby unexercised options and warrants 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 issuable upon exercise of options, warrants and
other dilutive securities have been excluded from the computation of diluted
income or loss per common share as the effect is anti-dilutive. Had options,
warrants and other dilutive securities been included in the computation,
shares for the diluted computation would have increased by approximately 42.3
million and 5.4 million for the three months ended June 30, 2000 and 1999,
respectively, and 41.6 million and 4.3 million for the six months ended June
30, 2000 and 1999, respectively.
Recent Accounting Pronouncement--In June 1998, the Financial Accounting
Standards Board (FASB) issued 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.
The SEC has issued Staff Accounting Bulletin (SAB) No. 101 "Revenue
Recognition," which provides the SEC staff's views in applying generally
accepted accounting principles to selected revenue recognition issues. SAB No.
101 will be effective for the Company on October 1, 2000. The Company does not
believe the adoption of SAB No. 101 will be material to its consolidated
financial statements.
Reclassifications--Certain reclassifications have been made to the 1999
condensed consolidated financial statements to conform to the 2000
presentation.
4
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--Unaudited--(Continued)
2. Income Taxes
The Company provides for income taxes at the end of each interim period
based on the estimated effective tax rate for the full fiscal year. Cumulative
adjustments to the Company's estimate are recorded in the interim period in
which a change in the estimated annual effective rate is determined.
3. 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 are as follows (in thousands):
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
------------- -----------------
<S> <C> <C>
Raw materials................................... $10,266 $ 859
Work in process................................. 525 303
Finished goods.................................. 16,372 10,100
------- -------
Total......................................... $27,163 $11,262
======= =======
</TABLE>
4. Acquisitions
General--The acquisitions consummated during the six month period ended June
30, 2000 have been accounted for by the purchase method of accounting. The
purchase prices have been allocated to the net assets acquired, principally
intangible and tangible 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 condensed
consolidated financial statements reflect the preliminary allocation of
purchase prices as the appraisals of assets acquired has 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 Company's consolidated
results of operations.
During the six month period ended June 30, 2000, the Company acquired
various communication sites and related businesses for an aggregate
preliminary purchase price of approximately $1.3 billion. The total purchase
price includes the payment of $1.0 billion in cash, the issuance of 2.4
million shares of Class A common stock and the assumption of $59.3 million of
debt. Significant transactions consummated during this period include the
following:
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 five-year
warrants to purchase 3.0 million shares of Class A common stock at $22.00 per
share. At the first five closings in the first and second quarters of 2000,
the Company leased 1,600 towers, paid AirTouch $609.5 million in cash and
issued warrants for 3.0 million shares of Class A common stock. It is expected
that the Company will not close on approximately 150 of the towers included in
the initial agreement. The remaining closings are expected to occur in the
third and fourth quarters of 2000 as the initial term of the agreement was
extended through October 2000.
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. At the four closings in the first and second quarters of 2000, the
Company acquired 1,910 towers and paid AT&T $258.0 million. It is expected
that the Company will close on any remaining towers in the third quarter of
2000.
5
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--Unaudited--(Continued)
Management estimates that a portion of the towers acquired in the AT&T
transaction will not be marketable for wireless co-location. Accordingly, the
Company has committed to a plan to dispose of these towers, which is in the
process of being finalized. Based on the preliminary information accumulated
to date, the Company estimates that the cost to dispose of these towers will
approximate $11.0 million, and has recorded this as a purchase price
adjustment and a current liability in the accompanying June 30, 2000
consolidated balance sheet. The plan is expected to be finalized in the third
quarter 2000.
UNIsite merger--In January 2000, the Company consummated its merger with
UNIsite, Inc. (UNIsite). The purchase price was approximately $196.4 million,
which included a payment of $147.7 million in cash and the assumption of $48.7
million of debt. 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 recognized an
extraordinary loss of $1.3 million (net of an income tax benefit of
$1.0 million) from the extinguishment of this debt in the first quarter of
2000.
USEI merger--In June 2000, the Company consummated its merger with U.S.
Electrodynamics, Inc. (USEI). The purchase price consisted of approximately
1.1 million shares of Class A common stock and $25.7 million in cash. The
acquisition involved around-the-clock teleport facilities in the Pacific
Northwest, the Southwest and the Northeast with a total of 52 antennas that
access satellites covering the continental United States and Pacific ocean
region.
General Telecom acquisition--In June 2000, the Company consummated the stock
purchase of General Telecom, Inc. (General Telecom). The purchase price
consisted of $28.5 million in cash and is subject to adjustment based on the
net working capital of General Telecom at closing. The Company's acquisition
of General Telecom provides it with independent partition voice switching
capabilities and network management services at three major voice
communications gateways in New York, Miami and Los Angeles.
The following unaudited pro forma summary for the six months ended June 30,
2000 and 1999 presents the condensed consolidated results of operations as if
all of the 2000 acquisitions had occurred as of January 1, 1999 after giving
effect to certain adjustments, including depreciation and amortization of
assets and interest expense on any 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, 1999 or of results which may occur in
the future.
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
June 30, June 30,
2000 1999
---------- ----------
In thousands, except
per share data:
<S> <C> <C>
Revenues............................................ $ 332,726 $196,798
Net loss before extraordinary losses................ $(110,805) $(67,009)
Net loss............................................ $(115,143) $(67,009)
Basic and diluted loss per common share before
extraordinary losses............................... $ (0.69) $ (0.46)
Basic and diluted loss per common share............. $ (0.72) $ (0.46)
</TABLE>
Since July 1, 2000, the Company has consummated several acquisitions for an
aggregate preliminary purchase price of approximately $69.3 million.
In addition, the Company is also party to various agreements, including the
remaining portions of the AirTouch and AT&T transactions, relating to the
acquisition of assets and businesses from third parties for an estimated
aggregate cost of approximately $143.9 million. Such transactions are subject
to the satisfaction of customary closing conditions, which are expected to be
met in the third and fourth quarters of 2000.
6
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--Unaudited--(Continued)
Other transactions--In July 2000, the Company was awarded a contract by AT&T
Wireless Services, Inc. to provide turnkey services for its fixed wireless
digital broadband network deployment in key markets throughout the United
States. The Company has already begun work in several markets and has been
given notice to proceed with network deployment on approximately 1,500 sites.
Deployment for these sites is expected to be completed by the end of 2001.
Under the Agreement, additional markets may be added over the next two years.
The Company is also pursuing the acquisition of other properties and
businesses in new and existing locations, although no definitive material
agreements have been agreed to with respect to any such acquisitions.
5. Business Segments
The Company operates in three business segments: rental and management (RM),
services (Services), and Internet, voice, data and video transmission services
(IVDV). The RM segment provides for 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 both domestic and
international satellite and Internet protocol network transmission services to
Internet, voice and data providers, as well as television networks,
broadcasters, cable programmers, major cruise lines and the U.S. military.
The accounting policies applied in compiling segment information below are
similar to those described in the Company's 1999 Annual Report on Form 10-K.
In evaluating financial performance, management focuses on operating profit
(loss), excluding depreciation and amortization, development and corporate
general and administrative expenses. This measure of operating profit (loss)
is also before interest income and other, net, interest income, TV Azteca,
interest expense, minority interest in net earnings of subsidiaries, income
taxes and extraordinary losses.
The Company's reportable segments are strategic business units that offer
different services. They are managed separately because each segment requires
different resources and marketing strategies. In addition, all reported
segment revenues are generated from external customers.
Summarized financial information concerning the Company's reportable
segments as of and for the three and six months ended June 30, 2000 and 1999,
is shown in the following table (in thousands). The "Other" column below
represents amounts excluded from specific segments such as income taxes,
extraordinary losses, corporate general and administrative expense,
development expense, depreciation and amortization and interest. In addition,
"Other" 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.
<TABLE>
<CAPTION>
Three Months Ended June
30, RM Services IVDV Other Total
-------------------------- ---------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
2000
Revenues................ $ 63,233 $ 74,026 $ 29,788 $ 167,047
Operating profit
(loss)................. 31,943 8,899 6,546 $ (106,020) (58,632)
Assets.................. 3,144,124 522,926 307,161 1,114,133 5,088,344
1999
Revenues................ $ 31,356 $ 21,412 $ 6,385 $ 59,153
Operating profit (loss)
....................... 17,576 6,116 1,892 $ (35,467) (9,883)
Assets.................. 1,383,770 497,429 77,733 559,644 2,518,576
</TABLE>
7
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--Unaudited--(Continued)
<TABLE>
<CAPTION>
Six Months Ended June 30, RM Services IVDV Other Total
----------------------------- ---------- -------- -------- --------- ----------
<S> <C> <C> <C> <C> <C>
2000
Revenues................... $ 116,940 $112,178 $ 53,446 $ 282,564
Operating profit (loss).... 57,158 14,851 11,188 $(183,827) (100,630)
Assets..................... 3,144,124 522,926 307,161 1,114,133 5,088,344
<CAPTION>
1999
<S> <C> <C> <C> <C> <C>
Revenues................... $ 56,872 $ 32,238 $ 12,451 $ 101,561
Operating profit (loss).... 31,500 7,704 3,827 $ (62,414) (19,383)
Assets..................... 1,383,770 497,429 77,733 559,644 2,518,576
</TABLE>
6. Financing Transactions
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 through 2007 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 LIBOR 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% above 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 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.
Convertible Note Issue--In February 2000, the Company completed a private
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 by the holders 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 New Credit Facilities. The
remaining proceeds were used to finance acquisitions and construction.
8
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--Unaudited--(Continued)
Convertible Notes Exchanges--In October 1999, the Company 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.
During the second quarter of 2000, the Company acquired an aggregate of $87.3
million of its 6.25% convertible notes and $73.1 million of its 2.25%
convertible notes for an aggregate of 5,724,184 shares of Class A common
stock. As an inducement to the noteholders to convert all or a portion of
their holdings, the Company issued an aggregate of 402,416 shares of Class A
common stock to such holders in addition to the amounts issuable upon
conversion of those notes as provided in the applicable indentures. The
Company made these exchanges pursuant to negotiated transactions with a
limited number of noteholders. As a consequence of those exchanges, the
Company recorded note conversion expense of approximately $17.0 million during
the second quarter of 2000 which represents the fair value of incremental
stock issued to noteholders to induce them to convert their holdings prior to
the first scheduled redemption date. The Company may negotiate similar
exchanges from time to time in the future, subject to favorable market
conditions.
June Stock Offering--In June 2000, the Company completed a public offering of
12,500,000 shares of its Class A common stock, $.01 par value per share at
$41.125 per share. The Company's net proceeds of the offering (after deduction
of the offering expenses) were approximately $513.6 million. The Company used
a portion of such proceeds on an interim basis to reduce borrowings under the
new credit facility and will use such proceeds in the long-term to finance the
construction of towers and acquisitions, as well as for general working
capital purposes. Certain selling stockholders also sold an additional
1,182,000 shares in the offering of which the Company did not receive any
proceeds.
7. Note Receivable--TV Azteca (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 which earns interest
at 12.87%, payable quarterly, has been discounted by the Company, as the fair
value of the interest rate has been preliminarily determined to be 14.25%. As
of June 30, 2000 approximately $119.8 million undiscounted ($108.9 million
discounted) of the loan was outstanding. The Company also assumed marketing
responsibility for approximately 190 broadcasting towers owned by TV Azteca.
Under the terms of the marketing agreement, the Company is entitled to receive
100% of the revenues generated by third party leases and is 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.
An executive officer and director of the Company also became a director of
TV Azteca in December 1999.
9
<PAGE>
ITEM 2. 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 the Company's results and could cause
the Company's 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.
The Company is 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 and components for
wireless service providers and broadcasters.
. We are a leading provider of domestic and international satellite and
Internet protocol network transmission services worldwide.
During the six month period ended June 30, 2000, we acquired various
communications sites, related businesses and teleports (and related
businesses) for an aggregate preliminary purchase price of approximately $1.3
billion. Management expects that acquisitions consummated to date will have a
material impact on future revenues, expenses and income from operations.
Results of Operations
As of June 30, 2000, the Company owned and/or operated approximately 9,500
communications sites, as compared to approximately 3,600 communications sites
as of June 30, 1999. The acquisitions consummated in 2000 and 1999 have
significantly affected operations for the three and six months ended June 30,
2000, as compared to the three and six months ended June 30, 1999. See the
notes to the condensed consolidated financial statements and the Company's
Annual Report on Form 10-K for a description of the acquisitions consummated
in 2000 and 1999.
10
<PAGE>
Three Months Ended June 30, 2000 and 1999 (dollars in thousands)--Unaudited
<TABLE>
<CAPTION>
Three Months Ended
June 30, Amount of Percentage
-------------------- Increase Increase
2000 1999 (Decrease) (Decrease)
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Rental and management............... $ 63,233 $ 31,356 $ 31,877 102%
Services............................ 74,026 21,412 52,614 246%
Internet, voice, data and video
transmission services.............. 29,788 6,385 23,403 367%
--------- -------- ---------
Total revenues...................... 167,047 59,153 107,894 182%
--------- -------- ---------
Operating Expenses:
Rental and management............... 31,290 13,780 17,510 127%
Services............................ 65,127 15,296 49,831 326%
Internet, voice, data and video
transmission services.............. 23,242 4,493 18,749 417%
--------- -------- ---------
Total operating expenses excluding
depreciation and amortization,
development and corporate general
and administrative expenses........ 119,659 33,569 86,090 256%
--------- -------- ---------
Depreciation and amortization....... 67,093 33,139 33,954 102%
Development expense................. 4,196 290 3,906 1,347%
Corporate general and administrative
expense............................ 3,084 2,291 793 35%
Interest expense.................... 38,437 5,538 32,899 594%
Interest income and other, net...... 3,851 5,788 (1,937) (33)%
Interest income, TV Azteca, net of
$297 of interest expense
(related party).................... 3,155 3,155 N/A
Note conversion expense............. 16,968 16,968 N/A
Minority interest in net (earnings)
losses of subsidiaries............. (22) 82 (104) (127)%
Income tax benefit (expense)........ 16,774 (79) 16,853 21,333%
--------- -------- ---------
Net loss............................ $ (58,632) $ (9,883) $ (48,749) 493%
========= ======== =========
</TABLE>
Rental and Management Revenue
Rental and management revenue for the three months ended June 30, 2000, was
$63.2 million, an increase of $31.9 million from the three months ended June
30, 1999. The majority of the increase is attributable to revenue generated
from tower acquisitions consummated and towers constructed subsequent to June
30, 1999. The remaining factor contributing to the increase is an increase in
comparable tower revenue in the second quarter 2000 for towers that existed as
of June 30, 1999.
Services Revenue
Services revenue for the three months ended June 30, 2000 was $74.0 million,
an increase of $52.6 million from the three months ended June 30, 1999. The
primary reasons for the increase are revenue generated from acquisitions
consummated in 2000 of approximately $22.8 million coupled with an increase in
revenue of approximately $29.8 million generated from our own turn-key
services business that existed as of June 30, 1999.
Internet, Voice, Data and Video Transmission Revenue
Internet, voice, data and video transmission (IVDV) revenue for the three
months ended June 30, 2000 was $29.8 million, an increase of $23.4 million
from the three months ended June 30, 1999. The primary reason for the increase
is attributed to revenue of $20.5 million generated from acquisitions
consummated subsequent to June 30, 1999. The remaining component of the
increase, $2.9 million, is due to growth in the overall IVDV business existing
at June 30, 1999.
Rental and Management Expense
Rental and management expense for the three months ended June 30, 2000 was
$31.3 million, an increase of $17.5 million from the three months ended June
30, 1999. The majority of the increase is attributable to
11
<PAGE>
expenses from towers acquired or constructed subsequent to June 30, 1999. The
remaining factor contributing to the increase is an increase in comparable
tower expenses in the second quarter 2000 for towers that existed as of June
30, 1999.
Services Expense
Services expense for the three months ended June 30, 2000 was $65.1 million,
an increase of $49.8 million from the three months ended June 30, 1999.
Approximately $18.8 million of the increase is due to acquisitions consummated
in 2000. The remaining component of the increase is attributable to growth in
the turn-key services business that existed as of June 30, 1999. The decline
in margins of the services business as a whole were due to the acquisition of
a lower margin business during 2000 coupled with additional expenses incurred
to shift the focus of the Company's construction division from tower
construction to antennae installation.
IVDV Expenses
IVDV expenses for the three months ended June 30, 2000 were $23.2 million,
an increase of $18.7 million from the three months ended June 30, 1999.
Approximately $15.0 million of the increase is attributable to acquisitions
consummated in 2000. The remaining component of the increase is due to the
growth in the overall IVDV business existing at June 30, 1999.
Depreciation and Amortization
Depreciation and amortization for the three months ended June 30, 2000 was
$67.1 million, an increase of $34.0 million from the three months ended June
30, 1999. A component of the increase is attributable to an increase in
depreciation expense of $12.7 million. This is a direct result of the
Company's construction and acquisition of approximately $1.1 billion of
property and equipment from July 1, 1999 to June 30, 2000. The other component
of the increase is attributable to an increase in amortization expense of
$21.3 million, resulting from the Company's recording and amortizing of
approximately $1.1 billion of goodwill and other intangible assets related to
acquisitions consummated from July 1, 1999 to June 30, 2000.
Development Expense
Development expense for the three months ended June 30, 2000 was $4.2
million, an increase of $3.9 million from the three months ended June 30,
1999. The majority of the increase, $2.6 million, represents integration and
related expenses related to acquisitions consummated from July 1, 1999 to June
30, 2000. The remainder of the increase, $1.3 million, represents costs
related to tower site inspections and related data gathering, and to a lesser
extent abandoned acquisitions. It is expected that the Company will continue
to incur these expenses as it implements its growth strategy.
Corporate General and Administrative Expenses
Corporate general and administrative expenses for the three months ended
June 30, 2000 were $3.1 million, an increase of $0.8 million from the three
months ended June 30, 1999. The majority of the increase is a result of higher
personnel and marketing costs associated with supporting the Company's
increasing number of towers, the growth of its other businesses, expanding
revenue base, and growth strategy.
Interest Expense
Interest expense for the three months ended June 30, 2000 was $38.4 million,
an increase of $32.9 million from the three months ended June 30, 1999. The
increase is attributable to an increase in interest expense incurred on the
Company's credit facilities of $17.8 million, convertible notes of $14.2
million, other notes payable of $1.0 million and an increase in deferred
financing amortization of $1.6 million. These increases were offset by an
increase in capitalized interest related to construction projects of
$1.7 million.
12
<PAGE>
Interest Income and Other, Net
Interest income and other, net for the three months ended June 30, 2000, was
$3.9 million, a decrease of $1.9 million from the three months ended June 30,
1999. The decrease is primarily attributable to a decrease in interest earned
on invested cash on hand of approximately $2.9 million, offset by an increase
in interest earned on deposits for acquisitions and advances to acquirees of
$1.0 million.
Interest Income-TV Azteca, Net
Interest income TV Azteca, net for the three months ended June 30, 2000 was
$3.2 million. Amounts included within this caption represent interest earned
on the Company's notes receivable from TV Azteca of $3.5 million offset by
interest expense of $0.3 million. An officer and director of the Company
became a director of TV Azteca in December 1999.
Note Conversion Expense
During the three month period ended June 30, 2000, the Company acquired a
portion of its 6.25% and 2.25% convertible notes in exchange for shares of
Class A common stock. As a consequence of those negotiated exchanges with
certain of its noteholders, the Company recorded note conversion expense of
$17.0 million during the second quarter of 2000, which represents the fair
value of incremental stock issued to noteholders to induce them to convert
their holdings prior to the first scheduled redemption date.
Income Tax Benefit
The income tax benefit for the three months ended June 30, 2000 was $16.8
million, an increase of $16.9 million from the three months ended June 30,
1999. The primary reason for the increase is a result of the Company's
increase in its loss before income taxes and extraordinary losses offset by an
increase in amortization of non-deductible goodwill arising from stock
acquisitions consummated in the six month period ended June 30, 2000 and the
year ended 1999. The effective tax rate differs in both periods from the
statutory rate due to the effect of non-deductible items, principally the
amortization of goodwill on certain stock acquisitions and for the three
months ended June 30, 2000, the non-deductible note conversion expense for
which the Company has recorded no tax benefit.
In assessing the realizability of the deferred tax asset, the Company
analyzed its 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.
13
<PAGE>
Six Months ended June 30, 2000 and 1999 (Dollars in thousands)--Unaudited
<TABLE>
<CAPTION>
Six Months Ended Amount of Percentage
------------------- --------- ----------
Increase Increase
June 30, (Decrease) (Decrease)
------------------- ---------- ----------
2000 1999
---- ----
<S> <C> <C> <C> <C>
Revenues:
Rental and management............... $ 116,940 $ 56,872 $ 60,068 106 %
Services............................ 112,178 32,238 79,940 248 %
Internet, voice, data and video
transmission services.............. 53,446 12,451 40,995 329 %
--------- -------- --------
Total revenues...................... 282,564 101,561 181,003 178 %
--------- -------- --------
Operating Expenses:
Rental and management............... 59,782 25,372 34,410 136 %
Services............................ 97,327 24,534 72,793 297 %
Internet, voice, data and video
transmission services.............. 42,258 8,624 33,634 390 %
--------- -------- --------
Total operating expenses excluding
depreciation and amortization,
development, and corporate general
and administrative expenses........ 199,367 58,530 140,837 241 %
--------- -------- --------
Depreciation and amortization....... 122,291 57,808 64,483 112 %
Development expense................. 5,184 557 4,627 831 %
Corporate general and administrative
expense............................ 6,515 4,073 2,442 60 %
Interest expense.................... 70,587 11,539 59,048 512 %
Interest income and other, net...... 6,437 10,737 (4,300) (40)%
Interest income, TV Azteca, net of
$457 of interest expense (related
party)............................. 5,463 5,463 N/A
Note conversion expense............. 16,968 16,968 N/A
Minority interest in net (earnings)
losses of subsidiaries............. (58) 79 (137) (173)%
Income tax benefit.................. 30,214 747 29,467 3,945 %
Extraordinary losses on
extinguishment of debt............. 4,338 4,338 N/A
--------- -------- --------
Net loss............................ $(100,630) $(19,383) $ 81,247 419 %
========= ======== ========
</TABLE>
Rental and Management Revenue
Rental and management revenue for the six months ended June 30, 2000, was
$116.9 million, an increase of $60.1 million from the six months ended June
30, 1999. The majority of the increase is attributable to revenue generated
from tower acquisitions consummated and towers constructed subsequent to
June 30, 1999. The remaining factor contributing to the additional revenue is
an increase in comparable tower revenue in the six month period ended June 30,
2000 for towers that existed as of June 30, 1999.
Services Revenue
Services revenue for the six months ended June 30, 2000, was $112.2 million,
an increase of $80.0 million from revenues for the six months ended June 30,
1999. The primary reasons for the increase are revenues generated from
acquisitions consummated in 2000 of approximately $27.5 million coupled with
an increase in revenue of $52.5 million generated from our turn-key services
business that existed as of June 30, 1999.
Internet, Voice, Data and Video Transmission Revenue
IVDV revenue for the six months ended June 30, 2000, was $53.4 million, an
increase of $41.0 million from revenues for the six months ended June 30,
1999. The primary reason for the increase is attributed to revenue of $36.2
million generated from acquisitions consummated subsequent to June 30, 1999.
The remaining component of the increase, $4.8 million, is due to growth in the
overall IVDV business existing at June 30, 1999.
14
<PAGE>
Rental and Management Expense
Rental and management expense for the six months ended June 30, 2000 was
$59.8 million, an increase of $34.4 million from the six months ended June 30,
1999. The majority of the increase is attributable to expenses from towers
acquired or constructed subsequent to June 30, 1999. The remaining factor
contributing to the increase is an increase in comparable tower expenses in
the six month period ended June 30, 2000 for towers that existed as of June
30, 1999.
Services Expense
Services expense for the six months ended June 30, 2000 was $97.3 million,
an increase of $72.8 million from the six months ended June 30, 1999.
Approximately $22.4 million of the increase is due to acquisitions consummated
in 2000. The remaining component of the increase is attributable to growth in
the turn-key services business that existed as of June 30, 1999. The decline
in margins of the services business as a whole were due to the acquisition of
a lower margin business during 2000, coupled with additional expenses incurred
to shift the focus of the Company's construction division from tower
construction to antennae installation.
IVDV Expenses
IVDV expenses for the six months ended June 30, 2000 were $42.3 million, an
increase of $33.6 million from the six months ended June 30, 1999.
Approximately $26.3 million of the increase is attributable to acquisitions
consummated in 2000. The remaining component of the increase is due to the
growth in the overall IVDV business existing at June 30, 1999.
Depreciation and Amortization
Depreciation and amortization for the six months ended June 30, 2000, was
$122.3 million, an increase of $64.5 million from the six months ended June
30, 1999. A component of the increase is attributable to an increase in
depreciation expense of $30.0 million. This is a direct result of the
Company's purchase, construction and acquisition of approximately $1.1 billion
of property and equipment from July 1, 1999 to June 30, 2000. The remaining
component of the increase is attributable to an increase in amortization of
$34.5 million, resulting from the Company's recording and amortizing of
approximately $1.1 billion of goodwill and other intangible assets related to
acquisitions consummated from July 1, 1999 to June 30, 2000.
Development Expense
Development expense for the six months ended June 30, 2000 was $5.2 million,
an increase of $4.6 million from the six months ended June 30, 1999. The
majority of the increase, $3.0 million, represents integration and related
expenses related to acquisitions consummated from July 1, 1999 to June 30,
2000. The remaining component of the increase, $1.6 million represents costs
related to tower site inspections and related data gathering, and to a lesser
extent abandoned acquisitions. It is expected that the Company will continue
to incur these expenses as it implements its growth strategy.
Corporate General and Administrative Expense
Corporate general and administrative expense for the six months ended June
30, 2000, was $6.5 million, an increase of $2.4 million from the six months
ended June 30, 1999. The majority of the increase is a result of higher
personnel and marketing costs associated with supporting the Company's
increasing number of towers, the growth of its other businesses, expanding
revenue base and growth strategy.
Interest Expense
Interest expense for the six months ended June 30, 2000, was $70.6 million,
an increase of $59.1 million from the six months ended June 30, 1999. The net
increase is attributable to an increase in the amount of interest
15
<PAGE>
incurred on the Company's credit facilities of $31.0 million, convertible
notes of $26.3 million, other notes payable of $3.1 million and an increase in
deferred financing amortization of $3.0 million. These increases were offset
by an increase in capitalized interest related to construction projects of
$4.3 million.
Interest Income and Other, Net
Interest income and other, net for the six months ended June 30, 2000, was
$6.4 million, a decrease of $4.3 million from the six months ended June 30,
1999. The decrease is primarily attributable to a decrease in interest earned
on invested cash on hand of approximately $6.3 million, offset by an increase
in interest earned on deposits for acquisitions and advances to acquirees of
$2.0 million.
Interest Income-TV Azteca, Net
Interest income TV Azteca, net for the six months ended June 30, 2000 was
$5.5 million. Amounts included within this caption represent interest earned
on the Company's notes receivable from TV Azteca of $6.0 million offset by
interest expense of $0.5 million. An officer and director of the Company
became a director of TV Azteca in December 1999.
Note Conversion Expense
During the six months ended June 30, 2000, the Company acquired a portion of
its 6.25% and 2.25% convertible notes in exchange for shares of Class A common
stock. As a consequence of those negotiated exchanges with certain of its
noteholders, the Company recorded note conversion expense of $17.0 million
during the second quarter of 2000, which represents the fair value of
incremental stock issued to noteholders to induce them to convert their
holdings prior to the first scheduled redemption date.
Income Tax Benefit
The income tax benefit for the six months ended June 30, 2000 was $30.2
million, an increase of $29.5 million from the six months ended June 30, 1999.
The primary reason for the increase is a result of the Company's increase in
its loss before income taxes and extraordinary losses offset by an increase in
amortization of non-deductible goodwill arising from stock acquisitions
consummated in the six month period ended June 30, 2000 and the year ended
1999. The effective tax rate differs in both periods from the statutory rate
due to the effect of non-deductible items, principally the amortization of
goodwill on certain stock acquisitions and for the six months ended June 30,
2000, the non deductible note conversion expense on which the Company has
recorded no tax benefit.
In assessing the realizability of the deferred tax asset, the Company
analyzed its 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 Loss on Extinguishment of Debt
The Company incurred extraordinary losses on the extinguishment of debt, net
in the first quarter 2000 of $4.3 million. The losses were incurred as a
result of an amendment and restatement of our primary credit facility ($3.0
million, net of a tax benefit of $2.0 million) and the Company's early
retirement of debt assumed as part of the UNIsite, Inc. merger ($1.3 million,
net of a tax benefit of $1.0 million).
Liquidity and Capital Resources
For the six months ended June 30, 2000, cash flows used for operating
activities were $42.7 million, as compared to cash flows provided for
operating activities of $25.8 million for the six months ended June 30, 1999.
The primary reason for the decrease is due to the paydown of current
liabilities assumed through acquisition coupled with an increase in other
current assets.
16
<PAGE>
For the six months ended June 30, 2000, cash flows used for investing
activities were $1.3 billion, as compared to $300.8 million for the six months
ended June 30, 1999. The increase in 2000 is primarily due to an increase in
cash expended for mergers and acquisitions of approximately $843.0 million, an
increase in property and equipment expenditures of approximately $85.0 million
and an increase in net notes receivable to acquirees of $63.0.
For the six months ended June 30, 2000, cash flows provided by financing
activities were $1.8 billion as compared to $442.0 million for the six months
ended June 30, 1999. The increase is primarily related to increased borrowings
under the Company's credit facility of $1.0 billion coupled with the issuance
of $450.0 million of convertible notes during the six month period ended June
30, 2000.
The Company's liquidity needs arise from its acquisition-related activities,
debt service, working capital and capital expenditures associated principally
with its construction program. As of June 30, 2000, the Company maintained
approximately $518.8 million in cash and cash equivalents, working capital of
approximately $534.8 million, and had approximately $400.0 million available
under its credit facilities. Historically, the Company has met its operational
liquidity needs with internally generated funds and has financed its
acquisitions and its construction program, including related working capital
needs, with a combination of capital funds from sales of its equity and debt
securities and bank borrowings.
Credit Facilities--In January 2000, the Company completed its New Credit
Facilities with its senior lenders. The New Credit Facilities increased the
borrowing capacity of the 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 through 2007 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 LIBOR 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% above 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 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 the first quarter 2000.
February 2000 Convertible Note Issue--In February 2000, the Company
completed a private placement of $450.0 million 5% Convertible 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 by the holders 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 have or will be used to finance
acquisitions and construction.
17
<PAGE>
Convertible Notes Exchanges--During 2000, the Company acquired an aggregate
of $87.3 million of its 6.25% convertible notes and $73.1 million of its 2.25%
convertible notes for an aggregate of 5,724,184 shares of Class A common
stock. As an inducement to the noteholders to convert all or a portion of
their holdings, the Company issued an aggregate of 402,416 shares of Class A
common stock to such holders in addition to the amount issuable upon
conversion of the notes as provided in the applicable indentures. The Company
made these exchanges pursuant to negotiated transactions with a limited number
of noteholders. As a consequence of those exchanges, the Company recorded note
conversion expense of $17.0 million during the second quarter of 2000. The
Company may negotiate similar exchanges from time to time in the future,
subject to favorable market conditions.
June Stock Offering--In June 2000, the Company completed a public offering
of 12,500,000 shares of its Class A common stock, $.01 par value per share at
$41.125 per share. The Company's net proceeds of the offering (after deduction
of offering expenses) were approximately $513.6 million. The Company on an
interim basis used a portion of such proceeds to reduce borrowings under its
credit facility and will use such proceeds in the long-term to finance the
construction of towers and acquisitions, as well as for general working
capital purposes. Certain selling stockholders also sold an additional
1,182,000 shares in the offering of which the Company did not receive any
proceeds.
As of June 30, 2000, the Company had approximately $2.0 billion of long-term
debt, of which $1.0 billion was outstanding under its credit facilities and
$900.0 million was outstanding in the form of convertible notes. Debt service
requires a substantial portion of the Company's cash flow from operations.
Accordingly, the Company's leverage could make it vulnerable to a downturn in
the operating performance of its operations or in economic conditions. The
Company believes that its cash flows from operations will be sufficient to
meet its debt service requirements for interest and scheduled payments of
principal under its existing credit facilities. If such cash flow were not
sufficient to meet such debt service requirements, the Company might sell
equity securities, refinance its obligations or dispose of one or more of its
properties in order to make such scheduled payments. The Company may not be
able to effect any of such transactions on favorable terms. The Company
believes that is has sufficient financial resources available to it, including
borrowings under its credit facilities, to finance operations for the
foreseeable future.
During the six months ended June 30, 2000, the Company had capital
expenditures of approximately $196.2 million primarily related to construction
activities and completed the construction of approximately 640 towers. The
Company's 2000 business plan calls for total capital expenditures of
approximately $510.0 million. Included in that plan (exclusive of broadcast
towers, but inclusive of the Company's commitment under build-to-suit
agreements) is the construction of approximately 1,500 towers for its own
account at a cost of between $244.5 million and $300.0 million. In addition,
the plan includes the construction of approximately 20 broadcast towers at an
estimated cost of $50.0 million to $70.0 million. Remaining capital
expenditures relate to enhancements in information technology, infrastructure
and structural improvements. Management believes that the Company has
sufficient funds available to finance current construction plans and pending
acquisitions.
Management expects that the consummated acquisitions and current and future
construction activities will have a material impact on liquidity. Management
believes that the acquisition activities, once integrated, will have a
favorable impact on liquidity and will offset the initial effects of the
funding requirements. Management also believes that the construction
activities may initially have an adverse effect on the future liquidity of the
Company as newly constructed towers will initially decrease overall liquidity.
However, as such sites become fully operational and achieve higher
utilization, they should generate tower cash flow, and, in the long-term,
increase liquidity.
ATC Separation--The Company continues to be obligated under the ATC
Separation agreement for certain tax liabilities to CBS Corporation and
American Radio Systems. As of June 30, 2000 no matters covered under this
indemnification have been brought to the Company's attention.
Acquisitions--As of June 30, 2000, the Company was a party to various
agreements relating to the acquisition of assets or businesses from various
third parties. See note 4 of the condensed consolidated financial statements.
18
<PAGE>
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.
The SEC has issued Staff Accounting Bulletin (SAB) No. 101 "Revenue
Recognition," which provides the SEC staff's views in applying generally
accepted accounting principles to selected revenue recognition issues. SAB No.
101 will be effective for the Company on October 1, 2000. The Company does not
believe the adoption of SAB No. 101 will be material to its consolidated
financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest rates on its
long-term debt obligations. The Company attempts to reduce these risks by
utilizing derivative financial instruments, namely interest rate caps, swaps
and floortions pursuant to Company policies. All derivative financial
instruments are for purposes other than trading.
During the three months ended June 30, 2000, the Company increased its
borrowings under its credit facilities by approximately $267.5 million. In
addition, the Company acquired an aggregate of $87.3 million of its 6.25%
convertible notes and $73.1 million of its 2.25% convertible notes for shares
of its Class A common stock. Lastly, the Company entered into several interest
rate hedge agreements with total notional amounts of $465.0 million ($185.0
million expiring in May 2002, $95.0 million expiring in July 2002, and $185.0
million expiring in May 2003).
The Company maintains a portion of its 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 the Company's
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 its financial condition or results of operations.
The Company's potential loss in future earnings over the next twelve months
as a result of a 10% increase in interest rates related to its long term debt
obligations (with variable interest rates) (using a weighted average interest
rate of 9.4% at June 30, 2000) would be approximately $10.3 million.
Except as discussed above, for the three months ended June 30, 2000, the
Company has not incurred any material changes with respect to the interest
rates, long-term debt and interest rate caps and swaps disclosed under this
section in its quarterly report on Form 10-Q for the three month period ended
March 31, 2000 and its Annual Report on Form 10-K. Accordingly, refer to those
reports for a more detailed discussion.
19
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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 its operations or liquidity.
ITEM 2. --CHANGES IN SECURITIES AND USE OF PROCEEDS.
Pursuant to an Exchange Agreement dated May 24, 2000, by and between the
Company and Bear Stearns & Company, Inc. ("Bear Stearns"), Bear Stearns
exchanged $7,000,000 aggregate principal amount of the Company's 6.25%
convertible notes due 2009 (the "6.25% Notes") for 312,543 shares of Class A
Common Stock pursuant to Section 3(a)(9) of the Securities Act of 1933, as
amended, (the "Securities Act").
Pursuant to an Exchange Agreement dated May 23, 2000, by and between the
Company and Jeffries & Company ("Jeffries"), Jeffries exchanged $2,627,000
aggregate principal amount of the Company's 6.25% Notes for 116,857 shares of
Class A Common Stock pursuant to Section 3(a)(9) of the Securities Act.
Pursuant to an Exchange Agreement dated May 23, 2000, by and between the
Company and Yield Strategies Fund II L.P. ("Yield"), Yield exchanged
$5,500,000 aggregate principal amount of the Company's 2.25% convertible notes
due 2009 (the "2.25% Notes") for 170,479 shares of Class A Common Stock
pursuant to Section 3(a)(9) of the Securities Act.
Pursuant to an Exchange Agreement dated May 23, 2000, by and between the
Company and Nomura Securities International ("Nomura"), Nomura exchanged
$2,000,000 aggregate principal amount of the Company's 6.25% Notes for 88,923
shares of Class A Common Stock pursuant to Section 3(a)(9) of the Securities
Act.
Pursuant to an Exchange Agreement dated May 23, 2000, by and between the
Company and AIG Sound Shore Holding LTD, AIG Sound Shore Opportunity Holding
LTD and AIG Sound Shore Strategic Holding Fund LTD (collectively, "AIG"), AIG
exchanged $15,000,000 aggregate principal amount of Company's 6.25% Notes for
666,869 shares of Class A Common Stock pursuant to Section 3(a)(9) of the
Securities Act.
Pursuant to an Exchange Agreement dated May 17, 2000, by and between the
Company and The Hampshire Company ("Hampshire"), Hampshire exchanged
$60,631,000 aggregate principal amount of the Company's 6.25% Notes and
$67,604,000 aggregate principal amount of the Company's 2.25% Notes for
4,770,923 shares of Class A Common Stock pursuant to Section 3(a)(9) of the
Securities Act.
ITEM 4. --SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The 2000 Annual Meeting of Stockholders was held on Thursday, May 18, 2000, to
consider and act upon the following matters, all of which were approved and
adopted. The results of the stockholder voting were as follows:
1. To elect ten (10) Directors, including two "independent" directors to be
elected by the holders of Class A Common Stock, voting separately as a
class, for the ensuing year or until their successors are elected and
qualified;
<TABLE>
<CAPTION>
Votes Cast For Votes Withheld
-------------- --------------
<S> <C> <C>
Steven B. Dodge................................ 205,013,668 299,333
Alan L. Box.................................... 204,985,428 327,573
Arnold L. Chavkin.............................. 203,186,202 2,126,799
Dean H. Eisner................................. 205,014,281 298,720
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Votes Cast For Votes Withheld
-------------- --------------
<S> <C> <C>
Jack D. Furst................................. 205,012,776 300,898
J. Michael Gearon, Jr......................... 203,821,776 1,491,225
Fred R. Lummis*............................... 129,941,813 298,598
Randall Mays.................................. 205,013,153 299,848
Thomas H. Stoner.............................. 205,010,911 302,090
Maggie Wilderotter*........................... 129,934,714 305,697
</TABLE>
--------
* In accordance with the Company's Restated Certificate of Incorporation, the
holders of Class A Common Stock, exclusive of all other stockholders, are
entitled to elect two of the Company's independent directors. Mr. Lummis
and Ms. Wilderotter were nominated as the independent directors and elected
by the holders of the Class A Common Stock.
2. To approve an amendment to the Company's 1997 Stock Option Plan, as amended
and restated, to increase the number of shares of the Company's Class A
Common Stock for which options may be granted from 15,000,000 to
24,000,000.
<TABLE>
<CAPTION>
Votes Votes Broker
Votes Cast For Against Withheld Non-Votes
-------------- ---------- -------- ----------
<S> <C> <C> <C>
149,239,790 40,809,745 277,616 14,985,850
</TABLE>
3. To approve the stock option plan of the Company's wholly-owned subsidiary,
ATC Teleports, Inc., pursuant to which options to purchase shares of common
stock of that subsidiary may be granted.
<TABLE>
<CAPTION>
Votes Votes Broker
Votes Cast For Against Withheld Non-Votes
-------------- ---------- -------- ----------
<S> <C> <C> <C>
172,951,403 16,922,744 453,004 14,985,850
</TABLE>
4. To approve the stock option plan of the Company's wholly-owned subsidiary,
Kline Iron & Steel Co., Inc., pursuant to which options to purchase shares
of common stock of the subsidiary may be granted.
<TABLE>
<CAPTION>
Votes Votes Broker
Votes Cast For Against Withheld Non-Votes
-------------- --------- -------- ----------
<S> <C> <C> <C>
182,193,618 7,670,303 463,230 14,985,850
</TABLE>
5. To approve the adoption of the American Tower Corporation 2000 Employee
Stock Purchase Plan.
<TABLE>
<CAPTION>
Votes Votes Broker
Votes Cast For Against Withheld Non-Votes
-------------- --------- -------- ----------
<S> <C> <C> <C>
188,604,789 1,408,091 294,833 14,985,850
</TABLE>
6. To ratify the selection by the Board of Directors of Deloitte & Touche LLP
as the Company's independent auditors for 2000.
<TABLE>
<CAPTION>
Votes Votes Broker
Votes Cast For Against Withheld Non-Votes
-------------- ------- -------- ---------
<S> <C> <C> <C>
205,624,227 48,620 59,592 0
</TABLE>
21
<PAGE>
ITEM 6.--EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
Listed below are the exhibits which are filed as part of this Form 10-Q
(according to the number assigned to them in Item 601 of Regulation S-K).
<TABLE>
<CAPTION>
Exhibit
No. Description of Document Exhibit File No.
------- ----------------------- ----------------
<S> <C> <C>
3(i) Restated Certificate of Incorporation, as amended, of the
Company as filed with the Secretary of State of the State
of Delaware on June 4, 1999.............................. Incorporated by reference to
Exhibit 3(i) from Company's
Quarterly Report on Form 10-Q
(File No. 001-14195) filed on
August 16, 1999.
3(ii) Bylaws, as amended, of the Company....................... Incorporated by reference to Exhibit 3.2
from Company's Registration Statement
on Form S-3 (File No. 333-37988) filed
on May 26, 2000.
27 Financial Data Schedule.................................. Filed herewith as Exhibit 27
</TABLE>
(b) Reports on Form 8-K.
1. Form 8-K (Items 2 and 7) filed on April 13, 2000.
2. Form 8-K (Item 7) filed on May 15, 2000.
3. Form 8-K (Items 2 and 7) filed on May 23, 2000.
4. Form 8-K (Items 2 and 7) filed on June 12, 2000.
5. Form 8-K (Items 2, 5 and 7) filed on June 23, 2000.
6. Form 8-K (Item 5) filed on June 29, 2000.
22
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
American Tower Corporation
By: /s/ Joseph L. Winn
Date: August 14, 2000 ----------------------------------
Joseph L. Winn
Treasurer & Chief Financial
Officer
(Duly Authorized Officer)
Date: August 14, 2000 By: /s/ Justin D. Benincasa
----------------------------------
Justin D. Benincasa
Vice President & Corporate
Controller
(Duly Authorized Officer)
