Acquisitions | 6 Months Ended |
Jun. 30, 2014 |
Business Combination, Description [Abstract] | ' |
Acquisitions | ' |
Acquisitions |
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All of the acquisitions described below are accounted for as business combinations and are consistent with the Company’s strategy to expand in selected geographic areas. |
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The estimates of the fair value of the assets acquired and liabilities assumed at the date of the applicable acquisition are subject to adjustment during the measurement period (up to one year from the particular acquisition date). The primary areas of the preliminary purchase price allocations that are not yet finalized relate to the fair value of certain tangible and intangible assets acquired and liabilities assumed, including contingent consideration, and residual goodwill and any related tax impact. The fair value of these net assets acquired are based on management’s estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. While the Company believes that such preliminary estimates provide a reasonable basis for estimating the fair value of assets acquired and liabilities assumed, it will evaluate any necessary information prior to finalization of the fair value. During the measurement period, the Company will adjust assets or liabilities if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the revised estimated values of those assets or liabilities as of that date. The effect of measurement period adjustments to the estimated fair values is reflected as if the adjustments had been completed on the acquisition date. The impact of all changes that do not qualify as measurement period adjustments are included in current period earnings. If the actual results differ from the estimates and judgments used in these fair values, the amounts recorded in the condensed consolidated financial statements could be subject to a possible impairment of the intangible assets or goodwill, or require acceleration of the amortization expense of intangible assets in subsequent periods. During the six months ended June 30, 2014, the Company made certain purchase accounting measurement period adjustments related to several acquisitions and therefore retrospectively adjusted the fair value of the assets acquired and liabilities assumed in the condensed consolidated balance sheet as of December 31, 2013. |
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Impact of current year acquisitions—The Company typically acquires communications sites from wireless carriers or other tower operators and subsequently integrates those sites into its existing portfolio of communications sites. The financial results of the Company’s acquisitions have been included in the Company’s condensed consolidated statements of operations for the three and six months ended June 30, 2014 from the date of respective acquisition. The date of acquisition, and by extension the point at which the Company begins to recognize the results of an acquisition may be dependent upon, among other things, the receipt of contractual consents, the commencement and extent of leasing arrangements and the timing of the transfer of title or rights to the assets, which may be accomplished in phases. For sites acquired from communications service providers, these sites may never have been operated as a business and were utilized solely by the seller as a component of their network infrastructure. An acquisition, depending on its size and nature, may or may not involve the transfer of business operations or employees. |
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The estimated aggregate impact of the 2014 acquisitions on the Company’s revenues and gross margin for the six months ended June 30, 2014 is approximately $10.2 million and $7.6 million, respectively. The revenues and gross margin amounts also reflect incremental revenues from the addition of new tenants to the acquired sites subsequent to the date of acquisition. Incremental amounts of segment selling, general, administrative and development expense have not been reflected as the amounts attributable to acquisitions are not comparable. |
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The Company recognizes acquisition and merger related costs in the period in which they are incurred and services are received. Acquisition and merger related costs may include finder’s fees, advisory, legal, accounting, valuation and other professional or consulting fees and general administrative costs, and are included in Other operating expenses in the condensed consolidated statements of operations. During the three and six months ended June 30, 2014, the Company recognized acquisition and merger related expenses, including the fair value adjustments to contingent consideration, of $4.8 million and $14.6 million, respectively. During the three and six months ended June 30, 2013, the Company recognized acquisition and merger related expenses, including the fair value adjustments to contingent consideration, of $3.3 million and $16.9 million, respectively. In addition, during the three and six months ended June 30, 2014, the Company recorded $3.2 million and $5.7 million, respectively, of integration costs related to recently closed acquisitions. |
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2014 Acquisitions |
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Richland Acquisition—On April 3, 2014, the Company, through one of its wholly-owned subsidiaries, acquired entities holding a portfolio of 60 communications sites, which at the time of acquisition were leased primarily to radio and television broadcast tenants, and four property interests in the United States from Richland for an aggregate purchase price of $385.9 million. The purchase price was satisfied with approximately $182.9 million in cash, approximately $6.5 million payable to the seller upon satisfaction of certain closing conditions and the assumption of $196.5 million of existing indebtedness. In June 2014, the Company repaid the outstanding indebtedness, paid prepayment consideration and wrote-off the unamortized premium associated with the fair value adjustment (see note 5). |
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International Acquisitions—During the six months ended June 30, 2014, the Company acquired a total of 136 communications sites and related assets in Brazil, Ghana and Mexico, for an aggregate purchase price of $25.8 million (including value added tax of $0.8 million) and acquired additional net assets of approximately $0.1 million. The Company also acquired 299 communications sites in Mexico for an aggregate purchase price of $44.1 million (including value added tax of $5.6 million). The Company assumed net liabilities of approximately $3.8 million, resulting in total consideration of approximately $40.3 million, which was satisfied by the issuance of approximately $36.3 million of credits to be applied against trade accounts receivable and cash consideration of approximately $4.0 million. Each purchase price is subject to post-closing adjustments. |
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Other U.S. Acquisitions—During the six months ended June 30, 2014, the Company acquired a total of 30 communications sites and equipment, as well as four property interests, in the United States for an aggregate purchase price of $33.6 million (including $0.4 million of contingent consideration). The Company also assumed net liabilities of approximately $0.4 million, resulting in total consideration of approximately $33.2 million. The aggregate purchase price is subject to post-closing adjustments. |
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The following table summarizes the preliminary allocation of the aggregate purchase price paid and the amounts of assets acquired and liabilities assumed for the fiscal year 2014 acquisitions based upon their estimated fair value at the date of acquisition (in thousands). Balances are reflected in the accompanying condensed consolidated balance sheets as of June 30, 2014. |
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| | Richland | | International | | Other U.S. | | | | | | | | | | | | |
Current assets | | $ | 7,819 | | | $ | 7,309 | | | $ | 20 | | | | | | | | | | | | | |
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Non-current assets | | — | | | 996 | | | — | | | | | | | | | | | | | |
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Property and equipment | | 173,686 | | | 29,900 | | | 7,696 | | | | | | | | | | | | | |
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Intangible assets (1): | | | | | | | | | | | | | | | | | | |
Customer-related intangible assets | | 185,000 | | | 20,409 | | | 18,928 | | | | | | | | | | | | | |
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Network location intangible assets | | 1,800 | | | 10,772 | | | 3,370 | | | | | | | | | | | | | |
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Current liabilities | | (3,954 | ) | | (1,307 | ) | | (439 | ) | | | | | | | | | | | | |
Long-term obligations (2) | | (201,999 | ) | | — | | | — | | | | | | | | | | | | | |
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Other non-current liabilities | | (2,922 | ) | | (6,126 | ) | | (74 | ) | | | | | | | | | | | | |
Fair value of net assets acquired | | $ | 159,430 | | | $ | 61,953 | | | $ | 29,501 | | | | | | | | | | | | | |
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Goodwill (3) | | 29,996 | | | 4,232 | | | 3,675 | | | | | | | | | | | | | |
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-1 | Customer-related intangible assets and network location intangible assets are amortized on a straight-line basis over periods of up to 20 years. | | | | | | | | | | | | | | | | | | | | | | | |
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-2 | Long-term obligations included $196.5 million of Richland’s existing indebtedness and a fair value adjustment of $5.5 million. The fair value adjustment was based primarily on reported market values using Level 2 inputs. | | | | | | | | | | | | | | | | | | | | | | | |
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-3 | Goodwill was allocated to the Company’s domestic and international rental and management segments, as applicable, and the Company expects goodwill recorded will be deductible for tax purposes. | | | | | | | | | | | | | | | | | | | | | | | |
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2013 Acquisitions |
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MIPT Acquisition |
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On October 1, 2013, the Company, through its wholly owned subsidiary American Tower Investments LLC, acquired 100% of the outstanding common membership interests of MIPT, a private REIT and the parent company of GTP, an owner and operator, through its various operating subsidiaries, of approximately 4,860 communications sites in the United States and approximately 510 communications sites in Costa Rica and Panama. GTP also manages rooftops and holds property interests that it leases to communications service providers and third-party tower operators. |
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The preliminary purchase price of $4.9 billion was satisfied with approximately $3.3 billion in cash, including an aggregate of approximately $2.8 billion from borrowings under the Company’s credit facilities, and the assumption of approximately $1.5 billion of MIPT’s existing indebtedness. |
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The consideration consisted of the following (in thousands): |
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Cash consideration (1) | $ | 3,330,462 | | | | | | | | | | | | | | | | | | | | | | |
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Assumption of existing indebtedness at historical cost | 1,527,621 | | | | | | | | | | | | | | | | | | | | | | |
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Estimated total purchase price | $ | 4,858,083 | | | | | | | | | | | | | | | | | | | | | | |
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-1 | Cash consideration includes $14.5 million of an additional purchase price adjustment which was paid to the sellers during the six months ended June 30, 2014 and is reflected in Accrued expenses on the consolidated balance sheet included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. | | | | | | | | | | | | | | | | | | | | | | | |
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The following table summarizes the updated allocation of the aggregate purchase price paid and the amounts of assets acquired and liabilities assumed for the MIPT acquisition based upon the estimated fair value at the date of acquisition (in thousands). |
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| | Updated Purchase Price Allocation (1) | | Preliminary Purchase Price Allocation (2) | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 35,967 | | | $ | 35,967 | | | | | | | | | | | | | | | | | |
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Restricted cash | | 30,883 | | | 30,883 | | | | | | | | | | | | | | | | | |
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Accounts receivable, net | | 10,021 | | | 10,021 | | | | | | | | | | | | | | | | | |
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Prepaid and other current assets | | 35,614 | | | 22,875 | | | | | | | | | | | | | | | | | |
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Property and equipment | | 920,782 | | | 996,901 | | | | | | | | | | | | | | | | | |
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Intangible assets (3): | | | | | | | | | | | | | | | | | | | | |
Customer-related intangible assets | | 2,464,300 | | | 2,629,188 | | | | | | | | | | | | | | | | | |
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Network location intangible assets | | 532,000 | | | 467,300 | | | | | | | | | | | | | | | | | |
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Notes receivable and other non-current assets | | 63,682 | | | 4,220 | | | | | | | | | | | | | | | | | |
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Accounts payable | | (9,456 | ) | | (9,249 | ) | | | | | | | | | | | | | | | | |
Accrued expenses | | (36,755 | ) | | (37,004 | ) | | | | | | | | | | | | | | | | |
Accrued interest | | (3,253 | ) | | (3,253 | ) | | | | | | | | | | | | | | | | |
Current portion of long-term obligations | | (2,820 | ) | | (2,820 | ) | | | | | | | | | | | | | | | | |
Unearned revenue | | (35,905 | ) | | (35,753 | ) | | | | | | | | | | | | | | | | |
Long-term obligations (4) | | (1,573,366 | ) | | (1,573,366 | ) | | | | | | | | | | | | | | | | |
Asset retirement obligations | | (43,089 | ) | | (43,089 | ) | | | | | | | | | | | | | | | | |
Other non-current liabilities | | (8,693 | ) | | (37,326 | ) | | | | | | | | | | | | | | | | |
Fair value of net assets acquired | | $ | 2,379,912 | | | $ | 2,455,495 | | | | | | | | | | | | | | | | | |
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Goodwill (5) | | 950,550 | | | 874,967 | | | | | | | | | | | | | | | | | |
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(1) Balances are reflected in the accompanying condensed consolidated balance sheets as of June 30, 2014. |
(2) Balances are reflected in the consolidated balance sheets in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. |
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-3 | Customer-related intangible assets and network location intangible assets are amortized on a straight-line basis over periods of up to 20 years. | | | | | | | | | | | | | | | | | | | | | | | |
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-4 | Long-term obligations included $1.5 billion of MIPT’s existing indebtedness and a fair value adjustment of $53.0 million. The fair value adjustment was based primarily on reported market values using Level 2 inputs. | | | | | | | | | | | | | | | | | | | | | | | |
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-5 | Goodwill was allocated to the Company’s domestic and international rental and management segments, as applicable, and the Company expects goodwill recorded will not be deductible for tax purposes. | | | | | | | | | | | | | | | | | | | | | | | |
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Other 2013 Acquisitions |
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Axtel Mexico Acquisition—On January 31, 2013, the Company acquired 883 communications sites from Axtel, S.A.B. de C.V. for an aggregate purchase price of $248.5 million. |
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NII Acquisition—On August 8, 2013, the Company entered into an agreement with NII to acquire up to 1,666 communications sites in Mexico and 2,790 communications sites in Brazil in two separate transactions. |
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On November 8, 2013, the Company acquired 1,473 communications sites in Mexico from NII for an initial aggregate purchase price of approximately $436.0 million (including value added tax of approximately $60.3 million) and net assets of approximately $0.9 million for total cash consideration of approximately $436.9 million. The purchase price was subsequently reduced to approximately $427.0 million (including value added tax of approximately $59.0 million) during the six months ended June 30, 2014 as a result of post-closing adjustments, while net assets acquired remained unchanged. The purchase price is subject to further post-closing adjustments. The Company’s right to purchase additional sites in Mexico expired on May 30, 2014. |
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On December 6, 2013, the Company acquired 1,937 communications sites in Brazil from NII for an initial aggregate purchase price of approximately $349.0 million. The purchase price was subsequently reduced to approximately $342.7 million during the six months ended June 30, 2014 as a result of post-closing adjustments. In addition, on June 26, 2014, the Company purchased an additional 103 communications sites for an aggregate purchase price of approximately $18.6 million, which are reflected above in “2014 Acquisitions”. The purchase price is subject to post-closing adjustments and the purchase of the remaining sites is subject to diligence and customary closing conditions. |
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Z Sites Acquisition—On November 29, 2013, the Company acquired 238 communications sites from Z-Sites Locação de Imóveis Ltda for an aggregate purchase price of approximately $122.8 million. The purchase price was subsequently increased to approximately $123.9 million during the six months ended June 30, 2014 and is subject to post-closing adjustments. |
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Other International Acquisitions—During the year ended December 31, 2013, the Company acquired a total of 714 additional communications sites in Brazil, Chile, Colombia, Ghana, Mexico and South Africa, for an aggregate purchase price of $89.8 million (including contingent consideration of $4.1 million and value added tax of $4.9 million). |
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Other U.S. Acquisitions—During the year ended December 31, 2013, the Company acquired a total of 55 additional communications sites and 23 property interests in the United States for an aggregate purchase price of $65.6 million, subject to post-closing adjustments. The purchase price included cash paid of approximately $65.2 million and net liabilities assumed of approximately $0.4 million. |
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The following table summarizes the updated allocation of the aggregate purchase price paid and the amounts of assets acquired and liabilities assumed for the fiscal year 2013 acquisitions based upon their estimated fair value at the date of acquisition (in thousands). Balances are reflected in the accompanying condensed consolidated balance sheets herein. |
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| | Axtel Mexico (1) | | NII Mexico (2) | | NII Brazil | | Z Sites | | Other International | | Other U.S. |
Current assets | | $ | — | | | $ | 59,938 | | | $ | — | | | $ | — | | | $ | 4,863 | | | $ | 1,220 | |
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Non-current assets | | 2,626 | | | 10,738 | | | 7,201 | | | 6,436 | | | 1,991 | | | 44 | |
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Property and equipment | | 86,100 | | | 143,680 | | | 111,094 | | | 26,881 | | | 44,844 | | | 23,537 | |
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Intangible assets (3): | | | | | | | | | | | | |
Customer-related intangible assets | | 119,392 | | | 132,897 | | | 143,037 | | | 62,286 | | | 20,590 | | | 29,325 | |
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Network location intangible assets | | 43,031 | | | 66,069 | | | 80,568 | | | 17,350 | | | 20,727 | | | 7,935 | |
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Current liabilities | | — | | | — | | | — | | | — | | | — | | | (454 | ) |
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Other non-current liabilities | | (9,377 | ) | | (10,478 | ) | | (13,188 | ) | | (1,502 | ) | | (8,168 | ) | | (848 | ) |
Fair value of net assets acquired | | $ | 241,772 | | | $ | 402,844 | | | $ | 328,712 | | | $ | 111,451 | | | $ | 84,847 | | | $ | 60,759 | |
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Goodwill (4) | | 6,751 | | | 25,056 | | | 13,978 | | | 12,493 | | | 4,970 | | | 4,403 | |
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-1 | The allocation of the purchase price was finalized during the year ended December 31, 2013. | | | | | | | | | | | | | | | | | | | | | | | |
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-2 | Current assets includes approximately $59.0 million of value added tax. | | | | | | | | | | | | | | | | | | | | | | | |
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-3 | Customer-related intangible assets and network location intangible assets are amortized on a straight-line basis over periods of up to 20 years. | | | | | | | | | | | | | | | | | | | | | | | |
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-4 | Goodwill was allocated to the Company’s domestic and international rental and management segments, as applicable, and the Company expects goodwill recorded will be deductible for tax purposes. | | | | | | | | | | | | | | | | | | | | | | | |
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The following table summarizes the preliminary allocation, unless otherwise noted, of the aggregate purchase price paid and the amounts of assets acquired and liabilities assumed for the fiscal year 2013 acquisitions. The allocation is based upon the estimated fair value at the date of acquisition (in thousands). Balances are reflected in the consolidated balance sheets in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. |
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| | Axtel Mexico (1) | | NII Mexico (2) | | NII Brazil | | Z Sites | | Other International | | Other U.S. |
Current assets | | $ | — | | | $ | 61,183 | | | $ | — | | | $ | — | | | $ | 4,863 | | | $ | 1,220 | |
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Non-current assets | | 2,626 | | | 11,969 | | | 4,484 | | | 6,157 | | | 1,991 | | | 44 | |
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Property and equipment | | 86,100 | | | 147,364 | | | 105,784 | | | 24,832 | | | 44,844 | | | 23,803 | |
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Intangible assets (3): | | | | | | | | | | | | |
Customer-related intangible assets | | 119,392 | | | 135,175 | | | 149,333 | | | 64,213 | | | 20,590 | | | 29,325 | |
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Network location intangible assets | | 43,031 | | | 63,791 | | | 93,867 | | | 17,123 | | | 20,727 | | | 7,607 | |
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Current liabilities | | — | | | — | | | — | | | — | | | — | | | (454 | ) |
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Other non-current liabilities | | (9,377 | ) | | (10,478 | ) | | (13,188 | ) | | (1,502 | ) | | (8,168 | ) | | (786 | ) |
Fair value of net assets acquired | | $ | 241,772 | | | $ | 409,004 | | | $ | 340,280 | | | $ | 110,823 | | | $ | 84,847 | | | $ | 60,759 | |
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Goodwill (4) | | 6,751 | | | 27,928 | | | 8,704 | | | 11,953 | | | 4,970 | | | 4,403 | |
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-1 | The allocation of the purchase price was finalized during the year ended December 31, 2013. | | | | | | | | | | | | | | | | | | | | | | | |
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-2 | Current assets includes approximately $60.3 million of value added tax. | | | | | | | | | | | | | | | | | | | | | | | |
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-3 | Customer-related intangible assets and network location intangible assets are amortized on a straight-line basis over periods of up to 20 years. | | | | | | | | | | | | | | | | | | | | | | | |
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-4 | Goodwill was allocated to the Company’s domestic and international rental and management segments, as applicable, and the Company expects goodwill recorded will be deductible for tax purposes. | | | | | | | | | | | | | | | | | | | | | | | |
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Pro Forma Consolidated Results |
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The following table presents the unaudited pro forma financial results as if the 2013 acquisitions had occurred on January 1, 2012 and the 2014 acquisitions had occurred on January 1, 2013 (in thousands, except per share data). Management relied on various estimates and assumptions due to the fact that some of the acquisitions never operated as a business and were utilized solely by the seller as a component of their network infrastructure. As a result, historical operating results for these acquisitions are not available. The pro forma results do not include any anticipated cost synergies, costs or other effects of the planned integration of the acquisitions. Accordingly, such pro forma amounts are not necessarily indicative of the results that actually would have occurred had the acquisitions been completed on the dates indicated, nor are they indicative of the future operating results of the Company. |
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| | Three Months Ended June 30, | | Six Months Ended June 30, | | | | | | | | |
| | 2014 | | 2013 | | 2014 | | 2013 | | | | | | | | |
Pro forma revenues | | $ | 1,033,541 | | | $ | 941,291 | | | $ | 2,031,066 | | | $ | 1,879,156 | | | | | | | | | |
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Pro forma net income attributable to American Tower Corporation common stockholders | | $ | 230,506 | | | $ | 74,956 | | | $ | 434,176 | | | $ | 212,146 | | | | | | | | | |
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Pro forma net income per common share amounts: | | | | | | | | | | | | | | | | |
Basic net income attributable to American Tower Corporation common stockholders | | $ | 0.58 | | | $ | 0.19 | | | $ | 1.1 | | | $ | 0.54 | | | | | | | | | |
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Diluted net income attributable to American Tower Corporation common stockholders | | $ | 0.58 | | | $ | 0.19 | | | $ | 1.09 | | | $ | 0.53 | | | | | | | | | |
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Other Signed Acquisitions |
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BR Towers Acquisition—On June 13, 2014, the Company entered into an agreement with GPCP V, a private equity fund managed by GP Investments, Ltd., FIP Multisetorial Plus, a private equity fund managed by Bradesco BBI, and other shareholders, to acquire 100% of the equity interests of BR Towers S.A., a Brazilian telecommunications real estate company that is expected to own approximately 2,530 towers and the exclusive use rights for approximately 2,110 additional towers in Brazil at closing. The purchase price of 2.18 billion Brazilian Reais (“BRL”) (approximately $990.3 million) is subject to customary adjustments. The Company deposited 130.0 million BRL (approximately $59.0 million) in escrow for this transaction, which is reflected in Prepaid and other current assets in the condensed consolidated balance sheets as of June 30, 2014. |
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U.S. Acquisition—In July 2014, the Company entered into an agreement to acquire 154 communications sites in the United States for approximately $132.5 million, subject to customary adjustments. |
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Acquisition-Related Contingent Consideration |
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The Company may be required to pay additional consideration under certain agreements for the acquisition of communications sites if specific conditions are met or events occur. |
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Colombia—Under the terms of the agreement with Colombia Movil S.A. E.S.P., the Company is required to make additional payments upon the conversion of certain barter agreements with other wireless carriers to cash paying lease agreements. Based on current estimates, the Company expects the value of potential contingent consideration payments required to be made under the agreement to be between zero and $37.6 million and estimates it to be $24.6 million using a probability weighted average of the expected outcomes at June 30, 2014. During the three and six months ended June 30, 2014, the Company recorded an increase in fair value of $0.5 million and $1.0 million, respectively, in Other operating expenses in the accompanying condensed consolidated statements of operations. |
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Ghana—Under the terms of its agreement, as amended, with MTN Group Limited, the Company is required to make additional payments upon the conversion of certain barter agreements with other wireless carriers to cash paying lease agreements. Based on current estimates, the Company expects the value of potential contingent consideration payments required to be made under the amended agreement to be between zero and $0.5 million and estimates it to be $0.5 million using a probability weighted average of the expected outcomes at June 30, 2014. |
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MIPT—In connection with the acquisition of MIPT, the Company assumed additional contingent consideration liability related to previously closed acquisitions in Costa Rica, Panama and the United States. The Company is required to make additional payments to the sellers if certain pre-designated tenant leases commence during a limited specified period of time after the applicable acquisition was completed, generally one year or less. The Company initially recorded $9.3 million of contingent consideration liability as part of the preliminary purchase price allocation upon closing of the acquisition. Based on current estimates, the Company expects the value of potential contingent consideration payments required to be made under these agreements to be between zero and $6.1 million and estimates it to be $5.5 million using a probability weighted average of the expected outcomes at June 30, 2014. During the three and six months ended June 30, 2014, the Company recorded a decrease in fair value of $1.4 million in Other operating expenses in the accompanying condensed consolidated statements of operations. During the three and six months ended June 30, 2014, the Company made payments under these agreements of $0.7 million and $1.3 million, respectively. |
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Other U.S.—In connection with other acquisitions in the United States, the Company is required to make additional payments if certain pre-designated tenant leases commence during a specified period of time. The Company initially recorded $0.4 million of contingent consideration liability as part of the preliminary purchase price allocation upon closing of certain acquisitions, which, based on current estimates, also represents the estimated balance at June 30, 2014 and the maximum potential liability. |
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For more information regarding contingent consideration, see note 7. |
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