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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For Fiscal Year Ended December 31, 2000
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission File 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 and Zip Code)
(617) 375-7500
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
(Name of exchange on
(Title of Class) which registered)
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Class A Common Stock, $0.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
(Title of Class)
None
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to this
Form 10-K. [_]
The aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant as of February 28, 2001 was approximately
$3,212,206,760. As of February 28, 2001, 180,165,054 shares of Class A Common
Stock, 8,077,635 shares of Class B Common Stock and 2,267,813 shares of Class C
Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement (the "Definitive Proxy Statement")
to be filed with the Securities and Exchange Commission relative to the
Company's 2001 Annual Meeting of Stockholders are incorporated by reference
into Part III of this Report.
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TABLE OF CONTENTS
FORM 10-K ANNUAL REPORT
FISCAL YEAR ENDED DECEMBER 31, 2000
Page
----
PART I.
ITEM 1. Business............................................................................... 1
ITEM 2. Properties............................................................................. 22
ITEM 3. Legal Proceedings...................................................................... 23
ITEM 4. Submission of Matters to a Vote of Security Holders.................................... 23
PART II.
ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters.................. 24
ITEM 6. Selected Financial Data................................................................ 26
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.. 28
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk............................. 40
ITEM 8. Financial Statements and Supplementary Data............................................ 41
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure... 41
PART III.
ITEM 10. Directors and Executive Officers of the Registrant..................................... 42
ITEM 11. Executive Compensation................................................................. 43
ITEM 12. Security Ownership of Certain Beneficial Owners and Management......................... 43
ITEM 13. Certain Relationships and Related Transactions......................................... 43
PART IV.
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K....................... 44
This Annual Report on Form 10-K contains forward-looking statements relating
to our goals, beliefs, plans or current expectations and other statements that
are not of historical facts. For example, when we use words such as "project,"
"believe," "anticipate," "plan," "expect," "estimate," "intend," "should,"
"would," "could" or "may," or other words that convey uncertainty of future
events or outcome, we are making forward-looking statements. We refer you to
the caption entitled "Business--Factors That May Affect Future Results" in Item
1 of Part I for important factors that could cause actual results to differ
materially from those indicated by our forward-looking statements made herein
and presented elsewhere by management. Such forward-looking statements
represent management's current expectations and are inherently uncertain. We do
not undertake any obligation to update forward-looking statements made by us.
i
PART I
ITEM 1. BUSINESS
Overview
We are a leading wireless and broadcast communications infrastructure
company operating in three business segments.
. Rental and management. Our primary business is renting antenna space to
wireless and broadcast companies on multi-tenant communications towers.
We operate the largest network of wireless communications towers in
North America and are the largest independent operator of broadcast
towers in North America, based on number of towers. Our growth strategy
focuses on both the acquisition and construction of towers. We use our
own extensive tower network development capabilities, which include site
acquisition and tower construction services, to construct our own build-
to-suit and other towers. These capabilities enable us to construct
towers at costs that are generally lower than the cost of acquiring
towers.
. Network development services. Through ATC Integrated Services, we
provide the full-range of tower-related services necessary to establish,
develop and maintain wireless and broadcast tower networks. Theses
services include:
. radio frequency engineering consulting;
. site acquisition and network design;
. zoning and other governmental approvals;
. tower construction;
. antenna installation;
. tower component part sales; and
. site monitoring and maintenance.
We provide these services to a variety of customers and actively market
them as part of a turnkey solution to our existing and prospective
rental customers. We believe our full service capabilities enhance our
core rental and management business by:
. making us a more attractive choice for build-to-suit
opportunities;
. enabling us to construct towers at costs that are generally less
than the costs of acquiring towers. This cost-efficiency enables
us to reduce our weighted average cost per tower, thereby
improving the overall return of our rental and management
business;
. strengthening our customer relationships; and
. increasing recurring revenues and cash flow from our towers.
. Satellite and fiber network access services. Our Verestar subsidiary is
a leading provider of integrated satellite and fiber network access
services, based on the number of our teleport antennae and facilities.
We provide these services to telecommunications companies, Internet
service providers (ISPs), broadcasters and maritime customers, both
domestic and international. Verestar's teleports and other facilities
enable its customers to transmit Internet traffic, voice, video and
other data through the integration of satellites, high-speed fiber
connections and communications switches.
Our operating revenues for the year ended December 31, 2000 were $735.3
million. Our three business segments accounted for the following percentages
of operating revenues for the year ended December 31, 2000:
.Rental and management--38.0%;
.Network development services--42.0%; and
.Satellite and fiber network access services--20.0%.
1
The relative contributions of each of our segments to our total operating
revenues in 2000 may not be indicative of future periods. For more financial
information about our business segments and geographic information about our
operating revenues and long-lived assets, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and note 13 to our
consolidated financial statements included in this Annual Report on Form 10-K.
We have a diversified base of customers. For the year ended December 31,
2000, none of our customers accounted for more than 10% of our operating
revenues and our five largest customers accounted for approximately 23% of
those revenues. Our customer base includes customers from various sectors
within the wireless communications industry, including personal communication
services, cellular and paging.
Growth Strategy
Background. Our growth strategy is to capitalize on the rapid expansion
taking place in the wireless communications industry. We believe the increase
in demand for wireless communications is attributable to a number of factors,
including:
. technological advances in communications equipment;
. decreasing costs of wireless services;
. the development of new applications for wireless services;
. the increasing mobility of the U.S. population;
. the growing awareness of the benefits of mobile communications;
. the auctioning of new communications spectrum; and
. business and consumer preferences for higher quality wireless, Internet,
voice and data transmission.
We believe that as the wireless communications industry grows and becomes
more competitive, many carriers seek to preserve capital and speed access to
their markets by:
. focusing on activities that contribute directly to subscriber growth;
. outsourcing infrastructure requirements such as owning, constructing and
maintaining towers; and
. co-locating transmission facilities, which is likely to accelerate
because of environmental and other regulatory restrictions, resulting in
the growing tendency of local authorities to slow the proliferation of
towers in their communities.
We believe we are well positioned to benefit from these trends in wireless
communications and to play an increasing role in addressing the needs of the
wireless, broadcast and Internet infrastructure industries. Our belief is
based on the following reasons:
. We operate the largest network of wireless communications towers in
North America and are the largest independent operator of broadcast
towers in North America, based on number of towers. We believe that
national and other large wireless service providers prefer to deal with
a company, such as ours, that can meet the majority of their tower needs
within a particular market or region. In addition, we offer turnkey
solutions to our customers, including a broad range of network
development services and related components and equipment.
. We are both an experienced builder and acquirer of towers, providing us
the flexibility to choose the most cost-effective means to expand our
network of towers.
. We are involved in a number of build-to-suit projects, which generally
reduce the financial risk of building new towers because these projects
have anchor tenants which are often located in markets where we would
like to expand our existing operations or in new markets where we would
like to establish a presence.
. Through our Verestar subsidiary, we are addressing the expanding market
for satellite and fiber network access services.
2
. We have a strong and experienced management team, led by our Chairman
and Chief Executive Officer, Steven B. Dodge.
We are seeking to enhance our position as a leader in each of our business
segments by:
. expanding our leading national footprint of desirable communications
towers in most major markets in the United States, creating networks in
Mexico and Canada, and creating networks internationally to serve
attractive foreign markets that we do not currently serve;
. increasing the profitability of our tower operations by reducing average
cost per tower through construction and attractive acquisitions,
reducing tower operating expenses and actively marketing unused space on
our towers;
. serving profitably selected infrastructure needs of our customers; and
. expanding Verestar as a leading provider of satellite and fiber network
access services for telecommunications companies, ISPs, broadcasters and
maritime customers.
Internal growth through sales, service and capacity utilization. We believe
that a substantial opportunity for profitable growth exists by increasing the
utilization of our existing towers and towers that we may build or acquire in
the future. Because the costs of operating a site are largely fixed,
increasing tower utilization significantly improves site operating margins.
Many of our towers have significant capacity available for additional antenna
space rental that we believe can be utilized at low incremental cost.
We intend to continue to use targeted sales and marketing techniques to
increase utilization of our towers. We believe that the key to the success of
this strategy lies in our ability to develop and consistently deliver a high
level of customer service, and to be widely recognized as a company that makes
realistic commitments and then delivers on them. Since speed to market and
reliable network performance are critical components to the success of
wireless service providers, our ability to assist our customers in meeting
these goals will ultimately define our marketing success and capacity
utilization. We target as customers wireless service providers that are
expanding or improving their existing network infrastructure, as well as those
deploying new technologies.
We also intend to continue actively marketing and selling our network
development services and satellite and fiber network access services as
related sources of revenue from those earned through our rental and management
business. We expect that a significant part of our growth may consist of
selling services and components to new customers on our existing towers or
towers that we may construct on a build-to-suit or other basis.
Growth by build-to-suit/construction. We believe we can achieve attractive
investment returns for our company by constructing new tower clusters:
. in and around markets in which we already have a presence;
. along major highways; and
. in targeted new markets, particularly markets that have not been
significantly built out by carriers or other communications site
companies.
We often seek to work with one or more anchor tenants when we construct
towers. When we do so, we develop an overall master plan for a particular
network by locating new sites in areas identified by our customers as optimal
for their network expansion requirements. We generally secure commitments for
leasing from the customer prior to commencing construction, thereby reducing
the risks associated with the investment.
In some cases, however, we may invest in the zoning and permitting of sites,
and even the construction of tower build-outs, where we have no anchor tenant.
We do this when, based on radio frequency engineering studies, our market
knowledge and our awareness of our customers' build-out plans, we believe
demand will exist in the near term.
3
We intend to place a strong emphasis on new tower development for the
foreseeable future because we believe that this can produce relatively
attractive initial returns. In addition, we can design and build towers to
specifications that assure ample future capacity and minimize the need for
future capital expenditures. We also intend to pursue new tower construction to
service the demand for digital television and for tower space for radio
antennae displaced by digital television requirements.
Growth by acquisitions. We have achieved a leading industry position through
acquisitions and construction. We intend to continue to pursue strategic
mergers and acquisitions with independent tower operators, consolidators and
wireless service providers. Our acquisition strategy is designed to:
. achieve enhanced operating efficiencies;
. take advantage of divestiture opportunities presented by wireless
service providers;
. broaden and strengthen our penetration of major markets;
. facilitate entry into new geographic markets in the United States and
abroad; and
. complement our construction program.
Among the potential acquisitions are tower networks still owned by major
wireless service providers. We have entered into these types of transactions
with ALLTEL, AirTouch and AT&T, as described elsewhere in this report. These
transactions are usually substantial, involving several thousand towers and
purchase prices in the hundreds of millions of dollars. In addition, they often
entail build-to-suit contracts involving thousands of towers.
We also intend to pursue, on a selective basis, the acquisition of companies
to enhance our satellite and fiber network access business.
Products and Services
We offer our products and services through three business segments:
. Rental and management;
. Network development services; and
. Satellite and fiber network access services provided by Verestar.
Rental and Management Segment
Leasing of antennae sites. Our primary business is renting antenna space to
wireless and broadcast companies on multi-tenant communications towers. We
operate the largest network of wireless communications towers in North America
and are the largest independent operator of broadcast towers in North America,
based on number of towers. Assuming the consummation of our pending
transactions, we operate a tower network of approximately 13,600 multi-user
sites in the United States, Canada and Mexico, including more than 300
broadcast tower sites. Approximately 12,600 of these towers are owned or leased
sites and approximately 1,000 are managed sites or lease/sublease sites under
which we hold a position as lessee that is co-terminous with a related
sublease. Our networks in the United States, Canada and Mexico are national in
scope. Our U.S. network spans 49 states and the District of Columbia, with
tower clusters in 43 of the 50 largest U.S. metropolitan statistical areas. Our
developing Mexican network includes sites in highly populated areas, including
Mexico City, Monterrey, Guadalajara and Acapulco. We plan for our Canadian
operations to include sites in major metropolitan areas.
We lease antenna space on our towers to tenants in a diverse range of
wireless communications and broadcast industries. Wireless industries we serve
include: personal communications services, cellular, enhanced specialized
mobile radio, specialized mobile radio, paging, fixed microwave and fixed
wireless.
4
Our wireless customers include:
. ALLTEL . Winstar . AT&T Wireless
. Cingular . Mobile Wireless Services
Wireless . Sprint PCS . Nextel
. PowerTel . VoiceStream . Teligent
. Verizon* . Western Wireless
Most major radio and television broadcasters rent antenna space on our
broadcast towers, including:
. ABC . CBS . Clear Channel
. Cox . Fox . Infinity
. NBC . Paxson . Paramount
. Sinclair . Telemedia . Tribune
. TV Azteca . Univision
Lease Terms. Our leases, like most of those in the industry, generally vary
depending upon the region and the industry user. Television and radio
broadcasters prefer long-term leases while wireless communications providers
favor somewhat shorter lease terms. In both cases, the leases often have
multiple renewals at the option of the tenant.
Tenants tend to renew their leases because of the complications associated
with moving antennae. For example, in the case of cellular, personal
communications services and other wireless users, moving one antennae might
necessitate moving several others because of the interlocking grid-like nature
of wireless systems. Moreover, a move by a television or radio broadcaster
would necessitate FCC approval and could entail major dislocations and the
uncertainty associated with building antennae in new coverage areas. In
addition, the increasing difficulty of obtaining local zoning approvals, the
increasing environmental concerns of communities, and the restrictions imposed
by the Federal Aviation Administration and FCC tend to reduce the number of
choices available to a tower user.
Most of our leases have escalator provisions. These automatic increases are
based on specified estimated cost measures or on increases in the consumer
price index.
Annual rental payments vary considerably depending upon:
. size of the transmission line and the number and weight of the antennae
on the tower;
. existing capacity of the tower;
. the placement of the customer's antenna on the tower;
. the location and height of the tower on which antenna space is rented;
and
. the competitive environment.
Because of the factors listed above, we believe that it is not possible to
state with any degree of precision the vacancy or unused capacity of a
"typical" tower, group of related towers or all of our towers.
Build-to-Suit Projects. Historically, cellular and other wireless service
providers have constructed and owned a majority of the towers for their
antennae needs, rather than leasing space on towers from a third party.
Beginning a few years ago, wireless service providers expressed a growing
interest in having independent companies own and operate the towers for their
antennae. We believe this trend is the result of a need among such providers to
preserve capital and to speed access to their markets by focusing on activities
that contribute to subscriber growth and by outsourcing infrastructure
requirements. This trend has resulted in our entering into
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* Includes the former operations of AirTouch, Bell Atlantic Mobile and GTE
Mobilenet.
5
agreements with a number of wireless carriers for build-to-suit projects. In
build-to-suit projects, we develop and construct a tower network for a major
anchor tenant, after the anchor tenant signs a lease agreement with us. Because
we own the constructed towers, we are able to rent space on them to other
tenants, as well as to the anchor tenant.
These build-to-suit projects constitute a major part of our rental business
and have the following benefits for us:
. build-to-suit projects generally reduce the financial risk of
constructing new towers because they have a pre-established anchor
tenant;
. build-to-suit projects are often located in markets where we would like
to expand our existing operations or in a new market where we would like
to establish a presence; and
. by utilizing our experienced in-house network development services,
build-to-suit projects enable us to construct towers at costs that are
generally less than the costs of acquiring towers. This cost-efficiency
reduces our weighted average cost per tower, thereby improving the
overall return of our rental and management business.
We are currently engaged in build-to-suit projects for the following
companies:
. ALLTEL . AT&T Wireless . Cingular Wireless
. Nextel . Omnipoint . Verizon
We continue to seek additional major build-to-suit projects, although we may
not enter into any of them.
Communications site management business. We are a leading manager of
communications sites. These sites include rooftop sites and ground towers. A
central aspect of this business is the development by us of new sources of
revenue for building owners by effectively managing all aspects of rooftop and
ground tower telecommunications, including:
. two-way radio systems . microwave . fiber optics
. wireless cable . paging . rooftop
. personal . cellular infrastructure
communications construction
services services
Our management contracts for these sites are generally for a period of five
years and contain automatic five-year renewal periods, subject to termination
by either party before renewal. Under these contracts, we are responsible for a
wide range of activities, including:
. marketing antennae sites on the tower;
. reviewing existing and negotiating future license agreements with tenant
users;
. managing and enforcing those agreements;
. supervising installation of equipment by tenants to ensure non-
interference with other users;
. supervising repairs and maintenance to the towers; and
. site billing, collections and contract administration.
In addition, we handle all service related calls and questions regarding the
site so that the building management team or owner is relieved of this
responsibility. For such services, we are entitled to a percentage of lease
payments, which is higher for new tenants than for existing tenants. Upon
termination of a contract, unless it is because of our default, we are
generally entitled to our percentage with respect to then existing tenants so
long as they remain tenants.
6
Network Development Services
Through ATC Integrated Services, we provide comprehensive network development
services for both wireless service providers and broadcasters. We offer full
turnkey network development solutions to our customers, including:
. radio frequency . tower construction . tower component part
engineering consulting . network design sales
. site acquisition . antennae . tower monitoring
. zoning and other installation
regulatory
approvals
We provide network development services to most of the major wireless service
providers and have constructed or are constructing towers on a build-to-suit
basis for a variety of wireless and broadcast companies. We are increasingly
applying our site acquisition and construction capabilities for our own account
as we engage in more built-to-suit and other proprietary construction projects.
Our ability to provide this full range of services is critical to our business
model because these services:
. enhance our overall returns as our costs for constructing towers are
generally lower than those we acquire;
. make us a more attractive choice for built-to-suit projects since we
believe wireless carriers prefer to work with a national company, rather
than contract with multiple vendors, to address their tower-related
needs;
. strengthens our existing customer relationships by increasing our
knowledge of our customers network needs, which we believe leads to
greater customer satisfaction and the opportunity to offer our customers
other services; and
. increase recurring revenues and cash flow from our towers. For example,
throughout a customer's lease with us, we often perform antenna
installation-related services and radio frequency engineering services
as our customer's needs change and as their network develops, and as
part of routine maintenance.
Site acquisition services. We engage in site acquisition services for our own
account, in connection with build-to-suit projects and other proprietary
construction, as well as for third parties. We provided site acquisition
services for some of the first personal communications services projects in the
United States, including the personal communication services network that at
the time of launch had the largest number of sites in the United States. We
provide these services nationally through our field offices in several major
cities, including Atlanta, Chicago, Charlotte, Cleveland, Jacksonville, New
Orleans and Seattle. Our site acquisition services include:
. site identification . geographic analysis . custom mapping
. market analysis . zoning review . zoning and other
governmental
approval
The site selection and acquisition process begins with the network design. We
identify highway corridors, population centers and topographical features
within the carrier's existing or proposed network. We then conduct drive tests
in the area to monitor all personal communication services, cellular and
enhanced specialized mobile radio frequencies to locate any systems then
operating in that area. This enables us to identify where any holes in coverage
may exist. Based on this data, we and the carrier develop a "search ring,"
generally of one-mile radius, within which our site acquisition department
identifies land available either for purchase or lease. Our personnel select
the most suitable sites, based on demographics, traffic patterns and signal
characteristics. If the customer approves the site, we then submit it to the
local zoning/planning board for approval. If we receive approval, our customer
typically engages us to supervise the construction of the towers or to
construct the towers ourselves.
7
We have performed site acquisition services for a wide range of customers,
including:
. ALLTEL . AT&T Wireless . Metricom
. Cingular Wireless . MobileComm . Sprint PCS
. PowerTel . SkyTel . Western Wireless
. Triton PCS . Verizon
We will continue to provide site acquisition services to those customers
desiring only these services. However, we also intend to continue to actively
market these services as part of a turnkey solution, including network design,
tower construction, tower site leasing, equipment installation and maintenance,
that we offer prospective rental customers. We believe that wireless service
providers will select companies that demonstrate the ability to successfully
locate, acquire and permit sites and finance and construct towers in a timely
manner for their built-to-suit projects.
Engineering Consulting Services and Network Design. Through Galaxy
Engineering Services, we provide a number of engineering services that enable
our customers to plan new tower networks, modify existing tower networks and
improve the quality of their networks. These engineering services include:
. wireless broadband design and implementation;
. wireless data network design and implementation;
. radio frequency network design for all mobile and fixed wireless
technologies;
. drive testing, which consists of measuring the signal strength of an
antenna from multiple points in a moving vehicle;
. performance engineering, which consists of adjusting variables in a
network to establish optimum performance levels;
. technical planning for spectrum license holders;
. upgrading networks to the next generation of broadcast technology, which
is often referred to as "3G" or third-generation technologies;
. transport engineering, which consists of improving transmission media
and interconnections for wireless service providers; and
. interconnection and microwave services
Tower Construction and Antennae Installation. We are one of the leading
builders of wireless and broadcast towers. Our Specialty Constructors unit has
over 30 years of wireless tower construction and equipment installation
experience. We also own and operate Kline Iron & Steel, an experienced builder
of broadcast towers. The following table shows the approximate number of towers
that we constructed during 1999 and 2000, and our projection for 2001 tower
construction:
Number of
Towers
Year Constructed
---- -----------
1999......................................................... 1,000
2000......................................................... 1,600
2001--Projection............................................. 2,000
We construct towers both for our own account in connection with build-to-suit
projects and other proprietary construction projects, as well as for third
parties. For third party construction, we bill customers on a fixed price or
time and materials basis, and we may negotiate fees on individual sites or for
groups of sites.
8
The cost of construction of a tower varies both by site location, which will
determine, among other things, the required height of the tower, and type of
tower. Non-broadcast towers, whether on a rooftop or the ground, generally cost
between approximately $185,000 and $225,000. Broadcast towers are generally
much taller and are built to bear a greater load. The costs per broadcast
tower are significantly greater than non-broadcast towers and vary based on
size, location and terrain.
As part of our construction service and as a separate service offering, we
provide antennae installation services. These services use not only our
construction-related skills, but also our technical expertise to ensure that
new installations do not cause interference with other tenants.
The number of antennae that our towers can accommodate varies depending on
whether the tower is broadcast or non-broadcast, and on the tower's location,
height and the loaded capacity at certain wind speeds. An antenna's height on a
tower and the tower's location determine the line-of-sight of the antenna with
the horizon and, consequently, the distance a signal can be transmitted. Some
of our customers, including paging companies and specialized mobile radio
providers in rural areas, need higher elevations for broader coverage. Other
customers, such as personal communications services, enhanced specialized
mobile radio and cellular companies in metropolitan areas, usually do not need
to place their equipment at the highest tower point. In most cases, well
engineered and well located towers built to serve the specifications of an
initial anchor tenant in the wireless communications sector will attract three
or more additional wireless tenants over time, thereby increasing revenue and
enhancing margins.
Wireless Components. Through MTS Wireless Components, we sell tower related
parts and equipment to wireless and broadcast companies, including:
. antennae fasteners and other mounting components;
. waveguide bridge products;
. square support rail;
. tower lighting systems;
. tower safety products; and
. other hardware products.
We also manufacture wireless components for several large wireless
communications equipment vendors who market these products under their own
brand names.
Satellite and Fiber Network Access Services
Our Verestar subsidiary is a leading provider of integrated satellite and
fiber network access services for telecommunications companies, ISPs,
broadcasters and maritime customers, both domestic and international. We own
and operate more than 175 satellite antennae at ten satellite network access
points, which we refer to as SNAPs, in Arizona, California, Massachusetts, New
Jersey, Texas, Washington state, and Washington, D.C. and one in Switzerland.
Our acquisition in 2001 of the satellite business assets of Swisscom provides
us with strategically located antennae in Switzerland and direct fiber links to
New York and London. Our satellite network access points in the U.S. and in
Switzerland enable us to access the majority of commercial satellites around
the world. Our customers include:
. ABC . British Telecom . Cable and Wireless
. CBS . CNN . Deutsche Telekom
. Fox Entertainment . MCI Worldcom . TCI
. Telefonica . UUNET
9
Our maritime customers include a number of major cruise lines.
Verestar transmits Internet traffic and voice, video and other data through
the integration of the following services:
. Teleport Services. Verestar operates 11 SNAPs. These SNAPs consist of
over 175 satellite antennae, transmitting and receiving electronics and
connectivity to major terrestrial fiber routes and the Internet. These
SNAPs are capable of uplinking and downlinking data, voice and video
(both analog and digital) to satellites in the Atlantic, Pacific and
Indian Ocean regions. Some of our SNAPs also provide telemetry, tracking
and control and communication systems for the launch and maintenance of
satellites in orbit. Each SNAP is operated 24 hours a day, 365 days a
year.
. Satellite Services. Verestar is one of the largest independent lessees
of satellite capacity for the transmission of Internet and other data
around the world. Verestar sells capacity through contracts with a
minimum term of one year and also offers spot market capacity on an as-
needed basis to news networks in the United States.
. Network Access Services. Verestar offers customers connections to their
choice of leading Internet services and high-speed fiber backbone
providers. Verestar also offers services that allow customers to select
the fastest available Internet connection on a per packet basis.
Verestar also offers long-haul fiber connectivity between select markets
in the United States and internationally.
. Switching Services. Verestar operates carrier-class voice switches in
New York, Miami, and Los Angeles, which enable international telephone
companies to connect their voice traffic to the U.S. public telephone
network and to exchange their traffic with other international long
distance carriers. These switches are connected to satellite and fiber
networks, which provide customers with end-to-end solutions from the
call origination to termination on the U.S. telephone network.
Significant Agreements
We are a party to three agreements that we consider to be material to our
business:
ALLTEL transaction. In December 2000, we entered into an agreement to acquire
the rights from ALLTEL to up to 2,193 communications towers through a 15-year
sublease agreement. Under the agreement, we will sublease these towers for
consideration of up to $657.9 million in cash. ALLTEL also granted us the
option to acquire the rights, through sublease agreements, to approximately 200
additional towers to be selected by us on a site-by-site basis for cash
consideration of up to $300,000 per tower. We expect the transaction to close
incrementally beginning in the second quarter of 2001.
Under our agreement with ALLTEL, we are entitled to all income generated from
leasing space on the towers and are responsible for all expenses, including
ground rent. ALLTEL has reserved space on the towers for its antennae, for
which it will pay a site maintenance fee of $1,200 per tower per month,
escalating at a rate equal to the lower of 5% per annum or the increase in
Consumer Price Index plus 4% per annum.
Under our agreement with ALLTEL, we will have the option to purchase the
towers at the end of the 15-year sublease term. For approximately 1,900 of the
towers, the purchase price per tower will be $27,500 plus interest accrued at
3% per annum. At ALLTEL's option, this price will be payable by us in cash or
with 769 shares of our Class A common stock. For approximately 300 other towers
and any of the 200 additional towers that we sublease, the per tower purchase
arrangement at the end of the sublease term is subject to adjustment based on
the cash consideration paid by us for the sublease and our Class A common stock
price on the date we agree to the tower sublease terms.
As part of the transaction, we entered into an exclusive build-to-suit
agreement with ALLTEL, that is expected to result in the construction of
approximately 500 sites.
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AT&T transaction. In September 1999, we agreed to purchase 1,942 towers from
AT&T. As of December 31, 2000, we had purchased 1,929 towers. The purchase
price for these towers was approximately $258.1 million in cash. We expect to
close on any remaining towers in the first and second quarters of 2001. These
towers are located throughout the United States and were constructed by AT&T
for its microwave operations.
AT&T entered into a master lease agreement covering 468 of these towers on
which it currently conducts microwave operations. The lease has an initial term
of ten years and AT&T has five five-year renewal options. The annual base rent
payment is approximately $1.0 million, payable in January of each lease year.
The master lease agreements provides that we will adjust, but not below the
base rent, the rent payable by AT&T based on AT&T's actual usage of the towers.
As part of this transaction, we entered into a build-to-suit agreement with
AT&T Wireless Services. This agreement requires AT&T Wireless Services to
present 1,200 sites nationwide from which we will select and be required to
build 1,000 towers. We entered into a separate master lease with AT&T Wireless
Services for the build-to-suit towers. The initial term is ten years, and AT&T
Wireless Services has three five-year renewal options. The rent for lease
supplements entered into pursuant to the master lease agreement in the initial
year is $1,350 per month, per antenna site, increasing annually by $50.00 per
year for lease supplements entered into in subsequent years. All rents will be
subject to 4% annual increases.
AirTouch transaction. In August 1999, we agreed to lease on a long-term basis
up to 2,100 towers located throughout the United States from AirTouch
Communications, which is now a part of Verizon Wireless. Our 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
our Class A common stock at $22.00 per share. As of December 31, 2000, we had
closed on 1,801 towers, paid AirTouch $686.1 million in cash and issued
warrants for 3.0 million shares of our Class A common stock. We expect that we
will not close on approximately 150 of the towers included in the initial
agreement. We expect the remaining closings to occur in the first and second
quarters of 2001. These towers are located in all of AirTouch's major markets,
other than Los Angeles and San Diego, including Albuquerque, Atlanta,
Cleveland, Denver, Detroit, Minneapolis, Omaha, Phoenix, Portland, Sacramento
and Seattle.
Under our agreement with AirTouch, we are entitled to all income generated
from leasing space on the towers and are responsible for all tower expenses,
including ground rent. AirTouch has reserved space on the towers for its
antennae, for which it has agreed to pay us a site maintenance charge equal to
$1,500 per month for each non-microwave reserved space and $385 per month for
each microwave reserved space, with 3% annual increases.
We have also entered into an exclusive three-year build-to-suit agreement
with AirTouch. Under that agreement, we have the right to construct and own all
of AirTouch's towers in all markets covered by the agreement. AirTouch entered
into a separate master lease covering all towers to be constructed pursuant to
the build-to-suit agreement. AirTouch will lease space for a period of ten
years and has the option to extend for five five-year periods. The rent is
$1,500 per month for each non-microwave antenna site and $385 per month for
each microwave antenna site, with 3% annual increases. We expect this build-to-
suit agreement will result in our constructing 400 to 500 towers.
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Year 2000 Transactions
Completed transactions in 2000
During 2000, we consummated more than 60 transactions involving the
acquisition of approximately 4,600 communications sites and related businesses
and several satellite and fiber network access services and related businesses
for an aggregate purchase price of approximately $1.8 billion. This purchase
price includes $1.4 billion in cash, 4.5 million shares of our Class A common
stock and options, warrants to purchase 3.0 million shares of our Class A
common stock and $59.2 million of assumed debt. The most significant of these
transactions, other than the AT&T and AirTouch transaction described above,
were the following:
Tower and services transactions
UNIsite transaction. In January 2000, we consummated a merger with UNIsite,
an owner and operator of wireless communications sites in the United States.
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, we repaid the debt assumed in connection with the UNIsite
transaction.
Galaxy transaction. In January 2000, we acquired Galaxy Engineering Services,
a global turnkey provider of engineering consulting services based in Atlanta,
Georgia. At the time of the merger, we owned one-third of Galaxy, which we had
acquired in December 1999 for $0.5 million. In the merger, the other Galaxy
stockholders received 523,113 shares of our Class A common stock and $0.3
million in cash. Galaxy provides a complete array of radio frequency
engineering and network design services, including drive testing, voice quality
analysis and transport engineering, interconnect and microwave services.
Foreign transactions
TV Azteca transaction. In December 1999, we signed definitive agreements to
loan up to $120.0 million to TV Azteca S.A. de C.V., the owner of a major
national television broadcast network in Mexico. During 2000, we advanced this
loan and assumed marketing responsibility for approximately 190 broadcasting
towers owned by TV Azteca. Under the terms of the marketing agreement, we are
entitled to receive 100% of the revenues generated by third party leases and
are responsible for any incremental operating expenses associated with those
leases during the term of the loan. The 70-year loan may be prepaid by TV
Azteca without penalty during the last 50 years of the agreement.
Iusacell transaction. In December 1999, we entered into a management
agreement for approximately 350 existing towers and a build-to-suit agreement
for approximately 200 towers with Grupo Iusacell, the second largest wireless
telecommunications provider in Mexico. The existing towers are located in urban
and rural areas such as Mexico City, Guadalajara, Veracruz and Acapulco. We
expect to construct the build-to-suit towers over the next 18 months in key
metropolitan areas. In February 2001, we purchased 170 of the 350 towers that
are currently under the management agreement.
Unefon transaction. In early 2000, we entered into an agreement with Unefon
S.A. de C.V., a wireless service provider, in Mexico, to form a strategic
alliance to build and operate towers throughout Mexico. In December 2000, we
revised the initial agreement and paid Unefon approximately $15.0 million in
cash for its agreement to terminate the strategic alliance. In connection with
this termination, we modified our build-to-suit agreement with Unefon, which
now provides for us to construct for it up to 1,000 sites on a build-to-suit
basis.
Canadian joint venture. In March 2000, we entered into a joint venture with
Telemedia, a privately held Canadian telecommunications company, to form
Canadian Tower L.P. Canadian Tower, which is Canadian controlled and operated,
will develop and acquire wireless and broadcast towers throughout Canada. We
have committed to invest $18.0 million (Canadian) in exchange for which we will
own 45.0% of Canadian Tower. The joint venture's initial assets will include
more than 20 broadcast towers to be contributed by Telemedia. We plan for our
Canadian operations to include sites in major metropolitan areas.
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Verestar transactions
USEI transaction. In June 2000, we acquired U.S. Electrodynamics for
approximately 1.1 million shares of Class A common stock and $33.2 million in
cash. We also issued options to purchase 0.4 million shares of Class A common
stock. At the time of closing, U.S. Electrodynamics operated around-the-clock
teleport facilities in the Pacific Northwest, the Southwest and the Northeast
with a total of 52 antennae that access satellites covering the continental
United States and the Pacific Ocean region.
General Telecom transaction. In June 2000, we acquired General Telecom for
$28.8 million in cash. Our acquisition of General Telecom provided us with
independent partition voice switching capabilities and network management
services at three major voice communications gateways in New York, Miami and
Los Angeles.
Publicom transaction. In October 2000, we acquired Publicom and its
affiliates for approximately 0.4 million shares of Class A common stock and
$14.5 million in cash. Publicom and its affiliates distribute satellite and
telecommunications equipment via strategic vendor relationships with
established equipment providers. Publicom also provides wholesale ISP services
in select markets.
InterPacket Networks transaction. In December 2000, we acquired InterPacket
Networks for approximately 1.1 million shares of Class A common stock and $21.4
million in cash. InterPacket is a leader in providing international ISPs, low
cost Internet access via a global satellite overlay network. InterPacket's
customer base includes companies primarily in Africa, the Middle East, Latin
America and Asia.
Pending transactions as of December 31, 2000
As of December 31, 2000, we were a party to various pending transactions
involving the acquisition of more than 2,500 communications sites and related
businesses with an aggregate purchase price of approximately $870.0 million.
These transactions remain subject to regulatory approvals in certain cases and
other closing conditions, which we may not meet. The most significant of these
pending transactions is our agreement with ALLTEL, which is described under
"Significant Agreements" above.
Management Organization
Our corporate headquarters is in Boston, Massachusetts. We are organized on a
regional basis, with each region being headed by a vice president who reports
to our chief operating officer. Our current regional centers are based in
Boston, Atlanta, Chicago, Houston, the San Francisco Bay area and Mexico City.
We may establish additional regional centers over time, including in Canada.
Our regional centers are further subdivided into 20 area operations centers.
Our regional centers are responsible for legal and accounting functions, and
our area operations centers are responsible for service, sales and marketing.
We believe our regional and area operations centers are capable of responding
effectively to the opportunities and customer needs of their defined geographic
areas. Our area operations centers are staffed with skilled engineering,
construction management and marketing personnel.
We believe that over time we can achieve enhanced customer service and
greater operating efficiencies by further centralizing certain operating
functions, including accounting and lease administration. We are designing this
centralization of functions to enable key information about each site, tower
lease and customer to become part of a centralized database linked to regional
and area operations centers.
Through our various acquisitions and organic growth, we believe we have
obtained the services of key personnel with skills in areas such as:
. site acquisition;
. zoning and other governmental approvals;
. radio frequency engineering;
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. construction management;
. tower operations;
. engineering;
. component manufacturing;
. marketing;
. information technology;
. lease administration; and
. finance.
As we seek to expand our size and improve on the quality and consistency of
our services, we believe we may need to supplement our current workforce in
certain areas, develop new regional centers and intensify our dedication to
customer service. Accordingly, we are actively recruiting key personnel to
complete the staffing of our regional operations centers and to strengthen and
deepen our corporate group. We focus our efforts on recruiting people from the
industry sectors we serve. In addition, in some instances we recruit skilled
engineering, marketing and other personnel from outside the communications
site, wireless communications and broadcasting industries.
History
In early 1995, Steven B. Dodge, the then chairman of the board, president
and chief executive officer of American Radio Systems Corporation (American
Radio), and other members of its management, recognized the opportunity in the
communications site industry as a consequence of its ownership and operation
of broadcast towers. American Radio formed our company to capitalize on this
opportunity. American Radio distributed its stock in our company to its
securityholders in connection with its merger with CBS in June 1998.
Regulatory Matters
Towers. Both the FCC and the FAA regulate towers used for wireless
communications and radio and television antennae. These regulations control
the siting, lighting, marking and maintenance of towers. Depending on factors
such as height and proximity to public airfields, the construction of new
antenna structures or modifications to existing antenna structures must be
reviewed by the FAA prior to initiation to ensure that the structure will not
present a hazard to aircraft navigation. After the FAA issues a "No Hazard"
determination, the tower owner must register the antenna structure with the
FCC and paint and light the structure in accordance with the FAA
determination. The FAA review and the FCC registration processes are
prerequisites to FCC authorization of communications devices placed on the
antenna structure.
The FCC separately regulates and licenses wireless communications devices
operating on towers based upon the particular frequency used. In addition, the
FCC separately licenses and regulates television and radio stations
broadcasting from towers. Tower owners bear the responsibility for notifying
the FAA of any tower lighting failures and the repair of those lighting
failures. Tower owners also must notify the FCC when the ownership of a tower
changes. We generally indemnify our customers against any failure to comply
with applicable standards. Failure to comply with applicable tower-related
requirements may lead to monetary penalties.
In January 2001, the FCC concluded investigations of several operators of
communications towers, including us. The FCC sent us a Notice of Apparent
Liability for Forfeiture preliminarily determining that we had failed to file
certain informational forms, had failed to properly post certain information
at various tower sites, and on one occasion had failed to properly light a
tower. The FCC has proposed a fine of $212,000 and intends to undertake an
additional review of our overall procedures for and degree of compliance with
the FCC's regulations. The proposed fine represents a significant increase
from the amount that otherwise might be
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imposed in similar situations because of the number of violations and the FCC's
negative perception of our compliance. Depending on the outcome of the further
investigation, the FCC could take additional adverse action against us. We are
conducting our own internal investigation into our regulatory compliance
policies. As permitted by the FCC's regulations, on March 1, 2001, we filed a
response to the Notice of Apparent Liability for Forfeiture requesting that the
forfeiture be reduced. We intend to cooperate further with the FCC in any
additional investigation to resolve these matters.
The introduction and development of digital television may affect us and some
of our broadcast customers. The need to install additional antennae required to
deliver digital television service may necessitate the relocation of many
currently co-located FM antennae. The need to secure state and local regulatory
approvals for the construction and reconstruction of this substantial number of
antennae and the structures on which they are mounted presents a potentially
significant regulatory obstacle to the communications site industry. As a
result, the FCC solicited comments on whether, and in what circumstances, the
FCC should preempt state and local zoning and land use laws and ordinances
regulating the placement and construction of communications sites. Federal
preemptive regulations may never be promulgated. If adopted, they may be more
or less restrictive than existing state and local regulations. In addition,
those regulations, if challenged on constitutional grounds, may not be upheld.
Local regulations include city and other local ordinances, zoning
restrictions and restrictive covenants imposed by local authorities. These
regulations vary greatly, but typically require tower owners to obtain approval
from local officials or community standards organizations prior to tower
construction. Local regulations can delay or prevent new tower construction or
site upgrade projects, thereby limiting our ability to respond to customer
demand. In addition, those regulations increase costs associated with new tower
construction. Existing regulatory policies may adversely affect the timing or
cost of new tower construction and additional regulations may be adopted which
increase delays or result in additional costs to us. These factors could
materially adversely affect our financial condition, results of operations or
liquidity.
Our tower operations in Mexico are also subject to regulation. As we pursue
additional international opportunities, we will be subject to regulations in
additional foreign jurisdictions. In addition, our customers, both domestic and
foreign, also may be subject to new regulatory policies that may adversely
affect the demand for communications sites.
Verestar. We are required to obtain authorization from the FCC for our use of
radio frequencies to provide satellite and wireless services in the United
States. We are also required to obtain authorizations from foreign regulatory
agencies in connection with our provision of these services abroad. We hold a
number of point-to-point microwave radio licenses that are used to provide
telecommunications services. Additionally, we hold a number of satellite earth
station licenses in connection with our operation of satellite-based networks.
We are required to obtain consent from the FCC prior to assigning these
licenses or transferring control of any of our companies holding an FCC
license. We also provide maritime communications services pursuant to an
experimental license and a grant of Special Temporary Authority. We also filed
32 applications for permanent full-term FCC licenses to operate shipboard earth
stations in fixed ports. Those applications are pending. We may not be granted
permanent licenses, and the experimental license and Special Temporary
Authority currently being used may not be renewed for future terms. Any license
granted by the FCC may require substantial payments by us.
Environmental Matters
Our operations are subject to federal, state and local and foreign laws,
ordinances and regulations relating to the management, use, storage, disposal,
emission and remediation of, and exposure to, hazardous and non-hazardous
substances, materials, and waste. As the owner and/or operator of real property
and facilities, these laws, ordinances and regulations may impose liability on
us for the costs of investigation, removal or remediation of soil and
groundwater contaminated by hazardous substances or wastes. Certain of these
laws impose cleanup responsibility and liability without regard to whether the
owner or operator of the real estate or
15
facility knew of or was responsible for the contamination, and whether or not
operations at the property have been discontinued or title to the property has
been transferred. The owner or operator of contaminated real estate also may be
subject to common law claims by third parties based on damages and costs
resulting from off-site migration of the contamination. In connection with our
former and current ownership or operation of our properties, we may be
potentially liable for those types of environmental costs.
We believe we are in compliance in all material respects with applicable
environmental laws. We have not received any written notice from any
governmental authority or third party asserting, and we are not otherwise aware
of, any material environmental non-compliance, liability or claim. However, we
might be liable in the future for existing environmental conditions. We also
may incur costs for future regulatory action, as well as compliance with
existing and future environmental laws. The foregoing could have a material
adverse affect on our financial condition, results of operations or liquidity.
Competition and New Technologies
Rental and Management Segment Competition. We compete for antennae site
customers with other national independent tower companies, wireless carriers
that own and operate their own tower networks and lease tower space to other
carriers, site development companies that acquire space on existing towers for
wireless service providers and manage new tower construction, and traditional
local independent tower operators. We believe that tower location and capacity,
price, quality of service and density within a geographic market historically
have been and will continue to be the most significant competitive factors
affecting owners, operators and managers of communications sites.
We face strong competition for build-to-suit opportunities, particularly
those with the remaining wireless service providers seeking to divest their
tower ownership, principally from other independent tower companies and site
developers.
We compete for tower and site acquisitions principally with other independent
tower owners and operators. Competition may intensify and result in
substantially higher prices, particularly for towers being divested by wireless
service providers. We may not, therefore, be able to complete acquisitions on
as favorable terms as in the past. Under certain circumstances, we may also be
required to pay higher prices or agree to less favorable terms than we would
otherwise have desired. We may also be impeded in our future acquisition
activities by antitrust constraints, either in local markets or on a regional
or national basis.
Network Development Services Segment Competition. We compete as to network
development services with a variety of companies offering individual, or
combinations of, competing services. The field of competitors includes site
acquisition consultants, zoning consultants, real estate firms, right-of-way
consulting firms, construction companies, tower owners/managers, radio
frequency engineering consultants, telecommunications equipment vendors, which
provide turnkey site development services through multiple subcontractors, and
carriers' internal staffs. We believe that carriers base their decisions on
network development services on various criteria, including a company's
experience, track record, local reputation, price and time for completion of a
project. Various elements of our components business compete with numerous
other companies.
Satellite and Fiber Network Access Services Segment Competition. In the
delivery of domestic and international satellite services, we compete with
other full service teleports in the United States and satellite communications
companies. The bases of competition are primarily reliability, price and
transmission quality. Competition is expected principally from a number of
domestic and foreign telecommunications carriers and satellite owners, many of
which have substantially greater financial and other resources than we do. In
the maritime telecommunications market, we compete primarily with several other
companies that provide similar telecommunications services. Several of these
companies have FCC licenses that are similar to ours and own their own
satellites.
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We believe that we compete favorably as to the key competitive factors
relating to each of our business segments.
New Technologies. The emergence of new technologies could reduce the need for
tower-based transmission and reception and may, thereby, have a negative impact
on our operations. For example, the FCC has granted license applications for
several low-earth orbiting satellite systems that are intended to provide
mobile voice and/or data services. In addition, the emergence of new
technologies could reduce the need for tower-based transmission and reception
and have an adverse effect on our operations. Additionally, the growth in
delivery of video services by direct broadcast satellites and the development
and implementation of signal combining technologies, which permit one antenna
to service two different frequencies of transmission and, thereby, two
customers, may reduce the need for tower-based broadcast transmission and hence
demand for tower space.
Finally, any increase in the use of roaming or resale arrangements by
wireless service providers would adversely affect the demand for tower space.
These arrangements enable a provider to serve customers outside its license
area, to give licensed providers the right to enter into arrangements to serve
overlapping license areas and to permit non-licensed providers to enter the
wireless marketplace. Wireless service providers might consider such roaming
and resale arrangements as superior to constructing their own facilities or
leasing antenna space from us.
Construction, Manufacturing and Raw Materials
We build, maintain and install land based wireless communications and
broadcast transmitting and receiving facilities by obtaining sheet metal and
other raw material parts and components from a variety of vendors. We also
engage third party contract manufacturers to construct certain of these
wireless transmitting and receiving and broadcast facilities. We have
historically obtained the majority of our sheet metal and other raw materials
parts and components, including for our components business, from a limited
number of suppliers. However, substantially all of these items are available
from numerous other suppliers. We have not, to date, experienced any
significant difficulties in obtaining the needed quantities of materials from
suppliers in a timely manner.
Employees
As of December 31, 2000, we employed approximately 3,300 full time
individuals and consider our employee relations to be satisfactory.
Factors That May Affect Future Results
We operate in a rapidly changing environment that involves a number of risks,
some of which are beyond our control. The following discussion highlights some
of the risks that may affect future operating results.
DECREASE IN DEMAND FOR TOWER SPACE WOULD MATERIALLY AND ADVERSELY AFFECT OUR
OPERATING RESULTS AND WE CANNOT CONTROL THAT DEMAND.
Many of the factors affecting the demand for tower space, and to a lesser
extent our services business, affect our operating results. Those factors
include:
. consumer demand for wireless services;
. the financial condition of wireless service providers and their
preference for owning rather than leasing antenna sites;
. the growth rate of wireless communications or of a particular wireless
segment;
. the number of wireless service providers in a particular segment,
nationally or locally;
17
. governmental licensing of broadcast rights;
. increased use of roaming and resale arrangements by wireless service
providers. These arrangements enable a provider to serve customers
outside its license area, to give licensed providers the right to enter
into arrangements to serve overlapping license areas and to permit
nonlicensed providers to enter the wireless marketplace. Wireless
service providers might consider such roaming and resale arrangements as
superior to constructing their own facilities or leasing antenna space
from us;
. zoning, environmental and other government regulations; and
. technological changes.
The demand for antenna space is dependent, to a significantly lesser extent,
on the needs of television and radio broadcasters. Among other things,
technological advances, including the development of satellite-delivered radio,
may reduce the need for tower-based broadcast transmission. We could also be
affected adversely should the development of digital television be delayed or
impaired, or if demand for it were to be less than anticipated because of
delays, disappointing technical performance or cost to the consumer.
A significant general slow down in the economy in 2001 or beyond could
negatively affect the foregoing factors influencing demand for tower space and
tower related services. For example, such a slow down could reduce consumer
demand for wireless services, thereby causing providers to delay implementation
of new systems, and the introduction of new technologies. We also believe that
the economic slow down in 2001 has already harmed, and may continue to harm,
the financial condition of some wireless service providers.
OUR SUBSTANTIAL LEVERAGE AND DEBT SERVICE OBLIGATIONS MAY ADVERSELY AFFECT OUR
CASH FLOW AND OUR ABILITY TO MAKE PAYMENTS ON OUR SENIOR NOTES.
We have a substantial amount of outstanding indebtedness. After giving effect
to our sale of 10.0 million shares of Class A common stock in January 2001, our
sale of $1.0 billion of 9 3/8% senior notes due 2009 in January 2001 and
borrowings that we assume we would have made to close acquisitions that were
pending as of December 31, 2000, we would have had at December 31, 2000
approximately $3.4 billion of consolidated debt. Our substantial level of
indebtedness increases the possibility that we may be unable to generate cash
sufficient to pay when due the principal of, interest on or other amounts due
in respect of our indebtedness. We may also obtain additional long-term debt
and working capital lines of credit to meet future financing needs. This would
have the effect of increasing our total leverage.
Our substantial leverage could have significant negative consequences,
including:
. increasing our vulnerability to general adverse economic and industry
conditions;
. limiting our ability to obtain additional financing;
. requiring the dedication of a substantial portion of our cash flow from
operations to service our indebtedness, thereby reducing the amount of
our cash flow available for other purposes, including capital
expenditures;
. requiring us to sell debt or equity securities or to sell some of our
core assets, possibly on unfavorable terms, to meet payment obligations;
. limiting our flexibility in planning for, or reacting to, changes in our
business and the industries in which we compete; and
. placing us at a possible competitive disadvantage with less leveraged
competitors and competitors that may have better access to capital
resources.
A significant portion of our outstanding indebtedness bears interest at
floating rates. As a result, our interest payment obligations on such
indebtedness will increase if interest rates increase.
RESTRICTIVE COVENANTS IN OUR CREDIT FACILITIES AND OUR SENIOR NOTES COULD
ADVERSELY AFFECT OUR BUSINESS BY LIMITING FLEXIBILITY.
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The indenture for our senior notes due 2009 and our credit facilities contain
restrictive covenants that limit our ability to take various actions and engage
in various types of transactions. These restrictions include:
. paying dividends and making distributions or other restricted payments;
. incurring more debt, guaranteeing indebtedness and issuing preferred
stock;
. issuing stock of certain subsidiaries;
. making certain investments;
. creating liens;
. entering into transactions with affiliates;
. entering into sale-leaseback transactions; and
. merging, consolidating or selling assets.
These covenants could have an adverse effect on our business by limiting our
ability to take advantage of financing, merger and acquisition or other
corporate opportunities.
BUILD-TO-SUIT CONSTRUCTION PROJECTS AND MAJOR ACQUISITIONS FROM WIRELESS
SERVICE PROVIDERS INCREASE OUR DEPENDENCE ON A LIMITED NUMBER OF CUSTOMERS, THE
LOSS OF WHICH COULD MATERIALLY DECREASE REVENUES, AND MAY ALSO INVOLVE LESS
FAVORABLE TERMS.
Our focus on major build-to-suit projects for wireless service providers and
related acquisitions entail several unique risks. First is our greater
dependence on a limited number of customers and the risk that customer losses
could materially decrease revenues. Another risk is that our agreements with
these wireless service providers have lease and control terms that are more
favorable to them than the terms we give our tenants generally. In addition,
although we have the benefit of an anchor tenant in build-to-suit projects, we
may not be able to find a sufficient number of additional tenants. In fact, one
reason wireless service providers may prefer build-to-suit arrangements is to
share or escape the costs of an undesirable site. A site may be undesirable
because it has high construction costs or may be considered a poor location by
other providers.
OUR EXPANDED CONSTRUCTION PROGRAM INCREASES OUR EXPOSURE TO RISKS THAT COULD
INCREASE COSTS AND ADVERSELY AFFECT OUR EARNINGS AND GROWTH.
Our expanded construction activities involve substantial risks. These risks
include:
. increasing our debt and the amount of payments on that debt;
. increasing competition for construction sites and experienced tower
construction companies, resulting in significantly higher costs and
failure to meet time schedules;
. failing to meet time schedules, which could result in our paying
significant penalties to prospective tenants, particularly in build-to-
suit situations; and
. possible lack of sufficient experienced personnel to manage an expanded
construction program.
IF WE ARE UNABLE TO CONSTRUCT OR ACQUIRE NEW TOWERS AT THE PACE, IN THE
LOCATIONS AND AT THE COSTS THAT WE DESIRE, OUR BUSINESS WOULD BE ADVERSELY
AFFECTED.
Our growth strategy depends in part on our ability to construct and acquire
towers in locations and on a time schedule that meets the requirements of our
customers. If our tower construction and acquisition projects fail to meet the
requirements of our customers, or fail to meet their requirements at our
projected costs, our business would be adversely affected. If we are unable to
build new towers where and when our customers require them, or where and when
we believe the best opportunity to add tenants exists, we could fail to meet
our contractual obligations under build-to-suit agreements, and we could lose
opportunities to lease space on our towers. Our ability to construct a tower at
a location, on a schedule and at a cost we project can be affected by a number
of factors beyond our control, including:
. zoning, and local permitting requirements and national regulatory
approvals;
. environmental opposition;
19
. availability of skilled construction personnel and construction
equipment;
. adverse weather conditions; and
. increased competition for tower sites, construction materials and labor.
INCREASING COMPETITION IN THE SATELLITE AND FIBER NETWORK ACCESS SERVICES
MARKET MAY SLOW VERESTAR'S GROWTH AND ADVERSELY AFFECT ITS BUSINESS.
In the satellite and fiber network access services market, Verestar competes
with other satellite communications companies that provide similar services, as
well as other communications service providers. Some of Verestar's existing and
potential competitors consist of companies from whom Verestar currently leases
satellite and fiber network access in connection with the provision of
Verestar's services to its customers. Increased competition could result in
Verestar being forced to reduce the fees it charges for its services and may
limit Verestar's ability to obtain, on economical terms, services that are
critical to its business. We anticipate that Verestar's competitors may develop
or acquire services that provide functionality that is similar to that provided
by Verestar's services and that those competitive services may be offered at
significantly lower prices or bundled with other services. Many of the existing
and potential competitors have financial and other resources significantly
greater than those available to Verestar.
IF WE CANNOT KEEP RAISING CAPITAL, OUR GROWTH WILL BE IMPEDED.
Without additional capital, we would need to curtail our acquisition and
construction programs that are essential for our long-term success. We expect
to use borrowed funds to satisfy a substantial portion of our capital needs.
However, we must continue to satisfy financial ratios and to comply with
financial and other covenants in order to do so. If our revenues and cash flow
do not meet expectations, we may lose our ability to borrow money or to do so
on terms we consider to be favorable. Conditions in the capital markets also
will affect our ability to borrow, as well as the terms of those borrowings.
All of these factors could also make it difficult or impossible for us
otherwise to raise capital, particularly on terms we would consider favorable.
IF WE CANNOT SUCCESSFULLY INTEGRATE ACQUIRED SITES OR BUSINESSES OR MANAGE OUR
OPERATIONS AS WE GROW, OUR BUSINESS WILL BE ADVERSELY AFFECTED AND OUR GROWTH
MAY SLOW OR STOP.
A significant part of our growth strategy is the continued pursuit of
strategic acquisitions of independent tower operators and consolidators,
wireless service providers and service and satellite and fiber network access
services businesses. We cannot assure you, however, that we will be able to
integrate successfully acquired businesses and assets into our existing
business. During 2000, we have consummated more than 60 transactions involving
the acquisition of more than 4,600 communications sites and related businesses
and several satellite and fiber network access services businesses and related
businesses. Our growth has placed, and will continue to place, a significant
strain on our management and operating and financial systems. Successful
integration of these and any future acquisitions will depend primarily on our
ability to manage these assets and combined operations and, with respect to the
services and satellite and fiber network access services businesses, to
integrate new management and employees into our existing operations.
IF OUR CHIEF EXECUTIVE OFFICER LEFT, WE WOULD BE ADVERSELY AFFECTED BECAUSE WE
RELY ON HIS REPUTATION AND EXPERTISE, AND BECAUSE OF OUR RELATIVELY SMALL
SENIOR MANAGEMENT TEAM.
The loss of our chief executive officer, Steven B. Dodge, has a greater
likelihood of having a material adverse effect upon us than it would on most
other companies of our size because of our comparatively smaller executive
group and our reliance on Mr. Dodge's expertise. Our growth strategy is highly
dependent on the efforts of Mr. Dodge. Our ability to raise capital also
depends significantly on the reputation of Mr. Dodge. You should be aware that
we have not entered into an employment agreement with Mr. Dodge. The tower
industry is relatively new and does not have a large group of seasoned
executives from which we could recruit a replacement for Mr. Dodge.
20
EXPANDING OPERATIONS INTO FOREIGN COUNTRIES COULD CREATE EXPROPRIATION,
GOVERNMENTAL REGULATION, FUNDS INACCESSIBILITY, FOREIGN EXCHANGE EXPOSURE AND
MANAGEMENT PROBLEMS.
Our recent expansion into Canada and Mexico, and other possible foreign
operations in the future, could result in adverse financial consequences and
operational problems not experienced in the United States. We have made a
substantial loan to a Mexican company and are committed to construct a sizable
number of towers in that country. We have also invested in a Canadian joint
venture that intends to acquire and construct towers in that country. We may
also engage in comparable transactions in other countries in the future. Among
the risks of foreign operations are governmental expropriation and regulation,
inability to repatriate earnings or other funds, currency fluctuations,
difficulty in recruiting trained personnel, and language and cultural
differences, all of which could adversely affect operations.
NEW TECHNOLOGIES COULD MAKE OUR TOWER ANTENNA LEASING SERVICES LESS DESIRABLE
TO POTENTIAL TENANTS AND RESULT IN DECREASING REVENUES
The development and implementation of signal combining technologies, which
permit one antenna to service two different transmission frequencies and,
thereby, two customers, may reduce the need for tower-based broadcast
transmission and hence demand for our antenna space.
Mobile satellite systems and other new technologies could compete with land-
based wireless communications systems, thereby reducing the demand for tower
lease space and other services we provide. The Federal Communication Commission
has granted license applications for several low-earth orbiting satellite
systems that are intended to provide mobile voice or data services. In
addition, the emergence of new technologies could reduce the need for tower-
based transmission and reception and have an adverse effect on our operations.
The growth in delivery of video services by direct broadcast satellites could
also adversely affect demand for our antenna space.
WE COULD HAVE LIABILITY UNDER ENVIRONMENTAL LAWS.
Under various federal, state and local environmental laws, we, as an owner,
lessee or operator of more than 13,600 real estate sites, after giving effect
to our pending transactions, may be liable for the substantial costs of
remediating soil and groundwater contaminated by hazardous wastes. For a
discussion of our risks relating to environmental matters, see "Environmental
Matters" above.
OUR BUSINESS IS SUBJECT TO GOVERNMENT REGULATIONS AND CHANGES IN CURRENT OR
FUTURE LAWS OR REGULATIONS COULD RESTRICT OUR ABILITY TO OPERATE OUR BUSINESS
AS WE CURRENTLY DO.
We are subject to federal, state and local and foreign regulation of our
business. Both the FCC and the FAA regulate towers used for wireless
communications and radio and television antennae. In addition, the FCC
separately regulates wireless communication devices operating on towers and
licenses and regulates television and radio stations broadcasting from towers.
Similar regulations exist in Mexico, Canada and other foreign countries
regarding wireless communications and the operation of communications towers.
Failure to comply with applicable requirements may lead to monetary penalties
and may require us to indemnify our customers against any such failure to
comply. New regulations may impose additional costly burdens on us, which may
affect our revenues and cause delays in our growth.
On January 16, 2001, the FCC issued a Notice of Apparent Liability for
Forfeiture against us for apparent violations of some FCC rules regarding the
registration of communication towers and, in one instance, the lighting
requirements for communication towers. This action involves a proposed fine of
$212,000. In addition, the FCC has ordered its Enforcement Division to conduct
a further investigation of our administrative compliance. At this time we are
unable to predict the outcome of the Notice of Apparent Liability for
Forfeiture or any further investigation. For a more complete discussion of the
regulatory risks affecting the various aspects of our business, and a recent
FCC investigation of our towers, see "Regulatory Matters" above.
21
OUR COSTS COULD INCREASE AND OUR REVENUES COULD DECREASE DUE TO PERCEIVED
HEALTH RISKS FROM RADIO EMISSIONS, ESPECIALLY IF THESE PERCEIVED RISKS ARE
SUBSTANTIATED.
Public perception of possible health risks associated with cellular and other
wireless communications media could slow the growth of wireless companies,
which could in turn slow our growth. In particular, negative public perception
of, and regulations regarding, these perceived health risks could slow the
market acceptance of wireless communications services.
If a connection between radio emissions and possible negative health effects,
including cancer, were established, our operations, costs and revenues would be
materially and adversely affected. We do not maintain any significant insurance
with respect to these matters.
CONTROL BY OUR PRINCIPAL STOCKHOLDERS COULD DETER MERGERS WHERE YOU COULD GET
MORE THAN CURRENT MARKET PRICE FOR YOUR STOCK.
Steven B. Dodge, together with his affiliates, owned approximately 26.0% of
our total voting power as of February 28, 2001. Control by Mr. Dodge and others
may discourage a merger or other takeover of our company in which holders of
common stock may be paid a premium for their shares over then-current market
prices. Mr. Dodge, together with a limited number of our directors, may be able
to control or block the vote on mergers and other matters submitted to the
common stockholders.
ITEM 2. PROPERTIES
Our corporate headquarters are at 116 Huntington Avenue, Boston,
Massachusetts, where we occupy approximately 40,000 square feet of office space
in a building that we own. A description of the principal properties of each of
our business segments is as follows:
. our rental and management segment leases an aggregate of approximately
82,000 square feet of office space in Atlanta, the Chicago metropolitan
area, Houston, the San Francisco Bay area and Mexico City;
. our network development services segment owns approximately 817,000
square feet and leases approximately 220,000 square feet of commercial
property in several cities around the United States. These properties
include an aggregate of approximately 476,000 square feet of space at
five locations that we use in our component part business to manufacture
and store inventory, and a 240,000 square foot steel fabrication
facility;
. The primary properties of our satellite and fiber network access
services segment are the parcels of land on which the satellite dishes
and related facilities of our 11 SNAPs are located. In the aggregate,
our SNAPs occupy over 180 acres of land, including 164 acres that we own
and 19 acres that we lease. All but one of these properties are located
throughout the United States and range in size from two- to seventy-acre
parcels. We also own one property in Switzerland.
Our interests in communications sites are comprised of a variety of fee and
leasehold interests created by long-term lease agreements, private easements
and easements, licenses or rights-of-way granted by government entities. In
rural areas, a communications site typically consists of a three-to-five-acre
tract, which supports towers, equipment shelters and guy wires to stabilize the
structure. Less than 2,500 square feet are required for a monopole or self-
supporting tower structure of the kind typically used in metropolitan areas.
Land leases generally have 20 to 25-year terms, with three five-year renewals,
or are for five-year terms with automatic renewals unless we otherwise specify.
Pursuant to our credit facilities, the lenders have liens on, among other
things, all tenant leases, contracts relating to the management of towers for
others, cash, accounts receivable, the stock and other equity interests of
virtually all of our subsidiaries and all inter-company debt, inventory and
other personal property, fixtures, including towers, intellectual property, as
well as certain fee and leasehold interests, and the proceeds of the foregoing.
22
We believe that our owned and leased facilities are suitable and adequate to
meet our anticipated needs.
ITEM 3. LEGAL PROCEEDINGS
We periodically become involved in various claims and lawsuits that are
incidental to our business. We believe that no matters currently pending would,
in the event of an adverse outcome, have a material impact on our consolidated
financial position, results of operations or liquidity. For information
regarding a recent FCC investigation of our towers, see "Business-Regulatory
Matters-Towers".
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of our security holders in the fourth
quarter of 2000.
23
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our Class A common stock commenced trading on the New York Stock Exchange
(NYSE) on June 5, 1998 (the day after we separated from American Radio). The
following table presents reported high and low sale prices of our Class A
common stock on the Composite Tape of the NYSE for the years 1999 and 2000.
1999 High Low
---- ------ ------
Quarter ended March 31........................................ $30.25 $20.50
Quarter ended June 30......................................... 26.88 20.50
Quarter ended September 30.................................... 26.00 19.50
Quarter ended December 31..................................... 33.25 17.13
2000
----
Quarter ended March 31........................................ $55.50 $28.56
Quarter ended June 30......................................... 50.44 36.31
Quarter ended September 30.................................... 47.63 27.63
Quarter ended December 31..................................... 42.44 28.75
On March 26, 2001, the closing price of our Class A common stock was $20.25
as reported on the NYSE.
The outstanding shares of common stock and number of registered holders as of
December 31, 2000 were as follows:
Class
-------------------------------
A B C
----------- --------- ---------
Outstanding shares........................... 170,035,952 8,095,005 2,267,813
Registered holders........................... 662 64 1
Dividends
We have never paid a dividend on any class of common stock. We anticipate
that we will retain future earnings, if any, to fund the development and growth
of our business. We do not anticipate paying cash dividends on shares of common
stock in the foreseeable future. Our credit facilities and the indenture for
our senior notes restrict the payment of cash dividends by us and our
subsidiaries.
Recent Sales of Unregistered Securities
In connection with acquisitions completed in 2000, we issued shares of our
Class A common stock in transactions exempt from the registration requirements
of the Securities Act of 1933 for the number of shares indicated on the
following dates: 523,113 shares on January 13, 2000; 766,666 shares on March
29, 2000; 1,115,151 shares and options to purchase 400,000 shares on June 7,
2000; 388,661 shares on October 2, 2000; 346,413 shares on October 26, 2000;
258,213 shares on November 15, 2000; and 1,124,475 shares on December 29, 2000.
The security holders of the acquired companies were the purchasers in each of
the foregoing instances.
On February 15, 2000, we completed a private placement of $450.0 million of
5.0% convertible notes to certain qualified institutional buyers. The notes are
convertible at any time on or before February 15, 2010 into shares of Class A
common stock at a conversion price of $51.50 per share. Upon conversion, we are
obligated to deliver 19.4175 shares of Class A common stock for each $1,000
principal amount of 5.0% notes.
During 2000, we also issued an aggregate of 3,576,145 shares of Class A
common stock pursuant to the exercise of conversion rights of holders of our
6.25% convertible notes. We originally issued these notes as a
24
private placement to qualified institutional buyers in October 1999. The 6.25%
notes are convertible at any time on or before October 15, 2009 at a conversion
price of $24.40 per share. Upon conversion, we are obligated to deliver 40.9836
shares of Class A common stock for each $1,000 principal amount of 6.25% notes.
During 2000, we also issued an aggregate of 2,148,035 shares of Class A common
stock pursuant to the exercise of conversion rights of holders of our 2.25%
convertible notes. We originally issued these notes as a private placement to
qualified institutional buyers in October 1999. The 2.25% notes are convertible
at any time on or before October 15, 2009 at a conversion price of $24.00 per
share. Upon conversion, we are obligated to deliver 29.3833 shares of Class A
common stock for each $1,000 principal amount of 2.25% notes. As an inducement
for the foregoing note conversions, we issued an aggregate of 402,414 shares of
Class A common stock to the holders of the notes in addition to the number of
shares of Class A common stock that they were entitled to receive upon
conversion.
We issued the securities referred to in the foregoing paragraphs in reliance
on the exemption from registration provided by Section 4(2) of the Securities
Act, or in the case of the conversions of convertible notes, Section 3(a)(9) of
the Securities Act. As a basis for doing so, we relied, in part, on the
following factors: (i) in each instance, we offered our securities to a limited
number of offerees without any general solicitation, (ii) we obtained
representations from the respective purchasers regarding their financial
suitability and investment intent, (iii) with respect to the exemption under
Section 3(a)(9), the converted securities were exchanged solely for Class A
common stock and no commission or remuneration (other than shares of Class A
common stock) was paid or given directly or indirectly for soliciting such
exchange and (iv) we issued all of the foregoing securities with restrictive
legends on the certificates to limit resales.
25
ITEM 6. SELECTED FINANCIAL DATA
The financial data set forth below has been derived from our audited
consolidated financial statements, certain of which are included in this Annual
Report on Form 10-K. The data should be read in conjunction with our audited
consolidated financial statements and with "Management's Discussion and
Analysis of Financial Condition and Results of Operations." Prior to the ATC
Separation on June 4, 1998, we operated as a subsidiary of American Radio
Systems (American Radio) and not as an independent public company. Therefore,
the results of operations and the financial conditions shown below for such
periods may be different from what they might have been had we operated as a
separate, independent public company.
We do not consider divisional cash flow and EBITDA as a substitute for other
measures of operating results or cash flow from operating activities or as a
measure of our profitability or liquidity. Divisional cash flow and EBITDA are
not calculated in accordance with generally accepted accounting principles.
However, we have included them because they are generally used in the
communications site industry as a measure of a company's operating performance.
More specifically, we believe they can assist in comparing company performances
on a consistent basis without regard to depreciation and amortization. Our
concern is that depreciation and amortization can vary significantly among
companies depending on accounting methods, particularly where acquisitions are
involved, or non-operating factors such as historical cost bases. We believe
divisional cash flow is useful because it enables you to compare divisional
performance before the effect of tower separation, development and corporate
general and administrative expenses that do not relate directly to such
performance.
Year Ended December 31,
-----------------------------------------------
2000 1999 1998 1997 1996
--------- -------- -------- ------- -------
(in thousands, except per share data)
Statements of Operations
Data:
Operating revenues........... $ 735,275 $258,081 $103,544 $17,508 $ 2,897
--------- -------- -------- ------- -------
Operating expenses:
Operating expenses (1)....... 524,074 155,857 61,751 8,713 1,362
Depreciation and
amortization................ 283,360 132,539 52,064 6,326 990
Tower separation expense
(2)......................... 12,772
Development expense (3)...... 14,517 1,607
Corporate general and
administrative expense...... 14,958 9,136 5,099 1,536 830
--------- -------- -------- ------- -------
Total operating
expenses................ 836,909 299,139 131,686 16,575 3,182
--------- -------- -------- ------- -------
(Loss) income from
operations.................. (101,634) (41,058) (28,142) 933 (285)
Interest expense............. (156,839) (27,492) (23,229) (3,040)
Interest income and other,
net......................... 13,018 17,695 9,217 251 36
Interest income--TV Azteca,
net (4)..................... 12,679 1,856
Premium on note conversion
(5)......................... (16,968)
Minority interest in net
earnings of subsidiaries
(6)......................... (202) (142) (287) (193) (185)
--------- -------- -------- ------- -------
Loss before income taxes and
extraordinary losses........ (249,946) (49,141) (42,441) (2,049) (434)
Benefit (provision) for
income taxes................ 59,656 (214) 4,491 473 (45)
--------- -------- -------- ------- -------
Loss before extraordinary
losses...................... $(190,290) $(49,355) $(37,950) $(1,576) $ (479)
========= ======== ======== ======= =======
Basic and diluted loss per
common share before
extraordinary losses (7).... $ (1.13) $ (0.33) $ (0.48) $ (0.03) $ (0.01)
========= ======== ======== ======= =======
Weighted average common
shares outstanding (7)...... 168,715 149,749 79,786 48,732 48,732
========= ======== ======== ======= =======
Other Operating Data:
Divisional cash flow (8)..... $ 223,880 $102,224 $ 41,793 $ 8,795 $ 1,535
EBITDA (9)................... 194,405 91,481 36,694 7,259 705
EBITDA margin (9)............ 26.4% 35.4% 35.4% 41.5% 24.3%
26
December 31,
-------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- -------- -------
(in thousands)
Balance Sheet Data:
Cash and cash
equivalents........... $ 82,038 $ 25,212 $ 186,175 $ 4,596 $ 2,373
Property and equipment,
net................... 2,296,670 1,092,346 449,476 117,618 19,710
Total assets........... 5,660,679 3,018,866 1,502,343 255,357 37,118
Long-term obligations,
including current
portion............... 2,468,223 740,822 281,129 90,176 4,535
Total stockholders'
equity................ 2,877,030 2,145,083 1,091,746 153,208 29,728
- --------
(1) Consists of operating expenses other than depreciation and amortization,
and tower separation, development and corporate general and administrative
expenses.
(2) Tower separation expense refers to the one-time expense incurred as a
result of our separation from American Radio.
(3) Development expense includes uncapitalized acquisition costs, costs to
integrate acquisitions, costs associated with new business initiatives,
abandoned acquisition costs and costs associated with tower site
inspections and related data gathering. Development expenses prior to 1999
were not material.
(4) Interest income--TV Azteca, net of interest expense of $1.0 million in
2000.
(5) Premium on note conversion represents the fair value of incremental stock
issued to noteholders to induce them to convert their holdings prior to
the first scheduled redemption date.
(6) Represents the minority interest in net earnings of our non-wholly-owned
subsidiaries.
(7) We computed basic and diluted loss per common share before extraordinary
losses using the weighted average number of shares outstanding during each
period presented. Shares outstanding following the separation from
American Radio are assumed to be outstanding for all periods presented
prior to June 4, 1998. We have excluded shares issuable upon exercise of
options and other common stock equivalents from the computations as their
effect is anti-dilutive.
(8) Divisional cash flow means (loss) income from operations before
depreciation and amortization, and tower separation, development and
corporate general and administrative expenses, plus interest income--TV
Azteca, net for the year ended December 31, 2000.
(9) EBITDA means (loss) income from operations before depreciation and
amortization and tower separation expense, plus interest income--TV
Azteca, net for the year ended December 31, 2000. EBITDA margin, as used
above, means EBITDA divided by operating revenues.
27
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
In early 1995, Steven B. Dodge, the then chairman of the board, president and
chief executive officer of American Radio, and other members of American
Radio's management, recognized the opportunity in the communications site
industry as a consequence of American Radio's ownership and operation of
broadcast towers. Our company was formed to capitalize on this opportunity.
American Radio distributed its stock in our company to its securityholders in
connection with its merger with CBS in June 1998. As a result, our consolidated
financial statements may not reflect our results of operations or financial
position had we been an independent public company during the period prior to
June 1998.
We are a leading wireless and broadcast communications infrastructure company
operating in three business segments.
. Rental and management. We operate the largest network of wireless
communications towers in North America and are the largest independent
operator of broadcast towers in North America, based on number of
towers.
. Network development services. We provide comprehensive network
development services and components for wireless service providers and
broadcasters.
. Satellite and fiber network access services. Our Verestar subsidiary is
a leading provider of integrated satellite and fiber network access
services based upon the number of teleport antennae and facilities. We
provide these services to telecommunications companies, ISPs,
broadcasters and maritime customers, both domestic and international. We
previously referred to our satellite and fiber network access services
segment as "Internet, voice, data and video transmission" or "IVDV".
During the years ended December 31, 2000, 1999, and 1998, we acquired various
communications sites, service businesses and satellite and fiber network access
related businesses for aggregate purchase prices of approximately $1.8 billion,
$1.2 billion and $853.8 million, respectively. We expect that acquisitions
consummated to date will have a material impact on future revenues, expenses
and income from operations. In addition, certain historical financial
information presented below and elsewhere in this document does not reflect the
impact of our construction program to any significant extent because most of
that activity is of a more recent origin and is expected to continue during
2001 and thereafter.
28
Results of Operations
Years Ended December 31, 2000 and 1999
As of December 31, 2000, we owned or operated approximately 11,000
communications sites, as compared to approximately 5,100 communications sites
as of December 31, 1999. The acquisitions and construction completed in 2000
and 1999 have significantly affected operations for the year ended December 31,
2000, as compared to the year ended December 31, 1999.
Year Ended December 31, Amount of Percent
------------------------- Increase Increase
2000 1999 (Decrease) (Decrease)
------------ ----------- --------- ---------
(in thousands)
Revenues:
Rental and management......... $ 278,153 $ 135,303 $142,850 106%
Network development services.. 311,921 90,416 221,505 245
Satellite and fiber network
access services.............. 145,201 32,362 112,839 349
------------ ----------- --------
Total operating revenues..... 735,275 258,081 477,194 185
------------ ----------- --------
Operating Expenses:
Rental and management......... 139,240 62,441 76,799 123
Network development services.. 274,769 69,318 205,451 296
Satellite and fiber network
access services.............. 110,065 24,098 85,967 357
------------ ----------- --------
Total operating expenses
excluding depreciation and
amortization, development and
corporate general and
administrative expenses...... 524,074 155,857 368,217 236
------------ ----------- --------
Depreciation and
amortization................. 283,360 132,539 150,821 114
Development expense........... 14,517 1,607 12,910 803
Corporate general and
administrative expense....... 14,958 9,136 5,822 64
Interest expense.............. 156,839 27,492 129,347 470
Interest income and other,
net.......................... 13,018 17,695 (4,677) (26)
Interest income--TV Azteca,
net of interest expense of
$1,047 in 2000............... 12,679 1,856 10,823 583
Premium on note conversion.... 16,968 16,968 N/A
Minority interest in net
earnings of subsidiaries..... 202 142 60 42
Income tax benefit
(provision).................. 59,656 (214) 59,870 N/A
Extraordinary losses on
extinguishment of debt, net.. 4,338 1,372 2,966 216
------------ ----------- --------
Net loss...................... $ (194,628) $ (50,727) $143,901 284%
============ =========== ========
Rental and Management Revenue
Rental and management revenue for the year ended December 31, 2000 was $278.2
million, an increase of $142.9 million from the year ended December 31, 1999.
The increase can be primarily attributed to two factors: the acquisition and
construction of towers in 2000 and the latter part of 1999 and increased lease-
ups (utilization) of new and existing towers. During 2000, we continued to
implement our growth strategy by aggressively acquiring and building new
towers. With the consummation of the AirTouch, AT&T and other transactions, we
acquired more than 4,600 towers in 2000. This coupled with the construction of
over 1,600 towers in 2000, increased the scope, depth and strength of our
national and international tower footprint providing us with a much larger base
of towers generating revenue in 2000 as compared to 1999.
In the long-term, we believe that our leasing revenues are likely to grow at a
more rapid rate than revenues from other segments of our business because of
increasing utilization of existing tower capacity, recent and pending
acquisitions and build-to-suit and other construction activities.
29
Additionally, during 2000, we also focused on implementing an area management
structure that enhances sales and marketing, enabling us to increase the
utilization of both previously existing (prior to January 2000) and newly
acquired/constructed towers. Increased utilization resulted in increases in
revenue in 2000 for towers that were in our portfolio as of January 1, 2000.
Network Development Services Revenue
Network development services revenue for the year ended December 31, 2000 was
$311.9 million, an increase of $221.5 million from revenue for the year ended
December 31, 1999. The significant growth in revenues during 2000 resulted from
strategic acquisitions and increased demand for installation work and component
parts from major wireless carriers.
During 2000, we acquired several key services companies that added additional
revenue and expanded our in-house services capabilities. Among the acquisitions
were Galaxy Engineering Services, which enables us to perform an array of radio
frequency engineering and network design services, such as drive testing, voice
quality analysis and transport engineering and Kline Iron & Steel Co., a steel
fabrication company with expertise in broadcast towers. In addition, increased
demand for some of our network development services, such as equipment
installation, maintenance and sales of component parts, also created additional
revenue in 2000. Much of this increased demand was a result of aggressive
network expansion programs initiated by major wireless communications carriers
during the year. In contrast, our revenues from site acquisition and
construction work for others, which are also part of our network development
services segment, have declined, and we believe will continue to decline, as a
percentage of our total revenues. This decline is attributable to the trend in
the wireless communications industry to outsource tower infrastructure needs.
This trend means we are increasingly applying our site acquisition and
construction capabilities to our build-to-suit projects and for other
construction for our own account.
Satellite and Fiber Network Access Services Revenue
Satellite and fiber network access services revenue for the year ended
December 31, 2000 was $145.2 million, an increase of $112.8 million from
revenue for the year ended December 31, 1999. The majority of the increase can
be attributed to the consummation of several key acquisitions that occurred in
2000 and the fourth quarter of 1999 including: ICG Satellite Services, General
Telecom, U.S. Electrodynamics, and Publicom. These acquisitions significantly
increased our service capabilities, revenue base, and geographical scope of our
customers as well as providing significant incremental revenues in 2000. We
also experienced an increase in demand of the internet and data requirements of
our internet service provider customers in 2000.
Rental and Management Expense
Rental and management expense for the year ended December 31, 2000 was $139.2
million, an increase of $76.8 million from the year ended December 31, 1999. A
significant portion of the increase is attributable to incremental operating
expenses incurred in 2000 for towers that were acquired or constructed during
2000 and the latter part of 1999 as discussed above. The remaining component of
the increase is primarily related to additional expenses incurred by us in 2000
to implement our area management structure together with, to a lesser extent,
increases in operating expenses on certain towers that existed in 1999.
Network Development Services Expense
Network development services expense for the year ended December 31, 2000 was
$274.8 million, an increase of $205.5 million from the year ended December 31,
1999. The significant increase in expense is primarily due to the strategic
acquisitions consummated in 2000 as discussed above. In addition, we incurred
expenses in 2000 to transition a portion of our Specialty Constructors unit
from tower construction work to equipment installation and other services. In
part, this transition is related to an ongoing process to decentralize some of
our tower construction capabilities and develop some of those capabilities at
our regional and area
30
locations. Remaining increases in expense are directly related to a charge for
a bad debt reserve of approximately $7.0 million recorded in the fourth quarter
and overall increases in the amount of services and component sales to
customers.
Satellite and Fiber Network Access Services Expense
Satellite and fiber network access services expense for the year ended
December 31, 2000 was $110.1 million, an increase of $86.0 million from the
year ended December 31, 1999. Substantially all of the increase can be
attributed to the strategic acquisitions discussed above, together with
additional expenses related to integrating those acquisitions. Remaining
increases are related to the building of infrastructure to help manage the
growth of this segment and overall increases in volume.
Depreciation and Amortization
Depreciation and amortization for the year ended December 31, 2000 was $283.4
million, an increase of $150.8 million from the year ended December 31, 1999. A
component of the increase is attributable to an increase in depreciation
expense of $74.8 million. This is a direct result of our purchase, construction
and acquisition of approximately $1.3 billion of property and equipment during
2000. The remaining component of the increase is an increase in amortization of
$76.0 million, resulting from our recording and amortizing approximately $1.3
billion of goodwill and other intangible assets related to acquisitions
consummated during 2000.
Development Expense
Development expense for the year ended December 31, 2000 was $14.5 million,
an increase of $12.9 million from the year ended December 31, 1999. The
majority of the increase represents costs related to tower site inspections,
related data gathering and certain integration expenses related to acquisitions
consummated in 2000. The remaining component of the increase, represents
expenses incurred in connection with abandoned acquisitions and other
acquisition related costs which are not capitalized in accordance with
generally accepted accounting principles.
Corporate General and Administrative Expense
Corporate general and administrative expense for the year ended December 31,
2000 was $15.0 million, an increase of $5.8 million from the year ended
December 31, 1999. The majority of the increase is a result of higher
personnel, marketing, professional services and information technology costs
associated with supporting our increasing number of towers, the growth of our
other businesses, our expanding revenue base and our growth strategy.
Interest Expense
Interest expense for the year ended December 31, 2000 was $156.8 million, an
increase of $129.3 million from the year ended December 31, 1999. This increase
is primarily related to increased borrowings to finance acquisitions and
construction. The net change, specifically, is attributable to increases in
interest incurred on our outstanding debt obligations of $131.7 million and
deferred financing amortization of $5.6 million. These interest increases were
offset by an increase in capitalized interest related to construction projects
of $8.0 million.
Interest Income and Other, Net
Interest income and other, net for the year ended December 31, 2000 was $13.0
million, a decrease of $4.7 million from the year ended December 31, 1999. The
decrease is primarily attributable to a decrease in interest earned on invested
cash on hand of $4.6 million as a consequence of such cash being used to
finance acquisitions and construction.
31
Interest Income--TV Azteca, Net
Interest income--TV Azteca, net for the year ended December 31, 2000 was
$12.7 million, an increase of $10.8 million for the year ended December 31,
1999. Amounts included within this caption at December 31, 2000 represent
interest earned on our note receivable from TV Azteca of $13.7 million offset
by interest expense of $1.0 million.
Premium on Note Conversion
During the year ended December 31, 2000, we acquired a portion of our 6.25%
and 2.25% convertible notes in exchange for shares of our Class A common stock.
As a consequence of those negotiated exchanges with certain of our noteholders,
we recorded an expense related to the premium on note conversion 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.
Income Taxes
The income tax benefit for the year ended December 31, 2000 was $59.7
million, an increase of $59.9 million from the year ended December 31, 1999.
The primary reason for the increase is a result of an increase in our loss
before income taxes and extraordinary losses, partially offset by an increase
in amortization of non-deductible intangible assets arising from stock
acquisitions consummated in the years ended December 31, 2000 and 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 year ended December 31, 2000, the non-
deductible note conversion expense on which we have recorded no tax benefit.
In assessing the realizability of the deferred tax asset, we analyzed our
forecast of future taxable income and concluded that, after recording a
valuation allowance of $6.0 million related to a portion of our state net
operating loss carry-forwards, recoverability of the remaining net deferred tax
asset is more likely than not. The realization of the deferred tax asset is not
dependent upon significant changes in the current relationship between income
reported for financial and tax purposes, or material asset sales or other
transactions not in the ordinary course of business.
Extraordinary Losses on Extinguishment of Debt
We have incurred extraordinary losses on the extinguishment of debt in 2000
of $4.3 million. The losses were incurred as a result of an amendment and
restatement of our primary credit facilities ($3.0 million, net of a tax
benefit of $2.0 million) and our early retirement of debt assumed in the
UNISite, Inc. merger ($1.3 million, net of a tax benefit of $0.9 million).
32
Years Ended December 31, 1999 and 1998
As of December 31, 1999, we operated approximately 5,100 communications
sites, as compared to approximately 2,300 communications sites as of December
31, 1998. The acquisitions consummated in 1999 and 1998 significantly affected
operations for the year ended December 31, 1999 as compared to the year ended
December 31, 1998.
Year Ended December 31, Amount of Percent
------------------------ Increase Increase
1999 1998 (Decrease) (Decrease)
----------- ----------- --------- ---------
(in thousands)
Revenues:
Rental and management.......... $ 135,303 $ 60,505 $74,798 124%
Network development services... 90,416 23,315 67,101 288
Satellite and fiber network
access services............... 32,362 19,724 12,638 64
----------- ----------- --------
Total operating revenues...... 258,081 103,544 154,537 149
----------- ----------- --------
Operating Expenses:
Rental and management.......... 62,441 29,455 32,986 112
Network development services... 69,318 19,479 49,839 256
Satellite and fiber network
access services............... 24,098 12,817 11,281 88
----------- ----------- --------
Total operating expenses
excluding depreciation and
amortization, tower
separation, development and
corporate general and
administrative expenses....... 155,857 61,751 94,106 152
----------- ----------- --------
Depreciation and amortization.. 132,539 52,064 80,475 155
Tower separation expense....... 12,772 (12,772) N/A
Development expense............ 1,607 1,607 N/A
Corporate general and
administrative expense........ 9,136 5,099 4,037 79
Interest expense............... 27,492 23,229 4,263 18
Interest income and other,
net........................... 17,695 9,217 8,478 92
Interest income--TV Azteca..... 1,856 1,856 N/A
Minority interest in net
earnings of subsidiaries...... 142 287 (145) (51)
Income tax (provision)
benefit....................... (214) 4,491 (4,705) N/A
Extraordinary loss on
extinguishment of debt, net... 1,372 1,382 (10) (1)
Extraordinary loss on
redemption of preferred stock,
net........................... 7,510 (7,510) N/A
----------- ----------- --------
Net loss....................... $(50,727) $(46,842) $ 3,885 8%
=========== =========== ========
Rental and Management Revenue
Rental and management revenue for the year ended December 31, 1999 was $135.3
million, an increase of $74.8 million from the year ended December 31, 1998.
The majority of the increase, $56.4 million, is attributable to revenue
generated from acquisitions consummated and/or towers constructed subsequent to
December 31, 1998. The remaining factor contributing to the additional revenue
is an increase in comparable tower revenue of $18.4 million during 1999 for
towers that existed during 1998.
Network Development Services Revenue
Network development services revenue for the year ended December 31, 1999 was
$90.4 million, an increase of $67.1 million from the year ended December 31,
1998. The primary reason for the increase is due to the $66.7 million of
revenue earned after the merger with OmniAmerica, Inc. The remaining component
of the increase is attributable to revenue generated from our existing services
business of approximately $0.4 million.
33
Satellite and Fiber Network Access Services Revenue
Satellite and fiber network access services revenue for the year ended
December 31, 1999 was $32.4 million, an increase of $12.6 million from the year
ended December 31, 1998. The primary reason for the increase is the
approximately $9.9 million of revenue earned during 1999 as a result of
acquisitions consummated in 1999. The remaining component of the increase, $2.7
million, is an increase in revenue from the satellite and fiber network access
services business that existed at December 31, 1998.
Rental and Management, Network Development Services and Satellite and Fiber
Network Access Services Expenses
Rental and management, network development services and satellite and fiber
network access services expenses for the year ended December 31, 1999 were
$62.4 million, $69.3 million and $24.1 million, respectively, an increase of
$33.0 million, $49.8 million and $11.3 million, respectively, from the year
ended December 31, 1998. The primary reasons for the increase in these expenses
are essentially the same as those discussed above under each respective revenue
segment.
Depreciation and Amortization
Depreciation and amortization for the year ended December 31, 1999 was $132.5
million, an increase of $80.5 million from the year ended December 31, 1998. A
component of the increase is attributable to an increase in depreciation
expense of $30.5 million resulting from our purchase, construction and/or
acquisition of approximately $693.4 million of property and equipment during
1999. The remaining component of the increase is an increase in amortization
expense of $50.0 million, resulting from our amortization of approximately
$751.7 million of goodwill and other intangible assets related to acquisitions
consummated during 1999.
Tower Separation Expense
We completed our separation from American Radio in 1998. No additional
expenses related to the separation were incurred in 1999, nor are any expected
to occur in the future. See note 1 of the consolidated financial statements for
a description of tower separation expense.
Corporate General and Administrative Expense
Corporate general and administrative expense for the year ended December 31,
1999 was $9.1 million, an increase of $4.0 million from the year ended December
31, 1998. The majority of this increase resulted from higher personnel and
marketing costs associated with our growing revenue base and market position.
The remaining component of the increase is the overall increases in other
administrative expenses incurred in supporting our growth.
Development Expense
Development expense for the year ended December 31, 1999 was $1.6 million.
These expenses include abandoned acquisition costs, costs to integrate
acquisitions and costs associated with new business initiatives.
Interest Expense
Interest expense for the year ended December 31, 1999 was $27.5 million, an
increase of $4.3 million from the year ended December 31, 1998. The increase is
primarily attributable to an increase of interest on our outstanding debt
obligations ($9.4 million) and amortization of deferred financing costs ($0.7
million). These interest increases were offset by a decrease of $3.1 million in
interest incurred during 1998 on our outstanding redeemable preferred stock
(which was redeemed in July 1998), as well as an increase in interest
capitalized during the year ended December 31, 1999.
34
Interest Income and Other, Net
Interest income and other, net for the year ended December 31, 1999 was $17.7
million, an increase of $8.5 million from the year ended December 31, 1998. The
increase is primarily related to an increase in interest earned on invested
cash on hand ($4.9 million), interest earned on notes receivable ($1.4 million)
and interest earned on security/escrow deposits ($2.2 million).
Interest Income--TV Azteca
Interest income--TV Azteca for the year ended December 31, 1999 was $1.9
million. Amounts included within this caption represent interest earned on our
notes receivable from TV Azteca.
Income Taxes
The income tax provision for the year ended December 31, 1999 was $0.2
million, a decrease of $4.7 million from the income tax benefit recorded for
the year ended December 31, 1998. The decrease in the tax benefit is due to an
increase in nondeductible permanent items (principally goodwill amortization).
The increase in nondeductible permanent items occurred as a result of the
consummation of several mergers and acquisitions in 1999.
As of December 31, 1999, we had a net deferred tax asset of $116.0 million.
In assessing the realizability of the deferred tax asset, we analyzed our
forecast of future taxable income and concluded that recoverability of the net
deferred tax asset is more likely than not. The realization of the deferred tax
asset is not dependent upon significant changes in the current relationship
between income reported for financial and tax purposes, or material asset sales
or other transactions not in the ordinary course of business.
Extraordinary Losses
We incurred an extraordinary loss on the extinguishment of debt in 1999 of
$1.4 million due to the early repayment of one of our term loans. We recorded
an extraordinary loss of $1.4 million in 1998 due to the refinancing of our
then existing credit facility. We also recorded an extraordinary loss of $7.5
million in 1998 due to the redemption of our interim preferred stock.
Liquidity and Capital Resources
Our liquidity needs arise from our acquisition-related activities, debt
service, working capital and capital expenditures associated principally with
our construction program. As of December 31, 2000, we had approximately $82.0
million in cash and cash equivalents, working capital of approximately $173.4
million, and had approximately $300.0 million of available borrowings under our
credit facilities.
Historically, we have met our operational liquidity needs primarily with
internally generated funds and have financed our acquisitions and our
construction program, including related working capital needs, with a
combination of capital funds from sales of our equity and debt securities and
bank borrowings. We expect that this trend will continue in 2001.
Our 2001 capital budget provides for expenditures of approximately $600.0
million, which includes towers to be built under existing build-to-suit
agreements. In addition, based on the transactions executed to date, we expect
to close on pending transactions of approximately $800.0 million in 2001.
Lastly, we believe that debt service requirements will be significant in 2001.
We believe our current cash and cash equivalents (which include proceeds from
our equity and senior note offerings in 2001) and existing borrowing capacity
under our credit facilities will be sufficient to meet these above cash
requirements. If we were to effect more than one or possibly two major new
acquisitions in the next twelve months, we would likely require additional
funds from external sources.
35
For the year ended December 31, 2000, cash flows used for operating
activities were $25.0 million, as compared to cash flows provided by operating
activities of $97.0 million for the year ended December 31, 1999. The primary
reasons for the decrease are increased interest payments, the paydown of
current liabilities assumed through acquisitions and an increase in current
assets.
For the year ended December 31, 2000, cash flows used for investing
activities were $2.0 billion, as compared to $1.1 billion for the year ended
December 31, 1999. The increase in 2000 is primarily due to a net increase in
cash expended for mergers and acquisitions, coupled with an increase in
property and equipment expenditures.
For the year ended December 31, 2000, cash flows provided by financing
activities were $2.1 billion, as compared to $879.7 million for the year ended
December 31, 1999. The increase is primarily related to increased net
borrowings under our credit facilities, offset by a decrease in proceeds from
the issuance of debt and equity securities.
As of December 31, 2000, we had outstanding the indebtedness as described
below (under "Credit Facilities" and "Equity Offerings and Note Placements").
In addition, as of December 31, 2000, we had outstanding $212.7 million
principal amount of our 6.25% convertible notes due October 15, 2009 and $258.2
million principal amount of our 2.25% convertible notes due October 15, 2009,
and other debt of approximately $197.3 million. See note 6 to our consolidated
financial statements. We may need to raise cash from external sources to meet
our debt service obligations and to pay the principal amounts of our
indebtedness when due.
Credit Facilities. Our credit facilities provide us with a borrowing capacity
of up to $2.0 billion, with the option to increase the capacity up to an
additional $500.0 million, subject to lender approval. Borrowings under the
credit facilities are subject to certain borrowing base restrictions, such as
operating cash flow and construction cost levels. Our credit facilities
currently include a $650.0 million revolving credit facility which was fully
available (subject to the borrowing base restrictions) on December 31, 2000,
maturing on June 30, 2007, an $850.0 million multi-draw Term Loan A, which was
fully drawn on December 31, 2000, maturing on June 30, 2007, and a $500.0
million Term Loan B, which was fully drawn on December 31, 2000, maturing on
December 31, 2007. The credit facilities are scheduled to amortize quarterly
commencing in March, 2003.
Our credit facilities contain certain financial and operational covenants and
other restrictions with which the borrower subsidiaries and the restricted
subsidiaries must comply, whether or not there are any borrowings outstanding.
We and the restricted subsidiaries have guaranteed all of the loans. We have
secured the loans by liens on substantially all assets of the borrower
subsidiaries and the restricted subsidiaries and substantially all outstanding
capital stock and other debt and equity interests of all of our direct and
indirect subsidiaries.
Under our credit facilities, we are also required to maintain an interest
reserve for our convertible notes and our senior notes. These funds can only be
used to make scheduled interest payments on our outstanding convertible notes
and senior notes. As of December 31, 2000 we had approximately $46.0 million of
restricted cash related to such interest reserve.
ATC Mexico Loan Agreement. In February 2001, our Mexican subsidiary, American
Tower Corporation de Mexico, S. de R.L. de C.V., which we refer to as ATC
Mexico, and two of its subsidiaries consummated a loan agreement with a group
of banks providing a credit facility of an initial aggregate amount of $95.0
million. If additional lenders are made party to the agreement, the size of the
facility may increase to $140.0 million. We have committed to ATC Mexico to
loan up to $45.0 million if additional lenders are not made party to the
agreement. Our committment will be reduced on a dollar-for-dollar basis if
additional lenders join the ATC Mexico loan agreement. This credit facility
requires maintenance of various financial covenants and ratios and is
guaranteed and collateralized by substantially all of the assets of ATC Mexico
and the assets of its subsidiaries. All amounts borrowed under this loan
agreement are due on September 30, 2003. The lenders' commitment to make loans
under the loan agreement expires on March 31, 2002. As of March 2001, an
aggregate of $95.0 million was outstanding under this loan agreement.
36
Equity Offerings and Note Placements. During 2000, we consummated a public
offering of 12.5 million shares of our Class A common stock for total net
proceeds of approximately $513.9 million. In addition, we consummated a private
placement of $450.0 million of 5.0% convertible notes, issued at 100% of their
face amount. The convertible notes mature in February 2010 and require interest
payments semi-annually. We used the proceeds from these two transactions to
reduce borrowings under our credit facilities, to finance acquisitions and
tower construction and for general working capital purposes.
In January 2001, we completed a public offering of 10.0 million shares of our
Class A common stock for total net proceeds of approximately $360.8 million. We
also completed a private placement of $1.0 billion of 9 3/8% senior notes that
mature in February 2009 for total net proceeds of $969.0 million. These notes
require interest payments semi-annually and contain certain financial and
operational covenants and other restrictions similar to those in our credit
facilities. We expect to use the proceeds from these two transactions to
finance the construction of towers, fund pending and future acquisitions and
for general corporate purposes.
ATC Separation. We continue to be obligated under the ATC Separation
agreement for certain tax liabilities to CBS and American Radio. As of December
31, 2000, no material matters covered under this indemnification have been
brought to our attention.
Acquisitions and Construction. We expect that the consummated acquisitions
and current and future construction activities will have a material impact on
liquidity. We believe that the acquisitions, once integrated, will have a
favorable impact on liquidity and will offset the initial effects of the
funding requirements. We also believe that the construction activities may
initially have an adverse effect on our future liquidity as newly constructed
towers will initially decrease overall liquidity. However, as such sites become
fully operational and achieve higher utilization, we expect that they will
generate tower cash flow and, in the long-term, increase liquidity. As of
December 31, 2000, we were a party to various agreements relating to
acquisitions of assets or businesses from various third parties and were
involved in the construction of numerous towers, pursuant to build-to-suit
agreements and for other purposes.
Economic conditions. A significant general slow down in the economy in 2001
or beyond could reduce consumer demand for wireless services, thereby causing
providers to delay implementation of new systems and technologies, and has
harmed, and may continue to harm, the financial condition of some wireless
service providers, as referred to elsewhere herein.
Recent Accounting Pronouncements
On January 1, 2001, we adopted the provisions of SFAS No. 133 "Accounting for
Derivative Instruments and Hedging Activities." This statement establishes
accounting and reporting standards for derivative instruments. Specifically, it
requires that an entity recognize all derivatives as either assets or
liabilities on the balance sheet at fair value. The accounting for changes in
the fair value of a derivative (that is unrealized gains or losses) will be
recorded as a component of an entity's net income or other comprehensive
income, depending upon designation (as defined in the statement). As a result
of adopting SFAS No. 133, we expect to record a pre-tax non-cash loss from a
cumulative effect of change in accounting principle of approximately $12.0
million to $14.0 million in the first quarter of 2001.
During 2000, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition," which provides the
SEC staff's views in applying generally accepted accounting principles to
revenue recognition. SAB No. 101 was effective for the Company on October 1,
2000. The adoption of SAB No. 101 was not material to our consolidated
financial statements.
In March 2000, the Financial Accounting Standards Board issued Interpretation
No. 44 (FIN 44), "Accounting for Certain Transactions involving Stock
Compensation", an interpretation of APB No. 25. FIN 44 was effective July 1,
2000. The adoption of FIN 44 was not material to our consolidated financial
statements.
37
Information Presented Pursuant to the Indenture for Our 9 3/8% Senior Notes
The following table sets forth information that is presented solely to
address certain reporting requirements contained in the indenture for our 9
3/8% senior notes issued in January 2001. This information presents certain
financial data for us on a consolidated basis and on a restricted group basis,
which means only for American Tower and its subsidiaries that comprise the
restricted group under the indenture governing those senior notes. All of our
subsidiaries are part of this restricted group, except Verestar and its
subsidiaries, whose operations constitute all of our satellite and fiber
network access services business segment. This restricted group data is not
intended to represent an alternative measure of operating results, financial
position or cash flow from operations, as determined in accordance with
generally accepted accounting principles.
Consolidated Restricted Group(1)
------------------------- --------------------
Year Ended
Year Ended December 31, December 31,
------------------------- --------------------
2000 1999 2000 1999
------------ ----------- ---------- --------
(in thousands)
Statement of Operations Data:
Operating revenues........... $ 735,275 $ 258,081 $ 590,074 $225,719
------------ ----------- ---------- --------
Operating expenses:
Operating expenses(2)........ 524,074 155,857 414,009 131,759
Depreciation and
amortization................. 283,360 132,539 256,286 125,275
Development expense(3)....... 14,517 1,607 14,433 1,406
Corporate general and
administrative expense...... 14,958 9,136 14,958 9,136
------------ ----------- ---------- --------
Total operating expenses.. 836,909 299,139 699,686 267,576
------------ ----------- ---------- --------
Loss from operations......... (101,634) (41,058) (109,612) (41,857)
Interest expense............. (156,839) (27,492) (155,006) (27,487)
Interest income and other,
net......................... 13,018 17,695 12,661 17,632
Interest income--TV Azteca,
net(4)...................... 12,679 1,856 12,679 1,856
Premium on note
conversion(5)............... (16,968) (16,968)
Minority interest in net
earnings of
subsidiaries(6)............. (202) (142) (202) (142)
------------ ----------- ---------- --------
Loss before income taxes and
extraordinary losses........ $ (249,946) $ (49,141) $(256,448) $(49,998)
============ =========== ========== ========
December 31, 2000
-----------------------------
Consolidated Restricted Group
------------ ----------------
Balance Sheet Data:
Cash and cash equivalents....................... $ 82,038 $ 66,547
Property and equipment, net..................... 2,296,670 2,013,270
Total assets.................................... 5,660,679 5,019,766
Long-term obligations, including current
portion........................................ 2,468,223 2,355,911
Net debt(7)..................................... 2,386,185 2,289,364
Total stockholders' equity...................... 2,877,030 2,877,030
- --------
(1) Corporate overhead allocable to Verestar and interest expense related to
intercompany borrowings to Verestar (unrestricted subsidiary) have not
been excluded from results shown for the restricted group.
(2) Consists of operating expenses other than depreciation and amortization,
and development and corporate general and administrative expenses.
(3) Development expense includes uncapitalized acquisition costs, costs to
integrate acquisitions, costs associated with new business initiatives,
abandoned acquisition costs and costs associated with tower site
inspections and related data gathering.
(4) Interest income--TV Azteca, net of interest expense of $1.0 million in
2000.
(5) Premium on note conversion represents the fair value of incremental stock
issued to noteholders to induce them to convert their holdings prior to
the first scheduled redemption date.
(6) Represents the minority interest in net earnings of our non-wholly-owned
subsidiaries.
(7) Net debt represents long-term obligations, including current portion, less
cash and cash equivalents.
38
Tower Cash Flow, Adjusted Consolidated Cash Flow and Non-Tower Cash Flow for
the Company and its restricted subsidiaries, as defined in the indenture for
our 9 3/8% senior notes, are as follows:
Tower Cash Flow, for the three months ended December 31, 2000..... $47,164
========
Consolidated Cash Flow, for the twelve months ended December 31,
2000............................................................. $173,786
Less: Tower Cash Flow, for the twelve months ended December 31,
2000........................................................... (151,592)
Plus: four times Tower Cash Flow, for the three months ended
December 31, 2000.............................................. 188,656
--------
Adjusted Consolidated Cash Flow, for the twelve months ended
December 31, 2000................................................ $210,850
========
Non-Tower Cash Flow, for the twelve months ended December 31,
2000............................................................. $7,761
========
39
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of and for the years ended December 31, 2000 and 1999, we were exposed to
market risk from changes in interest rates on long-term debt obligations. We
attempted to reduce those risks by utilizing derivative financial instruments,
namely interest rate caps, swaps, collars and swaptions. All derivative
financial instruments are for purposes other than trading.
During 2000, we increased our borrowings under our credit facilities by
approximately $1.26 billion. In addition, we completed a private placement of
$450.0 million of 5.0% convertible notes issued at 100% of their face amount.
We also entered into several interest rate cap, swap, collar and swaption
agreements to reduce our risk with respect to the variable rate debt under our
credit facilities. Lastly, during 2000 we had interest rate caps with a total
notional amount of $66.9 million expire.
The following tables provide information as of December 31, 2000 and 1999
about our market risk exposure associated with changing interest rates. For
long-term debt obligations, the tables present principal cash flows by maturity
date and average interest rates related to outstanding obligations. For
interest rate caps, swaps, collars and swaptions, the tables present notional
principal amounts and weighted-average interest rates by contractual maturity
dates.
As of December 31, 2000
Principal Payments and Interest Rate Detail by Contractual Maturity Dates (In
thousands)
Long-Term Debt 2001 2002 2003 2004 2005 Thereafter Total Fair Value
- -------------- ---------- ---------- ---------- -------- -------- ---------- ---------- ----------
Fixed Rate Debt(a)...... $495 $591 $641 $696 $37,107 $936,582 $976,112 $1,243,860
Average Interest
Rate(a)................ 5.79% 5.79% 5.80% 5.80% 5.71% 5.71%
Variable Rate Debt (a).. $56,000 $192,000 $243,000 $859,000 $1,350,000 $1,350,000
Average Interest Rate
(a)....................
Aggregate Notional Amounts Associated with Interest Rate Caps, Swaps, Collars
and Swaptions in Place
As of December 31, 2000 and Interest Rate Detail by Contractual Maturity Dates
(In thousands)
Interest Rate CAPS 2001 2002 2003 2004 2005 Thereafter Total Fair Value
- ------------------ ---------- ---------- ---------- -------- -------- ---------- ---------- ----------
Notional Amount......... $364,980 $364,980(c)
Cap Rate................ 9.00% 9.00%
Interest Rate SWAPS
- -------------------
Notional Amount......... $395,000 $395,000(d) $365,000(e) $ (7,680)
Weighted-Average Fixed
Rate Payable (b)....... 6.69% 6.69% 6.67%
Interest Rate COLLARS
- ---------------------
Notional Amount......... $465,000 $465,000(f) $185,000(g) $ (6,107)
Weighted-Average Below
Floor Rate Payable,
Above Cap Rate
Receivable (b)......... 6.35%,8.90% 6.35%,8.90% 6.46%,9.00%
Interest Rate SWAPTIONS
- -----------------------
Notional Amount......... $290,000(h) $ 1,707
Weighted-Average
Swaption Rate(b)....... 6.56%
As of December 31, 1999
Principal Payments and Interest Rate Detail by Contractual Maturity Dates (In
thousands)
Long-Term Debt 2000 2001 2002 2003 2004 Thereafter Total Fair Value
- -------------- ---------- ---------- ---------- -------- -------- ---------- ---------- ----------
Fixed Rate Debt(a)...... $270 $319 $347 $378 $411 $639,034 $640,759 $640,759
Average Interest
Rate(a)................ 6.38% 6.38% 6.37% 6.37% 6.37% 6.37%
Variable Rate Debt(a)... $6,750 $11,250 $13,500 $18,000 $40,500 $90,000 $90,000
Average Interest
Rate(a)................
Aggregate Notional Amounts Associated with Interest Rate Caps in Place As of
December 31, 1999
and Interest Rate Detail by Contractual Maturity Dates (In thousands)
Interest Rate CAPS 2000 2001 2002 2003 2004 Thereafter Total Fair Value
- ------------------ ---------- ---------- ---------- -------- -------- ---------- ---------- ----------
Notional Amount......... $66,860(i)
Weighted-Average Cap
Rate(b)................ 8.82%
40
- --------
(a) December 31, 2000 variable rate debt consists of our credit facilities
($1.35 billion) and fixed rate debt consists of the 2.25% and 6.25%
convertible notes ($470.9 million), the 5.0% convertible notes ($450.0
million) and mortgage payables ($55.2 million). Interest on the credit
facilities is payable in accordance with the applicable London Interbank
Offering Rate (LIBOR) agreement or quarterly and accrues at the Company's
option either at LIBOR plus margin (as defined) or the Base Rate plus
margin (as defined). The average interest rate in effect at December 31,
2000 for the credit facilities was 9.65%. For the year ended December 31,
2000, the weighted average interest rate under the credit facilities was
9.56%. The 2.25% and 6.25% convertible notes each bear interest (after
giving effect to the accretion of the original discount on the 2.25%
convertible notes) at 6.25%, which is payable semiannually on April 15 and
October 15 of each year beginning April 15, 2000. The 5.0% convertible
notes bear interest at 5.0% which is payable semiannually on February 15
and August 15 of each year. The mortgage payables bear interest at rates
ranging from 7.93% to 8.42% and are payable on a monthly basis.
December 31, 1999 variable rate debt consists of our credit facilities
existing at December 31, 1999 ($90.0 million) and fixed rate debt consists
of the 2.25% and 6.25% convertible notes ($602.3 million) and a mortgage
payable ($38.5 million). The interest rate in effect at December 31, 1999
for the then existing credit facilities was 9.25%. For the year ended
December 31, 1999, the weighted average interest rate under the credit
facilities was 7.94%. The mortgage payable bears interest at 8.42% and is
payable on a monthly basis.
(b) Represents the weighted-average fixed rate or range of interest based on
contract notional amount as a percentage of total notional amounts in a
given year.
(c) Includes notional amounts of $364,980 that will expire in February 2002.
(d) Includes notional amounts of $30,000 that will expire in March 2002.
(e) Includes notional amounts of $75,000 and $290,000 that will expire in
January and February 2003, respectively.
(f) Includes notional amounts of $185,000 and $95,000 that will expire in May
and July 2002, respectively.
(g) Includes notional amounts of $185,000 that will expire in May 2003.
(h) Includes notional amounts of $290,000 that will expire in August 2001.
(i) Includes notional amounts of $21,500, $23,750 and $21,610 that expired in
January, April and July 2000, respectively.
We maintain a portion of our cash and cash equivalents in short-term
financial instruments which are subject to interest rate risks. Due to the
relatively short duration of such instruments, we believe fluctuations in
interest rates with respect to such investments will not materially affect our
financial condition or results of operations.
Our foreign operations have not been significant to date. Accordingly,
foreign currency risk has not been material for the years ended December 31,
2000 and 1999.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Item 14(a).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
41
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Our executive officers, and their respective ages and positions as of
February 29, 2001 are set forth below:
Name Age Position
---- --- --------
Steven B. Dodge.................. 55 Chairman of the Board, President and
Chief Executive Officer
Justin D. Benincasa.............. 39 Senior Vice President and Corporate
Controller
Norman A. Bikales................ 65 Executive Vice President--Special
Counsel
Alan L. Box...................... 49 Executive Vice President and Director
James S. Eisenstein.............. 42 Executive Vice President--Corporate
Development
David W. Garrison................ 45 Director, Chairman and Chief Executive
Officer of Verestar, Inc.
J. Michael Gearon, Jr. .......... 36 Executive Vice President, Director and
President of American Tower
International
Steven J. Moskowitz.............. 37 Executive Vice President--Marketing and
Vice President and General Manager
Northeast Region
Bradley E. Singer................ 34 Executive Vice President--Strategy and
Vice President and General Manager,
Southeast Region
Douglas C. Wiest................. 48 Chief Operating Officer
Joseph L. Winn................... 49 Chief Financial Officer and Treasurer
Steven B. Dodge has served as our Chairman of the Board, President and Chief
Executive Officer since our separation from American Radio in June 1998 (the
"ATC Separation"). Mr. Dodge was the Chairman of the Board of Directors,
President and Chief Executive Officer of American Radio from its founding in
November 1993 until the ATC Separation. In 1988, Mr. Dodge founded Atlantic
Radio, one of the predecessor entities of American Radio. Mr. Dodge currently
serves on the boards of Citizens Financial Group, Inc., Nextel Partners, Inc.,
Sothebys Holdings, Inc. and TD Waterhouse Group, Inc.
Justin D. Benincasa is Senior Vice President and Corporate Controller. Mr.
Benincasa was a Vice President and Corporate Controller of American Radio from
its founding in 1993 until the ATC Separation.
Norman A. Bikales is Executive Vice President--Special Counsel. Mr. Bikales
joined us in February 2000. Previously, he was a senior partner at the Boston
law firm of Sullivan & Worcester LLP acting as our outside legal counsel.
Alan L. Box has served as an Executive Vice President since March 1998 and
has been a director since our organization. Mr. Box served as Chief Operating
Officer from June 1997 to March 1998, at which time he assumed his present role
as the Executive Vice President responsible for our satellite and fiber network
access services business. Mr. Box also was an Executive Vice President and a
director of American Radio from April 1997 when EZ Communications ("EZ"),
merged into American Radio, until the ATC Separation. Prior to April 1997, Mr.
Box had been the Chief Executive Officer of EZ, a company he joined in 1974.
James S. Eisenstein is Executive Vice President--Corporate Development. Mr.
Eisenstein has overall responsibility for seeking out acquisition and
development opportunities. Mr. Eisenstein helped form our company in the summer
of 1995. From 1990 to 1995, he was Chief Operating Officer for Amaturo Group
Ltd., a broadcast company operating 11 radio stations and four broadcasting
towers, several of which were purchased by American Radio. Mr. Eisenstein is a
director of U.S. Wireless, Inc.
David W. Garrison is Chairman and Chief Executive Officer of Verestar, one of
our wholly owned subsidiaries, and a director. From February 1995 to July 1998,
Mr. Garrison served as Chairman, Chief Executive Officer, President and Chief
Operating Officer of NETCOM OnLine Communications Services, Inc., a pioneer
independent provider of internet services in four countries. Prior to that, Mr.
Garrison was President of Skytel
42
Communications, Inc., a leading provider of wireless mobile data services, and
Chairman and Chief Executive Officer of Dial Page, Inc., a regional paging
carrier based in the Southeast United States, which became part of Nextel
Communications, Inc. ("Nextel"). Mr. Garrison is currently a director of
Ameritrade Holding Corporation.
J. Michael Gearon, Jr. is Executive Vice President and the President of
American Tower International, and has been a director since our acquisition of
Gearon Communications in January 1998. In addition, he has served as an
Executive Vice President since January 1998. Prior to joining us, Mr. Gearon
had been the founder and Chief Executive Officer of Gearon Communications since
September 1991, which he developed into one of the fastest growing private
companies in the United States.
Steven J. Moskowitz is Executive Vice President--Marketing and Vice President
and General Manager of our Northeast Region. Mr. Moskowitz joined us in January
1998, initially as a Vice President and General Manager of our Northeast
Region, and assumed his current position in March 1999. From 1989 until 1998,
Mr. Moskowitz served as a Vice President of The Katz Media Group, the largest
broadcast media representation firm in the United States.
Bradley E. Singer is Executive Vice President--Strategy and Vice President
and General Manager, Southeast Region. Mr. Singer joined us in September 2000
as Executive Vice President--Strategy, and was appointed Vice President and
General Manager of the Southeast region in November 2000. Prior to joining us,
Mr. Singer was an investment banker with Goldman, Sachs & Co. focusing on the
telecommunications industry.
Douglas C. Wiest is our Chief Operating Officer. Mr. Wiest joined us in
February 1998, initially as the Chief Operating Officer of Gearon
Communications, and assumed his current position in March 1998. Prior to
joining us, Mr. Wiest had been Regional Vice President of Engineering and
Operations for Nextel's Southern Region since 1993.
Joseph L. Winn is our Chief Financial Officer and Treasurer. Mr. Winn was
Treasurer, Chief Financial Officer and a director of American Radio from its
founding in 1993 until the ATC Separation.
The information under "Election of Directors" and "Section 16(a) Beneficial
Ownership Reporting Compliance" from the Definitive Proxy Statement is hereby
incorporated by reference herein.
ITEM 11. EXECUTIVE COMPENSATION
The information under "Compensation and Other Information Concerning
Directors and Officers" from the Definitive Proxy Statement is hereby
incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information under "Securities Ownership of Certain Beneficial Owners and
Management" from the Definitive Proxy Statement is hereby incorporated by
reference herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under "Certain Relationships and Related Transactions" from
the Definitive Proxy Statement is hereby incorporated by reference herein.
43
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8- K
(a) Financial Statements and Schedules. See index to Financial Statements,
which appears on page F-1 hereof.
(b) Reports on Form 8-K.
Form 8-K (Items 5, 7 and 9) filed on December 20, 2000.
Form 8-K (Items 2 and 7) filed on December 15, 2000.
Form 8-K (Item 7) filed on November 13, 2000.
Form 8-K (Item 7) filed on October 30, 2000.
(c) Exhibits. The exhibits listed on the Exhibit Index hereof are filed
herewith in response to this Item.
44
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on the 26th day of
March 2001.
American Tower Corporation
(Registrant)
/s/ Steven B. Dodge
By: _________________________________
Steven B. Dodge
Chief Executive Officer,
President and Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been duly signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Steven B. Dodge Chief Executive Officer, March 26, 2001
______________________________________ President and Chairman
Steven B. Dodge (Principal Executive
Officer)
/s/ Joseph L. Winn Chief Financial Officer March 26, 2001
______________________________________ and Treasurer
Joseph L. Winn (Principal Financial
Officer)
/s/ Justin D. Benincasa Senior Vice President and March 26, 2001
______________________________________ Corporate Controller
Justin D. Benincasa (Principal Accounting
Officer)
/s/ Alan L. Box Director March 26, 2001
______________________________________
Alan L. Box
/s/ Arnold L. Chavkin Director March 26, 2001
______________________________________
Arnold L. Chavkin
/s/ David W. Garrison Director March 26, 2001
______________________________________
David W. Garrison
/s/ J. Michael Gearon, Jr. Director March 26, 2001
______________________________________
J. Michael Gearon, Jr.
/s/ Fred R. Lummis Director March 26, 2001
______________________________________
Fred R. Lummis
45
Signature Title Date
--------- ----- ----
/s/ Thomas H. Stoner Director March 26, 2001
______________________________________
Thomas H. Stoner
/s/ Maggie Wilderotter Director March 26, 2001
______________________________________
Maggie Wilderotter
46
AMERICAN TOWER
INDEX TO FINANCIAL STATEMENTS
Page
----
Independent Auditors' Report............................................. F-2
Consolidated Balance Sheets as of December 31, 2000 and 1999............. F-3
Consolidated Statements of Operations for the Years Ended December 31,
2000, 1999, and 1998.................................................... F-4
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 2000, 1999 and 1998........................................ F-5
Consolidated Statements of Cash Flows for the Years Ended December 31,
2000, 1999 and 1998 .................................................... F-6
Notes to Consolidated Financial Statements............................... F-7
F-1
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
American Tower Corporation:
We have audited the accompanying consolidated balance sheets of American Tower
Corporation and subsidiaries (the "Company") as of December 31, 2000 and 1999,
and the related consolidated statements of operations, stockholders' equity,
and cash flows for each of the three years in the period ended December 31,
2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31,
2000 and 1999, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 2000 in conformity with
accounting principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
February 27, 2001 (March 26, 2001 as to the first full paragraph in note 6)
F-2
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2000 and 1999
(In thousands, except share data)
2000 1999
---------- ----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................. $ 82,038 $ 25,212
Restricted cash....................................... 46,036
Accounts receivable, net.............................. 194,011 58,482
Prepaid and other current assets...................... 42,377 19,570
Inventories........................................... 47,872 11,262
Costs and earnings in excess of billings on
uncompleted contracts and unbilled receivables....... 43,652 13,363
Deferred income taxes................................. 15,166 1,718
---------- ----------
Total current assets................................ 471,152 129,607
---------- ----------
PROPERTY AND EQUIPMENT, net............................ 2,296,670 1,092,346
GOODWILL AND OTHER INTANGIBLE ASSETS, net.............. 2,505,681 1,403,897
NOTES RECEIVABLE....................................... 123,945 118,802
DEPOSITS AND OTHER LONG-TERM ASSETS.................... 73,298 144,368
INVESTMENTS............................................ 49,538 15,594
DEFERRED INCOME TAXES.................................. 140,395 114,252
---------- ----------
TOTAL.................................................. $5,660,679 $3,018,866
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term obligations.............. $ 11,178 $ 4,736
Accounts payable...................................... 74,046 25,564
Accrued expenses...................................... 87,291 32,732
Accrued tower construction costs...................... 45,315 37,671
Accrued interest...................................... 31,708 6,769
Billings in excess of costs and earnings on
uncompleted contracts and unearned revenue........... 48,248 17,515
---------- ----------
Total current liabilities........................... 297,786 124,987
---------- ----------
LONG-TERM OBLIGATIONS.................................. 2,457,045 736,086
OTHER LONG-TERM LIABILITIES............................ 12,472 4,057
---------- ----------
Total liabilities................................... 2,767,303 865,130
---------- ----------
COMMITMENTS AND CONTINGENCIES (Notes 7 and 14)
MINORITY INTEREST IN SUBSIDIARIES...................... 16,346 8,653
---------- ----------
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; 170,180,549 and 144,965,623
shares issued, 170,035,952 and 144,889,220 shares
outstanding, respectively............................ 1,701 1,450
Class B Common Stock; $.01 par value; 50,000,000
shares authorized; 8,095,005 shares and 8,387,910
shares issued and outstanding, respectively.......... 81 84
Class C Common Stock; $.01 par value; 10,000,000
shares authorized; 2,267,813 shares and 2,422,804
shares issued and outstanding, respectively.......... 23 24
Additional paid-in capital............................ 3,174,622 2,245,482
Accumulated deficit................................... (295,057) (100,429)
Less: treasury stock (144,597 and 76,403 shares at
cost).............................................. (4,340) (1,528)
---------- ----------
Total stockholders' equity.......................... 2,877,030 2,145,083
---------- ----------
TOTAL.................................................. $5,660,679 $3,018,866
========== ==========
See notes to consolidated financial statements.
F-3
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 2000, 1999, and 1998
(In thousands, except per share data)
2000 1999 1998
--------- -------- --------
REVENUES:
Rental and management.......................... $ 278,153 $135,303 $ 60,505
Network development services................... 311,921 90,416 23,315
Satellite and fiber network access services.... 145,201 32,362 19,724
--------- -------- --------
Total operating revenues...................... 735,275 258,081 103,544
--------- -------- --------
OPERATING EXPENSES:
Operating expenses excluding depreciation and
amortization, tower separation, development
and corporate general and administrative
expenses:
Rental and management.......................... 139,240 62,441 29,455
Network development services................... 274,769 69,318 19,479
Satellite and fiber network access services.... 110,065 24,098 12,817
Depreciation and amortization.................. 283,360 132,539 52,064
Tower separation expense....................... 12,772
Development expense............................ 14,517 1,607
Corporate general and administrative expense... 14,958 9,136 5,099
--------- -------- --------
Total operating expenses...................... 836,909 299,139 131,686
--------- -------- --------
LOSS FROM OPERATIONS............................ (101,634) (41,058) (28,142)
--------- -------- --------
OTHER INCOME (EXPENSE):
Interest expense............................... (156,839) (27,492) (23,229)
Interest income and other, net................. 13,018 17,695 9,217
Interest income--TV Azteca, net of interest
expense of $1,047 in 2000 .................... 12,679 1,856
Premium on note conversion..................... (16,968)
Minority interest in net earnings of
subsidiaries.................................. (202) (142) (287)
--------- -------- --------
TOTAL OTHER EXPENSE............................. (148,312) (8,083) (14,299)
--------- -------- --------
LOSS BEFORE INCOME TAXES AND EXTRAORDINARY
LOSSES......................................... (249,946) (49,141) (42,441)
BENEFIT (PROVISION) FOR INCOME TAXES............ 59,656 (214) 4,491
--------- -------- --------
LOSS BEFORE EXTRAORDINARY LOSSES................ (190,290) (49,355) (37,950)
EXTRAORDINARY LOSSES ON EXTINGUISHMENT OF DEBT,
NET OF INCOME TAX BENEFIT OF $2,892 IN 2000,
$914 IN 1999 AND $921 IN 1998.................. (4,338) (1,372) (1,382)
EXTRAORDINARY LOSS ON REDEMPTION OF INTERIM
PREFERRED STOCK, NET OF INCOME TAX BENEFIT OF
$5,000......................................... (7,510)
--------- -------- --------
NET LOSS........................................ $(194,628) $(50,727) $(46,842)
========= ======== ========
BASIC AND DILUTED LOSS PER COMMON SHARE AMOUNTS:
Loss before extraordinary losses............... $ (1.13) $ (0.33) $ (0.48)
Extraordinary losses........................... (0.02) (0.01) (0.11)
--------- -------- --------
Net loss....................................... $ (1.15) $ (0.34) $ (0.59)
========= ======== ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING...... 168,715 149,749 79,786
========= ======== ========
See notes to consolidated financial statements.
F-4
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 2000, 1999 and 1998
(In thousands, except share data)
Common Stock Common Stock Common Stock Treasury Stock
------------------- ----------------- ----------------- -----------------
Class A Class B Class C
------------------- ----------------- ----------------- Additional
Issued Issued Issued Notes Paid-in
Shares Amount Shares Amount Shares Amount Shares Amount Receivable Capital
----------- ------- --------- ------ --------- ------ -------- ------- ---------- -----------
BALANCE, JANUARY
1, 1998......... 29,667,883 $ 297 4,670,626 $ 47 1,295,518 $ 13 $ 155,711
Contributions
from ARS:
Cash............ 56,918
Non-cash........ 6,489
Transfers to
ARS:
Cash............ (51,858)
Issuance of
common stock
under stock
purchase
agreement, net
of issuance
costs of $630... 1,350,050 14 4,649,950 46 2,000,000 20 $(49,375) 79,290
Issuance of
common stock and
options-
mergers......... 35,546,600 354 373,742
Reduction of
common stock
redemption
obligation...... 383,750 4 9,740
Exercise of
options......... 899,504 9 203,709 2 2,727
Repayment stock
purchase
agreement
notes........... 49,375
ATC Separation
tax liability... (61,715)
ATC Separation
working capital
adjustment...... (50,000)
ATC Separation
share
conversion...... 111,761 1 (347,159) (3) 2
Issuance of
common stock--
July offering,
net of issuance
costs of
$29,806......... 27,861,987 279 624,672
Share class
exchanges....... 469,576 5 (176,066) (2) (293,510) (3)
Accretion of
redeemable
stock........... (1,555)
Tax liability
from conversion
of CBS
securities...... (5,021)
Tax benefit of
stock options... 1,223
Net loss........
----------- ------- --------- ----- --------- ---- -------- -----------
BALANCE,
DECEMBER 31,
1998............ 96,291,111 $ 963 9,001,060 $ 90 3,002,008 $ 30 $ $ 1,140,365
----------- ------- --------- ----- --------- ---- -------- -----------
Cash
contributions
from ARS........ 507
Adjustment to
ATC separation
tax liability... 12,003
Transfers/payments
to ARS/CBS...... (1,070)
Issuance of
common stock and
options-
mergers......... 20,691,428 207 446,035
Wauka escrow
release--
treasury stock.. (76,403) $(1,528)
Issuance of
common stock
February
offerings, net
of issuance
costs of
$24,501......... 26,200,000 262 630,889
Expiration of
redeemable
common stock.... 336,250 3 9,937
Issuance of
options--
acquisition..... 1,794
Exercise of
options......... 254,480 3 3,573
Share class
exchanges....... 1,192,354 12 (613,150) (6) (579,204) (6)
Tax benefit of
stock options... 1,449
Net loss........
----------- ------- --------- ----- --------- ---- -------- ------- -----------
BALANCE,
DECEMBER 31,
1999............ 144,965,623 $ 1,450 8,387,910 $ 84 2,422,804 $ 24 (76,403) $(1,528) $ 2,245,482
----------- ------- --------- ----- --------- ---- -------- ------- -----------
6.25% and 2.25%
convertible
notes exchanged
for common
stock........... 6,126,594 61 153,306
Issuance of
common stock--
June offering... 12,500,000 125 513,780
Issuance of
common stock,
options and
warrants--
mergers......... 4,522,692 45 227,462
Issuance of
common stock--
Employee Stock
Purchase Plan... 33,794 865
Exercise of
options......... 1,418,560 14 165,390 2 23,461
Share class
exchanges....... 613,286 6 (458,295) (5) (154,991) (1)
Treasury stock.. (68,194) (2,812)
Tax benefit of
stock options... 10,266
Net loss........
----------- ------- --------- ----- --------- ---- -------- ------- -----------
BALANCE,
DECEMBER 31,
2000............ 170,180,549 $ 1,701 8,095,005 $ 81 2,267,813 $ 23 (144,597) $(4,340) $ 3,174,622
=========== ======= ========= ===== ========= ==== ======== ======= ===========
Accumulated
Deficit Total
----------- ------------
BALANCE, JANUARY
1, 1998......... $ (2,860) $ 153,208
Contributions
from ARS:
Cash............ 56,918
Non-cash........ 6,489
Transfers to
ARS:
Cash............ (51,858)
Issuance of
common stock
under stock
purchase
agreement, net
of issuance
costs of $630... 29,995
Issuance of
common stock and
options-
mergers......... 374,096
Reduction of
common stock
redemption
obligation...... 9,744
Exercise of
options......... 2,738
Repayment stock
purchase
agreement
notes........... 49,375
ATC Separation
tax liability... (61,715)
ATC Separation
working capital
adjustment...... (50,000)
ATC Separation
share
conversion......
Issuance of
common stock--
July offering,
net of issuance
costs of
$29,806......... 624,951
Share class
exchanges.......
Accretion of
redeemable
stock........... (1,555)
Tax liability
from conversion
of CBS
securities...... (5,021)
Tax benefit of
stock options... 1,223
Net loss........ (46,842) (46,842)
----------- ------------
BALANCE,
DECEMBER 31,
1998............ $ (49,702) $ 1,091,746
----------- ------------
Cash
contributions
from ARS........ 507
Adjustment to
ATC separation
tax liability... 12,003
Transfers/payments
to ARS/CBS...... (1,070)
Issuance of
common stock and
options-
mergers......... 446,242
Wauka escrow
release--
treasury stock.. (1,528)
Issuance of
common stock
February
offerings, net
of issuance
costs of
$24,501......... 631,151
Expiration of
redeemable
common stock.... 9,940
Issuance of
options--
acquisition..... 1,794
Exercise of
options......... 3,576
Share class
exchanges.......
Tax benefit of
stock options... 1,449
Net loss........ (50,727) (50,727)
----------- ------------
BALANCE,
DECEMBER 31,
1999............ $(100,429) $ 2,145,083
----------- ------------
6.25% and 2.25%
convertible
notes exchanged
for common
stock........... 153,367
Issuance of
common stock--
June offering... 513,905
Issuance of
common stock,
options and
warrants--
mergers......... 227,507
Issuance of
common stock--
Employee Stock
Purchase Plan... 865
Exercise of
options......... 23,477
Share class
exchanges.......
Treasury stock.. (2,812)
Tax benefit of
stock options... 10,266
Net loss........ (194,628) (194,628)
----------- ------------
BALANCE,
DECEMBER 31,
2000............ $(295,057) $ 2,877,030
=========== ============
See notes to consolidated financial statements.
F-5
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2000, 1999 and 1998
(In thousands)
2000 1999 1998
----------- ----------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................. $ (194,628) $ (50,727) $ (46,842)
Adjustments to reconcile net loss to cash
provided by operating activities:
Depreciation and amortization........... 283,360 132,539 52,064
Minority interest in net earnings of
subsidiaries........................... 202 142 287
Premium on note conversion.............. 16,968
Amortization of deferred financing
costs.................................. 6,945 1,466 1,629
Provision for losses on accounts
receivable............................. 16,423 2,639 1,136
Extraordinary losses, net............... 4,338 1,372 8,892
Amortization of debt discount........... 8,712 2,642 261
Dividends on preferred stock............ 3,117
Deferred income taxes................... (60,876) (1,140) (4,491)
Changes in assets and liabilities, net of
acquisitions:
Accounts receivable..................... (108,159) (17,368) (11,042)
Costs and earnings in excess of billings
on uncompleted contracts and unbilled
receivables............................ (26,153) (5,919) (1,185)
Prepaid and other current assets........ (23,990) (5,503) (1,553)
Inventories............................. (18,643) (6,210)
Accounts payable, accrued expenses and
accrued construction costs............. 31,281 31,516 13,577
Accrued interest........................ 24,631 5,436 (47)
Billings in excess of costs and earnings
on uncompleted contracts and unearned
revenue................................ 9,135 3,981 1,311
Other long-term liabilities............. 5,413 2,145 1,315
----------- ----------- ---------
Cash (used for) provided by operating
activities............................... (25,041) 97,011 18,429
----------- ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for purchase of property and
equipment and construction activities... (548,991) (294,242) (126,455)
Payments for acquisitions, (net of cash
acquired)............................... (1,368,024) (588,384) (208,717)
Advances of notes receivable............. (76,116) (119,282) (12,140)
Proceeds from notes receivable........... 2,749 1,587 2,001
Deposits, investments and other long-term
assets.................................. (20,298) (137,379) (5,066)
----------- ----------- ---------
Cash used for investing activities........ (2,010,680) (1,137,700) (350,377)
----------- ----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under notes payable and credit
facilities.............................. 1,777,000 224,779 205,500
Repayments of notes payable and credit
facilities.............................. (584,155) (512,856) (156,667)
Proceeds from issuance of debt
securities.............................. 450,000 600,063
Net proceeds from equity offerings and
stock options........................... 535,435 634,727 707,059
Restricted cash.......................... (46,036)
Cash payments from (to) CBS.............. 5,735 (48,752) (221,665)
Net proceeds from preferred stock........ 300,000
Redemption of preferred stock............ (303,117)
Contributions from ARS................... 507 5,060
Distributions to minority interest....... (667) (396) (393)
Deferred financing costs................. (44,765) (18,346) (22,250)
----------- ----------- ---------
Cash provided by financing activities..... 2,092,547 879,726 513,527
----------- ----------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS.............................. 56,826 (160,963) 181,579
CASH AND CASH EQUIVALENTS, BEGINNING OF
YEAR..................................... 25,212 186,175 4,596
----------- ----------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR.... $ 82,038 $ 25,212 $ 186,175
=========== =========== =========
See notes to consolidated financial statements.
F-6
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business and Corporate Structure--American Tower Corporation and subsidiaries
(collectively, ATC or the Company), is an independent owner, operator and
developer of broadcast and wireless communications sites in North America and
Mexico. The Company's primary businesses are the leasing of antenna space to a
diverse range of wireless communications and broadcast industries, providing
network development services and components to wireless service providers and
broadcasters and providing satellite and fiber network access services to
telecommunication companies, internet service providers, broadcasters and
maritime customers worldwide. The Company was a wholly-owned subsidiary of
American Radio Systems Corporation (ARS, American Radio or the Former Parent)
until consummation of the spin-off of the Company from American Radio on June
4, 1998 (the ATC Separation).
ATC Separation--On June 4, 1998, the merger of American Radio and a subsidiary
of CBS Corporation (CBS) was consummated. As a result of the merger, all of the
outstanding shares of the Company's common stock owned by American Radio were
distributed to American Radio common stockholders, and the Company ceased to be
a subsidiary of, or to be otherwise affiliated with, American Radio.
Furthermore, from that day forward the Company began operating as an
independent publicly traded company.
As part of the ATC Separation, the Company was required to reimburse CBS for
certain tax liabilities incurred by American Radio as a result of the
transaction. Upon completion of the final American Radio tax filings, a
calculation of the total tax payments due to CBS was performed and approved by
both the Company and CBS. The Company continues to be obligated to indemnify
CBS and American Radio for certain tax matters affecting American Radio prior
to the ATC Separation. As of December 31, 2000, no material matters covered
under this indemnification have been brought to the Company's attention.
Principles of Consolidation and Basis of Presentation--The accompanying
consolidated financial statements include the accounts of the Company and its
subsidiaries. All significant intercompany accounts and transactions have been
eliminated. Investments in those entities where the Company owns less than
twenty percent of the voting stock of the individual entity and does not
exercise significant influence over operating and financial policies of the
entity are accounted for using the cost method. Investments in entities where
the Company owns less than twenty percent but has the ability to exercise
significant influence over operating and financial policies of the entity or
where the Company owns more than twenty percent of the voting stock of the
individual entity, but not in excess of fifty percent, are accounted for using
the equity method. The Company consolidates those entities in which it owns
greater than fifty percent of the entity's voting stock.
For the period from January 1, 1998 to June 4, 1998, the Company effectively
operated as a stand-alone entity, with its own corporate staff and
headquarters, and received minimal assistance from personnel of American Radio.
Accordingly, the accompanying consolidated financial statements for the period
discussed above do not include any corporate general and administrative cost
allocations from American Radio. The consolidated financial statements may not
reflect the results of operations or financial position of the Company had it
been an independent public company during the periods presented prior to June
4, 1998.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results may differ from those estimates, and
such differences could be material to the accompanying consolidated financial
statements.
Revenue Recognition--Rental and management revenues are recognized on a monthly
basis under lease or management agreements when earned. Escalation clauses,
excluding those tied to the Consumer Price Index (CPI), and other incentives
present in lease agreements with the Company's customers are recognized on a
straight-line basis over the term of the lease. Amounts billed or received
prior to being earned are deferred until such time as the earnings process is
complete.
F-7
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Network development service revenues are derived under service contracts or
arrangements with customers that provide for billings on a time and materials,
cost plus profit or fixed price basis. Revenues are recognized as services are
performed with respect to the time and materials and cost plus profit
contracts. Revenues are recognized using the percentage-of-completion method
for fixed price contracts. Under the percentage-of-completion methodology,
revenues are recognized in accordance with the percentage of contract costs
incurred to date compared to estimated total contract costs. Costs and
earnings in excess of billings on uncompleted contracts represent revenues
recognized in excess of amounts billed. Billings in excess of costs and
earnings on uncompleted contracts represent billings in excess of revenues
recognized. Changes to total estimated contract costs or losses, if any, are
recognized in the period in which they are determined.
Revenue from the sale of component parts is reflected within network
development service revenue in the accompanying consolidated statements of
operations. Revenue from the sale of these components is recognized when
products are shipped. Provisions are recorded for estimated sales returns and
allowances at the time of shipment.
Satellite and fiber network access service revenues are recognized as such
services are provided. Amounts billed or received prior to services being
performed are deferred until such time as the earnings process is complete.
Development Expense--Development expense consists of uncapitalized acquisition
costs, costs to integrate acquisitions, costs associated with new business
initiatives, abandoned acquisition costs and costs associated with tower site
inspections and related data gathering. Such costs are expensed as incurred.
Tower Separation Expense--Tower separation expense consists of one-time costs
incurred in connection with the separation of the Company from its former
parent. Specifically, it includes legal, accounting, financial advisory and
consent solicitation fees. Such costs were expensed as incurred.
Corporate General and Administrative Expense--Corporate general and
administrative expense consists of corporate overhead costs not specifically
allocable to any of the Company's individual business segments.
Premium on Note Conversion--Premium on note conversion represents the fair
value of incremental stock issued to induce convertible noteholders to convert
their holdings prior to the first scheduled redemption date. Such amounts were
expensed as incurred in accordance with Statement of Financial Accounting
Standard (SFAS) No. 84 "Induced Conversions of Convertible Debt."
Concentrations of Credit Risk--Financial instruments that potentially subject
the Company to concentrations of credit risk are primarily cash and cash
equivalents, restricted cash, notes receivable and trade receivables. The
Company mitigates its risk with respect to cash and cash equivalents and
restricted cash by maintaining its deposits at high quality credit financial
institutions and monitoring the credit ratings of those institutions.
The Company mitigates its concentrations of credit risk with respect to notes
and trade receivables by actively monitoring the creditworthiness of its
borrowers and customers. Accounts receivable are reported net of allowances
for doubtful accounts of $19,809,000, $3,386,000 and $1,230,000 as of December
31, 2000, 1999 and 1998, respectively. Amounts charged against the allowance
for doubtful accounts for the years ended December 31, 2000, 1999 and 1998
approximated $3,112,000, $721,000 and $206,000, respectively. Bad debt
recoveries have not been significant in the three year period ended December
31, 2000.
Discount on Convertible Notes--The Company amortizes the discount on its
convertible notes using the effective interest method over the term of the
obligation. Such amortization is recorded as interest expense in the
accompanying consolidated statements of operations.
Derivative Financial Instruments--During the years ended December 31, 2000,
1999 and 1998, the Company used derivative financial instruments as a means of
hedging cash flow exposure related to variable interest rates on its credit
facilities. The Company's derivative instruments generally consist of interest
rate swaps, interest rate collars and interest rate cap agreements. These
instruments are matched with variable rate debt, and
F-8
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
payments thereon are recorded on a settlement basis as an adjustment to
interest expense. Premiums paid to purchase interest rate cap agreements are
amortized as an adjustment to interest expense over the life of the contract.
The Company does not hold derivative financial instruments for trading
purposes. See "Recent Accounting Pronouncements" below.
Foreign Currency Translation--The Company's foreign subsidiary in Mexico has
designated the U.S. dollar as its functional currency. Monetary peso-based
assets and liabilities related to the Company's Mexican operations are
translated from the local currency into U.S. dollars at the approximate rate of
currency exchange at the end of the applicable fiscal period. Non monetary
peso-based assets and liabilities are translated at historical exchange rates.
Revenues and expenses, if peso-based, are translated at average monthly
exchange rates. All translation gains and losses are included in the Company's
consolidated statement of operations within the caption interest income and
other, net. Such amounts were not material for the years ended December 31,
2000 and 1999. There were no international operations during the year ended
December 31, 1998.
Cash, Cash Equivalents--Cash and cash equivalents include cash on hand, demand
deposits and short-term investments with remaining maturities (when purchased)
of three months or less.
Restricted Cash--Represents amounts required to be held in escrow under the
Company's Amended Credit Facilities to pay interest on its convertible note
obligations.
Inventories--Inventories, which consist primarily of finished goods and raw
material component parts, are stated at the lower of cost or market, with cost
being determined on the first-in, first-out (FIFO) basis. The components of
inventories as of December 31, 2000 and 1999 are as follows (in thousands):
2000 1999
------- --------
Finished goods............................................... $25,947 $ 10,100
Raw materials................................................ 20,887 859
Work in process.............................................. 1,038 303
------- --------
Total $47,872 $ 11,262
======= ========
Property and Equipment--Property and equipment are recorded at cost or at
estimated fair value (in the case of acquired properties). Cost for self-
constructed towers includes direct materials and labor, indirect costs
associated with construction and capitalized interest. Approximately
$11,365,000, $3,379,000 and $1,403,000 of interest was capitalized for the
years ended December 31, 2000, 1999 and 1998, respectively.
Depreciation is provided using the straight-line method over the assets'
estimated useful lives. Property and equipment acquired through capitalized
leases are amortized using the straight-line method over the shorter of the
lease term or the estimated useful life of the asset. Asset useful lives are as
follows:
Equipment......................................................... 3-15 years
Towers............................................................ 15 years
Buildings and land improvements................................... 15-32 years
Goodwill and Other Intangible Assets--The consolidated financial statements
reflect the preliminary allocation of purchase prices for certain transactions
consummated in fiscal 2000, as certain appraisals for these acquisitions have
not been finalized. Goodwill represents the excess of purchase price over the
estimated fair value of net assets acquired. The Company amortizes goodwill
over an estimated useful life of fifteen years. Other intangible assets
primarily represent acquired customer base, workforce, network locations,
licenses, non-competition agreements and certain deferred financing costs. The
Company amortizes these other intangible assets over periods ranging from two
to fifteen years. (See note 4).
F-9
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Income Taxes--The consolidated financial statements reflect provisions for
federal, state, local and foreign income taxes. However, the tax costs of
repatriating foreign subsidiary business earnings to the Company's domestic
subsidiaries have not been reflected in the tax provision, as the Company
intends to permanently reinvest the profits of its foreign subsidiaries within
those entities.
The Company recognizes deferred tax assets and liabilities for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases, as well as operating loss and tax credit carryforwards. The Company
measures deferred tax assets and liabilities using enacted tax rates expected
to apply to taxable income in the years in which those temporary differences
and carryforwards are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. The Company provides
valuation allowances if, based on the weight of available evidence, it is more
likely than not that some or all of the deferred tax assets will not be
realized. (See note 9).
Loss Per Common Share--Basic and diluted income or loss per common share has
been computed by dividing the Company's net loss by the weighted average
number of common shares outstanding during the period. Diluted per share
amounts are computed by adjusting the weighted average number of common shares
for dilutive potential common shares during the period, if any. In computing
diluted per share amounts, the Company uses the treasury stock method, whereby
unexercised options 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. For
the years ended December 31, 2000, 1999 and 1998, dilutive potential common
shares, including options, warrants and shares issuable upon conversion of the
Company's convertible notes, have been excluded from the computation of
diluted loss per common share, as the effect is anti-dilutive. Had these
dilutive potential common shares been included in the computation, shares for
the diluted computation would have increased by approximately 39.8 million,
11.5 million and 3.9 million for the years ended December 31, 2000, 1999 and
1998, respectively.
For purposes of calculating earnings per share for the year ended December 31,
1998, shares outstanding upon consummation of the ATC Separation are assumed
to be outstanding for the entire period prior to June 4, 1998.
Impairment of Long-Lived Assets--The Company reviews long-term assets,
including identifiable intangibles, for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company assesses recoverability by determining whether the
net book value of the related assets will be recovered through projected
undiscounted future cash flows. The Company records any related impairment
losses in the period in which it identifies such impairment.
Stock-Based Compensation--The Company accounts for equity grants and awards to
employees, officers and directors using the intrinsic value method prescribed
by Accounting Principles Board Opinion (APB) No. 25 "Accounting For Stock
Issued To Employees," and related interpretations. In addition, the Company
also provides the required disclosures under SFAS No. 123, "Accounting For
Stock Based Compensation," as if the fair-value based method (defined in SFAS
No. 123) had been applied. (See note 10).
Fair Value of Financial Instruments--As of December 31, 2000 the carrying
amount of the Company's 5.0% convertible notes and the 2.25% and 6.25%
convertible notes was approximately $450.0 million and $470.9 million,
respectively and the fair value of such notes was $408.4 million and $780.2
million, respectively, based on quoted market prices. See note 6 for fair
value of derivative instruments.
The carrying values of all other financial instruments reasonably approximate
the related fair values as of December 31, 2000.
F-10
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Retirement Plan--The Company has a 401(k) plan covering substantially all
employees who meet certain age and employment requirements. Under the plan, the
Company matched 35% in 2000 and 30% in 1999 of participants' contributions up
to a maximum 5% of a participant's compensation. Prior to the ATC Separation,
employees of the Company participated in a similar plan sponsored by ARS. The
Company contributed approximately $1,875,000, $461,000, and $207,700 to the
plans for the years ended December 31, 2000, 1999 and 1998, respectively.
Recent Accounting Pronouncements--On January 1, 2001, the Company adopted the
provisions of SFAS No. 133 "Accounting for Derivative Instruments and Hedging
Activities." This statement establishes accounting and reporting standards for
derivative instruments. Specifically, it requires that an entity recognize all
derivatives as either assets or liabilities on the balance sheet at fair value.
The accounting for changes in the fair value of a derivative (that is
unrealized gains or losses) will be recorded as a component of an entity's net
income or other comprehensive income, depending upon designation (as defined in
the statement). As a result of adopting SFAS No. 133, the Company expects to
record a pre-tax non-cash loss from a cumulative effect of change in accounting
principle of approximately $12.0 million to $14.0 million in the first quarter
of 2001.
During 2000, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition," which provides the
SEC staff's views in applying generally accepted accounting principles to
revenue recognition. SAB No. 101 was effective for the Company on October 1,
2000. The adoption of SAB No. 101 was not material to the Company's
consolidated financial statements.
In March 2000, the Financial Accounting Standards Board issued Interpretation
No. 44 (FIN 44), "Accounting for Certain Transactions involving Stock
Compensation", an interpretation of APB No. 25. FIN 44 was effective July 1,
2000. The adoption of FIN 44 was not material to the Company's consolidated
financial statements.
Comprehensive Loss--The Company had no other component of comprehensive loss,
and accordingly, net loss is equal to comprehensive loss for each of the years
in the three year period ended December 31, 2000.
Reclassifications--Certain reclassifications have been made to the 1999 and
1998 financial statements to conform with the 2000 presentation.
2. COSTS AND EARNINGS IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS AND
UNBILLED RECEIVABLES
The Company derives a portion of its network development services revenue from
customer contracts that provide for billing only after certain milestones
within contracts have been achieved. As the Company recognizes revenue on these
contracts using the percentage-of-completion and cost plus profit and time and
materials methodologies, such contracts give rise to revenue which has been
earned, but, as of a certain point in time, remains unbilled. Such amounts
(along with unbilled rental revenue) are included in costs and earnings in
excess of billings on uncompleted contracts and unbilled receivables in the
accompanying consolidated balance sheets.
The Company also enters into contracts within its network development services
segment that provide for progress billings as the Company fulfills its
obligation under the related contracts. These contracts may give rise to
billings that are in excess of amounts actually earned as of a certain point in
time. The excess of amounts billed over the amount earned on these contracts is
reflected (along with customer rent received in advance) in billings in excess
of costs and earnings on uncompleted contracts and unearned revenue in the
accompanying consolidated balance sheets.
F-11
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following are the components of costs and earnings in excess of billings on
uncompleted contracts and unbilled receivables and billings in excess of costs
and earnings on uncompleted contracts and unearned revenue as of December 31,
(in thousands):
2000 1999
---------- ----------
Costs incurred on uncompleted contracts............ $ 165,982 $ 20,783
Estimated earnings................................. 67,222 13,228
Unbilled receivables............................... 10,113 3,664
Less billings to date.............................. (247,913) (41,827)
---------- ----------
$ (4,596) $ (4,152)
========== ==========
Included in the accompanying consolidated balance
sheets:
Costs and earnings in excess of billings on
uncompleted contracts and unbilled receivables.. $ 43,652 $ 13,363
Billings in excess of costs and earnings on
uncompleted contracts and unearned revenue...... (48,248) (17,515)
---------- ----------
$ (4,596) $ (4,152)
========== ==========
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following as of December 31, (in
thousands):
2000 1999
---------- ----------
Towers............................................. $1,579,616 $ 672,039
Equipment.......................................... 366,343 148,614
Buildings and improvements......................... 224,836 156,005
Construction in progress........................... 206,069 127,171
Land and improvements.............................. 115,151 61,007
---------- ----------
Total.......................................... 2,492,015 1,164,836
Less accumulated depreciation and amortization..... (195,345) (72,490)
---------- ----------
Property and equipment, net........................ $2,296,670 $1,092,346
========== ==========
4. GOODWILL AND OTHER INTANGIBLE ASSETS
The Company's intangible assets consist of the following as of December 31,
(in thousands):
2000 1999
---------- ----------
Goodwill........................................... $1,372,399 $1,016,846
Acquired customer base and network locations....... 1,292,631 474,723
Acquired workforce, licenses, deferred financings
and other intangibles............................. 129,394 35,911
---------- ----------
Total.......................................... 2,794,424 1,527,480
Less accumulated amortization...................... (288,743) (123,583)
---------- ----------
Goodwill and other intangible assets, net.......... $2,505,681 $1,403,897
========== ==========
F-12
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5. NOTES RECEIVABLE
In December 1999, the Company signed 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. In 2000, the Company loaned TV Azteca $119.8
million. The loan which bears interest at 12.87%, payable quarterly, has been
discounted by the Company, as the fair value interest rate was determined to be
14.25%. As of December 31, 2000 approximately $119.8 million undiscounted
($108.9 million discounted) was outstanding. The term of the loan is seventy
years. The loan may be prepaid by TV Azteca without penalty during the last
fifty years of the agreement. The discount recorded on the note is being
amortized to interest income using the effective interest method over the term
of the loan.
Simultaneous with the signing of the loan agreement, the Company also entered
into an agreement with TV Azteca that entitles the Company to assume the
marketing responsibility and future economic rights for approximately 190
broadcasting towers owned by TV Azteca. Under the terms of the agreement the
Company pays TV Azteca $1.5 million annually and is entitled to receive 100% of
the revenues generated from leases with new tenants and is responsible for any
incremental operating expenses associated with those new leases during the term
of the loan.
In anticipation of the loan described above, the Company made an interim loan
of $60.0 million to TV Azteca in September 1999. The interim loan, which bore
interest at approximately 11%, matured at the closing of the loan described
above and was partially collateralized by the stock of TV Azteca. As of
December 31, 1999 the amount due to the Company in connection with this interim
loan was $60.0 million.
An executive officer and director of the Company became a director of TV Azteca
in December 1999.
As of December 31, 2000 and 1999, the Company also had several other notes
receivable outstanding totaling approximately $15.0 million and $58.8 million,
respectively. These notes bear interest at rates ranging from 7% to 15% and
mature in periods ranging from the earlier of two to three years or upon the
consummation of certain transactions.
6. FINANCING ARRANGEMENTS
Outstanding amounts under the Company's long-term financing arrangements
consisted of the following as of December 31, (in thousands):
2000 1999
---------- --------
Credit facilities..................................... $1,350,000 $ 90,000
Convertible notes, net of discount.................... 920,908 602,259
Notes payable, capital leases and other obligations... 197,315 48,563
---------- --------
Total................................................. 2,468,223 740,822
Less current portion.................................. (11,178) (4,736)
---------- --------
Long-term debt........................................ $2,457,045 $736,086
========== ========
The following is a description of the Company's outstanding long-term debt as
of December 31, 2000:
Credit Facilities--In January 2000, the Company through its principal operating
subsidiaries (Principal Operating Subsidiaries) completed its amended and
restated credit facilities (Amended Credit Facilities). Under the Amended
Credit Facilities (as amended through March 26, 2001), the borrowing capacity
of the Company is up to $2.0 billion, with the option to increase the capacity
up to an additional $500.0 million subject to lender approval. All borrowings
under the Amended Credit Facilities are subject to borrowing base restrictions
such as operating cash flow and construction cost levels.
F-13
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Components of the Amended Credit Facilities include:
. $650.0 million revolving credit facility maturing on June 30, 2007;
. $850.0 million multi-draw term loan A maturing on June 30, 2007; and
. $500.0 million term loan B maturing December 31, 2007.
The Amended Credit Facilities are scheduled to amortize quarterly commencing on
March 31, 2003 based on defined percentages of outstanding commitment and
principal balances. As of December 31, 2000, the Company has $850.0 million
outstanding under the multi-draw term loan A and $500.0 million outstanding
under the term loan B. Any amounts repaid under the multi-draw term loan A and
the term loan B will reduce future borrowing capacity under these facilities to
the extent of the amount repaid.
Interest rates for the revolving credit facility and the multi-draw term loan A
are determined at the option of the Company as either 1.5% to 2.75% above the
LIBOR Rate or 0.5% to 1.75% above the defined Base Rate. Interest rates for the
term loan B are determined at either 3.0% to 3.25% above LIBOR or 2.0% to 2.25%
above the defined Base Rate. The Company is required to pay quarterly
commitment fees ranging from 0.5% to 1.0% per annum, depending on the level of
facility usage. In addition, the Amended Credit Facilities require compliance
with financial coverage ratios that measure operating cash flow against total
debt, interest expense, pro forma debt service and fixed charges, as defined in
the Amended Credit Facilities. The Amended Credit Facilities also contain
financial and operational covenants and other restrictions which the Company
must comply with, whether or not there are borrowings outstanding. Such
covenants and restrictions include restrictions on certain types of
acquisitions, indebtedness, liens, capital expenditures, and the ability of the
Company to pay dividends and make other distributions. The borrowers under the
Amended Credit Facilities are the Company's Principal Operating Subsidiaries.
The Company and the restricted subsidiaries (as defined in the Amended Credit
Facilities) have guaranteed all of the loans under our Amended Credit
Facilities. These loans are secured by liens on substantially all assets of the
Principal Operating Subsidiaries and the restricted subsidiaries. The Amended
Credit Facilities also restrict the Principal Operating Subsidiaries ability to
transfer funds to the Company. Substantially all assets of the Company are held
by the Principal Operating Subsidiaries.
Prior to the consummation of the Amended Credit Facilities described above, the
Company maintained credit facilities that provided for total capacity of
$925.0 million. Interest rates under the prior credit facilities were
determined at the option of the Company as either LIBOR plus margin (as
defined) or the Base Rate plus margin (as defined). As of December 31, 1999,
the Company had $90.0 million outstanding under the prior credit facilities.
All amounts outstanding under the prior credit facilities were repaid in
January 2000 with proceeds from the Amended Credit Facilities. In connection
with the repayment of borrowings under the Company's prior 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.
For the years ended December 31, 2000, 1999 and 1998, the combined weighted
average interest rate related to the Company's amended and prior credit
facilities was 9.56%, 7.94%, and 7.97%, respectively. Commitment fees incurred
by the Company related to the amended and prior credit facilities aggregated
approximately $9,777,000, $1,504,000 and $1,172,000 for the years ended
December 31, 2000, 1999 and 1998, respectively.
As a result of a reduction in borrowing capacity under prior credit facilities,
in October of 1999 associated with the issuance of the 2.25% and 6.25%
convertible notes, the Company recognized an extraordinary loss on
extinguishment of debt during the year ended December 31, 1999 of approximately
$1.4 million, net of an income tax benefit of $0.9 million. The Company also
incurred an extraordinary loss on extinguishment of debt of approximately $1.4
million, net of an income tax benefit of $0.9 million, in 1998 as a result of a
refinancing to its previously existing credit facilities.
F-14
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5% Convertible Notes--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 restrictive
covenants.
The 5% Notes are convertible at any time into shares of the Company's Class A
common stock at a conversion price of $51.50 per share. The Company cannot
redeem the 5% Notes prior to February 20, 2003 and the Company may be required
to repurchase all or any of the 5% Notes on February 20, 2007 at their
principal amount, together with accrued and unpaid interest. The Company may,
at its option, elect to pay the repurchase price in cash or shares of Class A
common stock or any combination thereof. The 5% Notes rank equally with the
6.25% and 2.25% Notes described below and are structurally and effectively
junior to indebtedness outstanding under the Amended Credit Facilities. 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 Amended Credit
Facilities. The remaining proceeds were used to finance acquisitions and
construction.
As of December 31, 2000 the Company had $450.0 million outstanding under the 5%
Notes.
2.25% and 6.25% Convertible Notes--In October 1999, the Company completed a
private placement of $300.0 million 6.25% Convertible Notes (6.25% Notes),
issued at 100% of their face amount and $425.5 million 2.25% Convertible Notes
(2.25% Notes), issued at 70.52% of their face amount (collectively, the
"Notes"). The yield to maturity on the 2.25% Notes is 6.25%, giving effect to
the accrued original issue discount and accrued interest. The Notes mature on
October 15, 2009. Interest on the Notes is payable semiannually on April 15 and
October 15 of each year, beginning April 15, 2000.
The 6.25% Notes and 2.25% Notes are convertible at any time, at the option of
the holder, into the Company's Class A common stock at a conversion price of
$24.40 per share and $24.00 per share, respectively, subject to adjustment in
certain events. The Company may redeem the Notes at any time on or after
October 22, 2002. The initial redemption price on the 6.25% Notes is 103.125%
of the principal amount, subject to ratable declines immediately after October
15 of each following year to 100% of the principal amount in 2005. The 2.25%
Notes are redeemable incrementally at increasing prices designed to reflect the
accrued original issue discount. The holders have the option of requiring the
Company to repurchase all or a portion of the 6.25% Notes on October 22, 2006
at their principal amount, together with accrued and unpaid interest, and all
or a portion of the 2.25% Notes on October 22, 2003 at $802.93, plus accrued
and unpaid interest. The Company may elect to pay the repurchase price on the
Notes in cash or shares of Class A common stock. The Notes rank equally with
one another and the 5% Notes and are structurally and effectively junior to
indebtedness outstanding under the Company's Amended Credit Facilities.
In May of 2000, the Company acquired an aggregate of $87.3 million of the 6.25%
Notes and $73.1 million (face amount) of the 2.25% Notes for an aggregate of
5,724,180 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 402,414 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 a premium on note conversion of approximately
$17.0 million during the second quarter of 2000.
As of December 31, 2000 and 1999 the Company had $470.9 million and $602.3
million outstanding respectively, under the Notes.
Notes Payable--In connection with a number of acquisitions consummated during
2000, 1999 and 1998, the Company issued or assumed several notes payable. Such
notes approximated $57.2 million and $43.8 million as of December 31, 2000 and
1999, respectively. These notes bear interest at rates ranging from 7.9% to
12.0% and mature in periods ranging from approximately two to six years.
F-15
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Capital Lease Obligations--The Company's capital lease obligations expire in
periods ranging from less than one year to approximately fifty years.
Future minimum capital lease payments for the next five years and thereafter
are as follows (in thousands):
Year Ending December 31,
2001............................................................... $ 20,977
2002............................................................... 20,387
2003............................................................... 18,830
2004............................................................... 18,227
2005............................................................... 16,898
Thereafter......................................................... 119,876
--------
Total minimum lease payments....................................... 215,195
Less amounts representing interest................................. (89,900)
--------
Present value of capital lease obligations......................... $125,295
========
Derivative Positions--Under the terms of the Amended Credit Facilities, the
Company is required, to enter into interest rate protection agreements on its
variable rate debt. Under these agreements the Company is exposed to credit
risk to the extent that a counterparty fails to meet the terms of a contract.
Such exposure is limited to the current value of the contract at the time the
counterparty fails to perform. The Company believes its contracts as of
December 31, 2000 are with credit worthy institutions. As of December 31, 2000,
the Company had interest rate protection agreements outstanding as follows (in
thousands):
Notional Interest Fair
Derivative Amount Range Term Value
---------- --------- ----------- -------------------------- ----------
Interest rate caps...... $ 364,980 9.00% Expiring 2002
Interest rate swaps..... 395,000 6.19%-7.00% Expiring 2002 through 2003 $ (7,680)
Interest rate collars... 465,000 5.95%-9.00% Expiring 2002 through 2003 (6,107)
Interest rate
swaptions.............. 290,000 6.00%-6.60% Expiring 2001 1,707
----------
Total.................................................................. $ (12,080)
==========
As of December 31, 2000, aggregate principal payments of long-term debt,
including capital leases, for the next five years and thereafter are estimated
to be (in thousands):
Year Ending December 31,
2001.............................................................. $ 11,178
2002.............................................................. 11,474
2003.............................................................. 66,493
2004.............................................................. 202,900
2005.............................................................. 289,953
Thereafter........................................................ 1,886,225
----------
Total........................................................... $2,468,223
==========
F-16
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
7. COMMITMENTS AND CONTINGENCIES
Lease Obligations--The Company leases certain land, office, tower and satellite
space under operating leases that expire over various terms. Many of the leases
also contain renewal options with specified increases in lease payments upon
exercise of the renewal option. Escalation clauses present in operating leases,
excluding those tied to CPI, are straight-lined over the initial term of the
lease.
Future minimum rental payments under noncancelable operating leases in effect
at December 31, 2000 are as follows (in thousands)
Year Ending December 31,
2001................................................................ $165,994
2002................................................................ 134,033
2003................................................................ 94,917
2004................................................................ 65,418
2005................................................................ 43,023
Thereafter.......................................................... 200,129
--------
Total............................................................. $703,514
========
Aggregate rent expense under operating leases for the years ended December 31,
2000, 1999 and 1998 approximated $99,060,000, $23,211,000 and $10,818,000,
respectively.
Customer Leases--The Company's lease agreements with its customers vary
depending upon the industry. Escalation clauses present in operating leases,
excluding those tied to CPI, are straight-lined over the initial term of the
lease.
Future minimum rental receipts expected from customers under noncancelable
operating lease agreements in effect at December 31, 2000 are as follows (in
thousands):
Year Ending December 31,
2001.............................................................. $ 214,226
2002.............................................................. 201,835
2003.............................................................. 185,334
2004.............................................................. 165,630
2005.............................................................. 126,111
Thereafter........................................................ 588,722
----------
Total........................................................... $1,481,858
==========
Acquisition Commitments--See notes 11 and 14.
ATC Separation--See note 1.
Litigation--The Company periodically becomes involved in various claims and
lawsuits that are incidental to its business. In the opinion of management,
after consultation with counsel, there are no matters currently pending which
would, in the event of adverse outcome, have a material impact on the Company's
consolidated financial position, the results of its operations or liquidity.
F-17
8. RELATED PARTY TRANSACTIONS
2000 and 1999
Chase Manhattan Bank (Chase) is a lender under the Company's credit facilities
and had participation percentages ranging from 3.14% to 6.67% during 2000 and
1999. Chase is an affiliate of J.P. Morgan Partners, LLC (JPMP), which
indirectly controls J.P. Morgan Partners (BHCA), L.P. (JPLP) and J.P. Morgan
Partners (23ASBIC), LLC (JPSBIC), stockholders of the Company. A director of
the Company is an Executive Partner of JPMP. At December 31, 2000 and 1999 the
aggregate principal amount outstanding under the credit facilities was $1.4
billion and $90.0 million, respectively. Chase's participation in the credit
facilities at December 31, 2000 was 3.14%. Chase's approximate share of
interest and fees paid by the Company pursuant to its various credit
arrangements was $3.2 million, $1.2 million and $0.8 million in 2000, 1999 and
1998, respectively.
In 1999, the Company owned 33 1/3% of the outstanding equity of Kline Iron &
Steel Co. (Kline). During 1999 the Company purchased approximately $7.4 million
of tower steel products from Kline. In 2000, the Company purchased the
remaining equity interest in Kline.
During 2000 and 1999, the Company made demand loans to two executive officers.
At December 31, 2000 and 1999 amounts outstanding under the loans approximated
$1.0 million and $1.1 million respectively.
1998
In June 1998, American Radio contributed the majority of its corporate fixed
assets to the Company (with an American Radio net book value of approximately
$1.4 million). During the period that the Company was a majority owned
subsidiary of American Radio, the Company received revenues of approximately
$565,000 from American Radio for tower rentals at Company-owned sites for the
period ending June 4, 1998 (date of the ATC Separation).
In January 1998, American Radio contributed to the Company nineteen
communications sites used by American Radio and various third parties (with an
American Radio aggregate net book value of approximately $4.7 million), and
American Radio and the Company entered into leases or subleases of space on the
transferred towers. In May 1998, two additional communications sites were
transferred and leases were entered into following acquisition by American
Radio of the sites from third parties. These sites were contributed to the
Company at an aggregate ARS net book value of approximately $0.3 million.
In January 1998, the Company consummated the transactions contemplated by a
stock purchase agreement with certain related parties. (See note 10).
F-18
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
9. INCOME TAXES
The income tax benefit (provision) from continuing operations was comprised of
the following for the years ended December 31, (in thousands):
2000 1999 1998
------- ------- ---------
Current:
Federal......................................... $(116,322)
State........................................... (18,866)
Foreign......................................... $(1,220)
Deferred:
Federal......................................... 68,582 $ 1,029 (8,407)
State........................................... 8,560 148 (841)
Foreign......................................... 58
Add:
Deferred tax assets related to corporate tax
restructuring.................................. 150,150
Less:
Benefit from disposition of stock options
recorded to additional paid-in capital......... (10,266) (1,449) (1,223)
Valuation allowance............................. (6,000)
------- ------- ---------
Income tax benefit (provision) ................... $59,656 $ (214) $ 4,491
======= ======= =========
A reconciliation between the U.S. statutory rate from continuing operations and
the effective rate was as follows for the years ended December 31,
2000 1999 1998
------- ------- ---------
Statutory tax rate................................ 35% 35% 35%
State taxes, net of federal benefit............... 5 5 4
Non-deductible tower separation expenses.......... (11)
Non-deductible intangible amortization and premium
on note conversion............................... (14) (42) (16)
Other (including valuation allowance)............. (2) 2 (1)
------- ------- ---------
Effective tax rate................................ 24% % 11%
======= ======= =========
The components of the net deferred tax asset and related valuation allowance
are as follows (in thousands):
2000 1999
-------- --------
Current assets:
Allowances, accruals and other items not currently non-
deductible............................................... $ 15,166 $ 1,718
======== ========
Long-term items:
Assets:
Basis step-up from corporate restructuring............... 120,042 $133,380
Net operating loss carry-forwards........................ 175,859 63,070
Other.................................................... 716 152
Liabilities:
Depreciation and amortization............................ (150,222) (82,350)
-------- --------
Subtotal................................................... $146,395 $114,252
Less: Valuation allowance................................. (6,000)
-------- --------
Net long-term deferred tax assets........................ $140,395 $114,252
======== ========
F-19
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
At December 31, 2000, the Company has net federal and state operating loss
carry-forwards available to reduce future taxable income of $437.7 million.
These loss carry-forwards, if not utilized, expire at various dates through
2020.
During 2000, the Company recorded a $6.0 million deferred tax asset valuation
allowance related to a portion of its state net operating loss carry-forward.
Management believes that sufficient uncertainty exists regarding the
realizability of these items to warrant such allowance. In the opinion of
management, all other deferred tax assets are more likely than not recoverable.
10. STOCKHOLDERS' EQUITY
Preferred Stock
As of December 31, 2000 the Company was authorized to issue up to 20.0 million
shares of $0.01 par value preferred stock. As of December 31, 2000 and 1999
there were no preferred shares issued or outstanding.
Common Stock
As of December 31, 2000 the Company was authorized to issue up to 500.0 million
shares of its $.01 par value per share Class A common stock, 50.0 million
shares of its $.01 par value per share Class B common stock and 10.0 million
shares of its $.01 par value per share Class C common stock. The Class A and B
common stockholders are entitled to one and ten votes per share, respectively.
The Class C common stock is non-voting. In addition, holders of Class B and C
common stock may exchange their shares on a one-to-one basis for shares of
Class A common stock. During the years ended December 31, 2000, 1999 and 1998,
holders of Class B and Class C common stock exchanged 613,286, 1,192,354 and
469,576 of their shares, respectively, for shares of Class A common stock.
The following is a summary of the Company's principal equity transactions
during the years ended December 31, 2000, 1999 and 1998. See note 11 of the
consolidated financial statements for issuances of common stock in connection
with the Company's acquisitions.
2000
In June 2000, the Company completed a public offering of 12,500,000 shares of
its Class A common stock, at $41.125 per share. The Company's net proceeds of
the offering (after deduction of the offering expenses) were approximately
$513.9 million. The Company used the proceeds to reduce borrowings under the
Amended Credit Facilities and to finance acquisitions and the construction of
towers, as well as for general working capital purposes.
1999
In February 1999, the Company completed a public offering of 25,700,000 shares
of Class A common stock, (including 1,700,000 shares sold by the Company
pursuant to the exercise in full of the underwriters' over-allotment option) at
$25.00 per share. The Company's net proceeds of the offering (after deduction
of the underwriting discount and offering expenses) were approximately $618.0
million. The Company used such proceeds, together with borrowings under its
prior credit facilities, to fund acquisitions and construction activities.
In February 1999, the Company consummated the sale of 500,000 shares of Class A
common at $26.31 per share. The Company's net proceeds of the offering were
approximately $13.2 million. The Company used such proceeds, together with
borrowings under its prior credit facilities, to fund acquisitions and
construction activities.
1998
In July, 1998, the Company completed its initial public offering of 27,861,987
shares of Class A common stock, (including 2,361,987 shares sold by the Company
pursuant to the exercise in full of the underwriters'
F-20
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
over-allotment option) at $23.50 per share. The Company's net proceeds of the
offering (after deduction of the underwriting discount and offering expenses)
were approximately $625.0 million. On July 9, 1998, the Company used
approximately $306.1 million of the net proceeds from the offering to redeem
all of the outstanding shares of the Interim Preferred Stock described below.
The balance was used, together with borrowings under the prior credit
facilities, to fund acquisitions and construction activities.
In June 1998, the Company merged with a company owning a broadcasting tower in
the Boston, Massachusetts area and issued 720,000 shares of Class A common
stock valued at approximately $18.0 million. Under a put agreement that was
executed in connection with the merger, the sellers had the right to require
the Company to purchase, at any time prior to June 5, 1999, any or all shares
of Class A common stock received pursuant to consummation of the merger for a
purchase price equal to the then current market price. On June 5, 1999, the
sellers' right to require the Company to purchase shares of common stock
expired. Accordingly, all unsold shares as of that date (336,250) were
reclassified from Redeemable Class A common stock to common stock and
additional paid in capital.
In June 1998, the Company entered into a stock purchase agreement (the Interim
Financing Agreement) with respect to a preferred stock financing, which
provided for the issuance and sale by the Company of up to $400.0 million of
Series A Redeemable Pay-In-Kind Preferred Stock (the Interim Preferred Stock)
to finance the Company's obligation to CBS with respect to tax reimbursement.
The Company issued $300.0 million of Interim Preferred Stock, which accrued
dividends at a rate equal to the three-month LIBOR then in effect
(approximately 5.69%) plus an agreed upon adjustable spread (5.0% for the
period in which the obligation was outstanding). Due to the short term nature
of the issue, accrued dividends were recorded as interest expense in the
accompanying consolidated financial statements. Such interest expense
approximated $3.1 million for the year ended December 31, 1998. The Interim
Preferred Stock was redeemed in July 1998 at a redemption price equal to $1,010
per share plus accrued and unpaid dividends for an aggregate redemption value
of $306.1 million. The Company incurred an extraordinary loss of approximately
$7.5 million, net of a tax benefit of $5.0 million, during the third quarter of
1998, representing the write-off of certain commitment, deferred financing and
redemption fees.
In January 1998, the Company consummated the transactions contemplated by the
stock purchase agreement (the ATC Stock Purchase Agreement), dated as of
January 8, 1998, with Steven B. Dodge, Chairman of the Board, President and
Chief Executive Officer of American Radio and the Company, and certain other
officers and directors of American Radio (or their affiliates or family members
or family trusts), pursuant to which those persons purchased 8.0 million shares
of the Company's common stock at a purchase price of $10.00 per share for an
aggregate purchase price of approximately $80.0 million, including 4.0 million
shares by Mr. Dodge for $40.0 million. Payment of the purchase price was in the
form of cash aggregating approximately $30.6 million and in the form of notes
aggregating approximately $49.4 million which were repaid upon the consummation
of the ATC Separation.
Stock Issued for Acquisitions and Subsequent events--See note 11 of the
consolidated financial statements for issuances of warrants and common stock in
connection with the Company's acquisitions and note 14 for a description of
common stock issued in connection with the equity offering consummated in
January 2001.
Stock Option Plans--The Company maintains a stock option plan for directors,
officers and employees (the Plan), which provides for non qualified and
incentive stock options. Exercise prices in the case of incentive stock options
are not less than the fair market value of the underlying common stock on the
date of grant. Exercise prices in the case of non-qualified stock options are
set at the discretion of the Company's Board of Directors (which to date has
not been less than the fair market value on the date of grant).
F-21
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The option pool under the Plan consists of an aggregate of 24,000,000 shares of
common stock. In addition to the 24,000,000 shares authorized under the Plan,
options to purchase approximately 2,300,000 shares of common stock were
outstanding as of December 31, 2000 outside of the Plan. Options outside the
Plan are the result of the exchange of certain American Radio options that
occurred pursuant to the ATC Separation and the assumption of certain options
that occurred pursuant to the mergers of OmniAmerica, Inc, and American Tower
Corporation (Old ATC) as described in note 11. Each unexercised option to
purchase shares of American Radio, Omni America and Old ATC common stock held
by persons who became directors or employees of the Company were exchanged or
converted into the Company's options. All options were exchanged or converted
in a manner that preserved the spread in such options between the option
exercise price and the fair market value of the common stock and the ratio of
the spread to the exercise price prior to such conversion.
Option grants vest ratably over various periods, generally three to five years,
commencing one year from the date of grant. Option grants generally expire ten
years from the date of grant.
The following table summarizes the Company's option activity for the periods
presented:
Weighted Average Options
Options Exercise Price Exercisable
----------- ---------------- -----------
Outstanding as of January 1, 1998... 931,332 $ 4.16 252,640
-----------
Granted............................. 8,371,700 16.16
Transferred -- American Radio (a)... 1,862,806 6.21
Transferred -- Old ATC Merger (a)... 1,252,364 2.29
Exercised........................... (1,103,213) 2.48
Cancelled........................... (226,894) 8.80
-----------
Outstanding as of December 31,
1998............................... 11,088,095 13.43 1,513,639
-----------
Granted............................. 5,391,450 22.72
Transferred -- OmniAmerica Merger
(a)................................ 971,850 13.83
Exercised........................... (314,305) 13.43
Cancelled........................... (419,848) 20.72
-----------
Outstanding as of December 31,
1999............................... 16,717,242 16.23 4,132,562
-----------
Granted............................. 7,092,350 32.77
Exercised........................... (1,517,928) 15.45
Cancelled........................... (693,525) 27.72
-----------
Outstanding as of December 31,
2000............................... 21,598,139 $21.35 5,781,018
===========
(a) Represents options outside the
Plan
F-22
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following table sets forth information regarding options outstanding at
December 31, 2000:
Options Outstanding Options Exercisable
- ------------------------------------------------------------------------ ------------------------------------
Outstanding Weighted Average
Number of Range of Exercise Weighted Average Remaining Life Options Weighted Average
Options Price Per Share Exercise Price Per Share (Years) Exercisable Exercise Price Per Share
- ----------- ----------------- ------------------------ ---------------- ----------- ------------------------
2,617,762 $2.05-$9.09 $ 5.47 5.53 2,160,246 $ 4.99
2,798,132 10.00-10.00 10.00 7.01 1,085,050 10.00
4,083,784 10.91-21.13 17.82 7.56 1,185,201 16.61
2,577,231 21.38-23.75 22.89 8.10 748,731 23.23
2,361,250 23.81-23.81 23.81 8.86 462,010 23.81
424,480 24.31-30.38 26.75 8.93 64,780 25.74
4,930,400 30.63-30.63 30.63 9.72 75,000 30.62
1,785,600 30.69-46.38 37.87 9.48
19,500 46.75-48.87 48.83 9.20
- ---------- ---------
21,598,139 $2.05-$48.87 $21.35 8.13 5,781,018 $12.74
========== =========
ATC Teleports Stock Option Plan--During 1999, Verestar, Inc.'s (Verestar,
formerly ATC Teleports, Inc.) Board of Directors approved the formation of the
ATC Teleports Stock Option Plan (ATC Teleports Plan) which provides for the
issuance of options to officers, employees, directors and consultants of the
Company's wholly owned subsidiary Verestar. The ATC Teleports Plan limits the
number of shares of common stock which may be granted to an aggregate of
1,000,000 shares. During 2000, Verestar, granted 809,400 options to purchase
shares of Verestar common stock to officers, directors and employees. Such
options were issued at one time with an exercise price of $7.75 per share. The
exercise price per share was at fair market value based on an independent
appraisal performed at the Company's request. The fair value of ATC Teleports
Plan options granted during 2000 were $1.97 per share. Options granted vest
based on the discretion of Verestar's Board of Directors and expire ten years
from the date of grant. No options under the ATC Teleports Plan were exercised
in 2000 and none were exercisable as of December 31, 2000.
Pro Forma Disclosure--As described in note 1, the Company uses APB. No. 25 to
account for equity grants and awards to employees. Accordingly, there is no
compensation cost related to option grants reflected in the accompanying
consolidated financial statements. Had the Company used the fair value method,
as prescribed in SFAS No. 123, to measure compensation for grants under all
plans made in 2000, 1999 and 1998, the reported net loss and basic and diluted
loss per common share would have been as follows (in thousands, except per
share amounts):
2000 1999 1998
--------- -------- --------
Net loss..................................... $(245,814) $(87,221) $(62,439)
Basic and diluted earnings per share......... $ (1.46) $ (0.58) $ (0.78)
The "fair value" of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model. The weighted average fair values of
the Company's options granted during 2000, 1999 and 1998 were $18.19, $13.14
and $15.50 per share, respectively. Key assumptions used to apply this pricing
model are as follows:
2000 1999 1998
------- ------- -------
Approximate risk-free interest rate (both the
Company and ATC Teleports plans).............. 5.95% 5.7% 5.5%
Expected life of option grants (both the Com-
pany and ATC Teleports plans)................. 5 years 5 years 5 years
Expected volatility of underlying stock (the
Company plan)................................. 68.0% 72.0% 177.5%
Expected volatility of underlying stock (ATC
Teleports plans).............................. N/A N/A N/A
Expected dividends (both the Company and ATC
Teleports plans).............................. N/A N/A N/A
F-23
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Employee Stock Purchase Plan--During 2000, the Company established an employee
stock purchase plan for all eligible employees. Under the plan, shares of the
Company's common stock may be purchased at six-month intervals at 85% of the
lower of the fair market value on the first or the last day of each offering
period. Employees may purchase shares having a value not exceeding 15% of their
gross compensation during an offering period and may not purchase more than
$25,000 worth of stock in a calendar year (based on market values at the
beginning of each offering period). During 2000, employees purchased 33,794
shares at $25.61 per share. At December 31, 2000, 4,966,206 shares remain
reserved for future issuance.
11. ACQUISITIONS
General--The acquisitions consummated during 2000, 1999 and 1998 have been
accounted for under the purchase method of accounting. The aggregate purchase
price has been allocated to the net assets acquired, (principally tangible and
intangible assets), and the liabilities assumed based on estimated fair values
at the date of acquisition. For certain acquisitions, the consolidated
financial statements reflect preliminary allocations of purchase price, as
appraisals of the net assets acquired have not been finalized. The Company does
not expect any changes in depreciation and amortization resulting from the
finalization of these appraisals to be material to its consolidated results of
operations.
2000 Acquisitions--During the year ended December 31, 2000, the Company
consummated more than 60 transactions involving the acquisition of various
communications sites and related businesses and several satellite and fiber
network access services businesses for a purchase price of approximately of
$1.8 billion. This purchase price includes approximately $1.4 billion in cash,
the issuance of approximately 4.5 million shares of Class A common stock and
options valued at approximately $164.0 million, warrants to purchase
approximately 3.0 million shares of Class A common stock valued at $63.5
million and the assumption of $59.2 million of debt. Total purchase price
allocated to goodwill was approximately $426.8 million. The principal
transactions were as follows:
AirTouch transaction--In August 1999, the Company agreed to lease on a long-
term basis up to 2,100 towers located throughout the United States from
AirTouch Communications, Inc. (now part of Verizon Wireless 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 the issuance of
five-year warrants to purchase 3.0 million shares of Class A common stock at
$22.00 per share. At various closings in 2000, the Company leased 1,801 towers,
paid AirTouch approximately $686.1 million in cash and issued warrants for
approximately 3.0 million shares of its 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
first and second quarters of 2001, as the initial term of the agreement was
extended through April 2001. The Company has accounted for the AirTouch
transaction as a purchase of assets.
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 various closings in 2000, the Company acquired 1,929 towers and paid AT&T
$258.1 million. It is expected that the Company will close on any remaining
towers in the first quarter of 2001.
Management has concluded that a portion of the towers acquired in the AT&T
transaction will not be marketable for wireless colocation and has recorded
those towers at net realizable value. Accordingly, the Company has committed to
a plan to dispose of these towers, which it is currently in the process of
implementing. In connection with this Plan, the Company has recorded a
liability of $2.0 million related to the disposition of these towers. For the
year ended December 31, 2000 approximately $0.8 million has been charged
against this accrual.
F-24
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
UNISite merger--In January 2000, the Company consummated its merger with
UNISite, Inc. (UNISite). The purchase price was approximately $196.4 million,
which included 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 $0.9
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, $33.2 million in cash and vested
options to purchase 0.4 million shares of Class A common stock. The
acquisition involved around-the-clock teleport facilities in the Pacific
Northwest, the Southwest and the Northeast, with a total of 52 antennae 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 approximately $28.8 million in cash. 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.
Publicom transaction--In October 2000, the Company consummated the purchase of
Publicom Corporation (Publicom) and its affiliates. The aggregate purchase
price was approximately $31.4 million, which included a payment of
approximately $14.5 million in cash and the issuance of approximately 0.4
million shares of Class A common stock. Publicom and its affiliates distribute
satellite and telecommunications equipment via strategic vendor relationships
with established equipment providers. Publicom also provides wholesale
Internet Service Provider (ISP) services.
InterPacket Networks merger--In December 2000, the Company consummated its
merger with InterPacket Networks, Inc. (InterPacket). Total merger
consideration was approximately $63.5 million and included approximately $21.4
million in cash and the issuance of approximately 1.1 million shares of Class
A common stock. InterPacket is a leader in providing international ISPs low-
cost Internet access via a global satellite overlay network. InterPacket's
customer base includes companies primarily in Africa, the Middle East, Latin
America and Asia.
1999 Acquisitions--During the year ended December 31, 1999, the Company
consummated more than 60 transactions involving the acquisition of various
communications sites, service providers and satellite and fiber network access
services assets for an estimated purchase price of approximately $1.2 billion.
This purchase price includes the issuance of approximately 20.7 million shares
of Class A common stock valued at $430.8 million. The principal transactions
were as follows:
OmniAmerica merger--In February 1999, the Company consummated its merger with
Omni America Inc. (Omni). Omni owned or co-owned 223 towers in 24 states. Omni
also offered nationwide turnkey tower construction and installation services
and manufactured wireless infrastructure components. Total merger
consideration was $462.0 million, consisting of the issuance of 16.8 million
shares of Class A common stock and the assumption of $96.6 million of debt.
The Company also assumed certain Omni employee stock options that were
converted into options to purchase approximately 1.0 million shares of the
Company's Class A common stock.
TeleCom merger--In February 1999, the Company consummated its merger with
TeleCom Towers, LLC (TeleCom). TeleCom owned or co-owned approximately 271
towers and managed 121 revenue-generating sites in 27 states. The aggregate
merger consideration was $194.6 million, consisting of the payment of $63.1
million in cash, the issuance of 3.9 million shares of Class A common stock
and the assumption of $48.4 million in debt.
Triton PCS acquisition--In September 1999, the Company acquired 187 wireless
communications towers from Triton PCS for $70.7 million in cash.
F-25
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
ICG transaction--In December 1999, the Company acquired ICG Satellite Services
and its subsidiary, Maritime Telecommunications Network, Inc., (collectively,
ICG), for $100.0 million in cash. The acquisition involved a major around-the-
clock teleport facility in New Jersey and a global maritime telecommunications
network headquartered in Miramar, Florida. ICG provides Internet, voice, data
and compressed video satellite services to major cruise lines, the U.S.
military, Internet-related companies and international telecommunications
customers.
1998 Acquisitions--During the year ended December 31, 1998, the Company
acquired various communications sites and a major site acquisition business for
an aggregate purchase price of approximately $853.8 million, including the
issuance of approximately 36.3 million shares of Class A common stock valued at
approximately $382.6 million. The principal transactions were as follows:
Gearon merger--In January 1998, the Company acquired all of the outstanding
stock of Gearon & Co. Inc. (Gearon), for an aggregate purchase price of
approximately $80.0 million. Gearon was engaged in site acquisition,
development and construction and facility management of wireless network
communication facilities. The purchase price consisted of approximately $32.0
million in cash and the issuance of approximately 5.3 million shares of Class A
common stock .
OPM merger--In January 1998, the Company acquired OPM-USA-INC. (OPM), a company
that owned and developed communications towers, for approximately $70.0 million
in cash.
ATC merger--On June 8, 1998, the Company consummated its merger with American
Tower Corporation (ATC merger). The total purchase price was approximately
$425.8 million. At the time of closing, the acquired company owned
approximately 775 communications towers and managed approximately 125
communications towers. In conjunction with the ATC merger, the Company issued
28.8 million shares of Class A common stock valued at approximately
$287.8 million (excluding 1,252,364 shares of common stock reserved for options
held by former employees of the acquired company valued at approximately $9.7
million) and assumed approximately $4.5 million of redeemable preferred stock
(which was paid at closing) and $122.7 million of debt (of which approximately
$118.3 million, including interest and associated fees, was paid at closing).
Upon consummation of the ATC merger, the Company changed its name from American
Tower Systems Corporation to American Tower Corporation.
Grid/Wauka/other transactions--In October 1998, the Company acquired
approximately 300 towers and certain tower related assets in six transactions
for an aggregate purchase price of approximately $100.2 million. These
transactions included the acquisition of Wauka Communications, Inc. and the
assets of Grid Site Services, Inc.
Unaudited Pro Forma Operating Results--The operating results of the 2000 and
1999 acquisitions have been included in the Company's consolidated results of
operations from the date of acquisition. The following unaudited pro forma
summary presents the consolidated results of operations as if the acquisitions
had occurred as of January 1, 1999, after giving effect to certain adjustments,
including depreciation and amortization of assets and interest expense on debt
incurred to fund the acquisitions. This unaudited pro forma information has
been prepared for comparative purposes only and does not purport to be
indicative of what would have occurred had the acquisitions been made as of
January 1 of each of the periods presented or results which may occur in the
future.
2000 1999
---------- -----------
(In thousands, except
per share data-
unaudited)
Operating revenues................................... $860,672 $625,598
Loss before extraordinary losses..................... (239,241) (206,158)
Net loss............................................. (243,579) (207,530)
Basic and diluted loss per common share.............. (1.42) (1.32)
F-26
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
12. SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental cash flow information and noncash investing and financing
activities are as follows (in thousands):
2000 1999 1998
-------- ------- -------
Supplemental cash flow information:
Cash paid during the period for interest (including
amounts capitalized).............................. $140,251 $22,160 $23,011
Cash paid during the period for income taxes
(including amounts paid to CBS)................... 4,335 2,242 212,196
Noncash investing and financing activities:
Issuance of common stock, warrants and assumption
of options for acquisitions....................... 227,507 448,036 392,226
Treasury stock transactions........................ 2,812 1,528
Conversion of convertible notes.................... 136,399
Capital leases..................................... 77,427 4,518
Corporate tax restructuring........................ 150,150
(Decrease) increase to CBS Corporation from
estimated
remaining tax liabilities......................... (12,003) 66,736
Property, equipment and other assets transferred
from American Radio............................... 6,489
Accrual for final payment for OPM Merger........... 21,914
F-27
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
13. BUSINESS SEGMENTS
The Company operates in three business segments: rental and management (RM),
network development services (Services), and satellite and fiber network access
services (formerly internet, voice, data and video transmission services)
(SFNA). The RM segment provides for the leasing and subleasing of antennae
sites on multi-tenant towers and other properties for a diverse range of
customers in the wireless communication and broadcast and other industries. The
Services segment offers a broad range of services, including radio frequency
engineering, network design, site acquisition, zoning and other regulatory
approvals, construction, component part sales and antennae installation. The
SFNA segment offers satellite and fiber network services to telecommunications
companies, internet service providers, broadcasters and maritime customers.
The accounting policies applied in compiling segment information below are
similar to those described in note 1. In evaluating financial performance,
management focuses on Operating Profit (Loss), excluding depreciation and
amortization, tower separation, development and corporate general and
administrative expenses. This measure of Operating Profit (Loss) is also before
interest expense, interest income and other, net, premium on note conversion,
minority interest in net earnings of subsidiaries, income taxes and
extraordinary losses. For reporting purposes the RM segment includes interest
income-TV Azteca, net for the year ended December 31, 2000.
The Company's reportable segments are strategic business units that offer
different services. They are managed separately because each segment requires
different resources, skill sets and marketing strategies. Summarized financial
information concerning the Company's reportable segments as of and for the
years ended December 2000, 1999 and 1998 is shown in the following table. The
"Other" column below represents amounts excluded from specific segments, such
as income taxes, extraordinary losses, corporate general and administrative
expense, tower separation expense, development expense, depreciation and
amortization, interest expense, interest income and other net, premium on note
conversion and minority interest in net earnings of subsidiaries. In addition,
the Other column also includes corporate assets such as cash and cash
equivalents, tangible and intangible assets and income tax accounts which have
not been allocated to specific segments. All amounts shown are in thousands.
RM Services SFNA Other Total
--------- -------- -------- --------- ----------
2000
Revenues................... $ 278,153 $311,921 $145,201 $ 735,275
Operating profit (loss).... 151,592 37,152 35,136 $(418,508) (194,628)
Assets..................... 3,861,060 723,262 640,913 435,444 5,660,679
Capital expenditures....... 491,343 19,402 25,560 12,686 548,991
Depreciation and
amortization.............. 211,432 41,018 27,074 3,836 283,360
1999
Revenues................... $ 135,303 $ 90,416 $32,362 $ 258,081
Operating profit (loss).... 72,862 21,098 8,264 $(152,951) (50,727)
Assets..................... 1,847,847 505,018 229,260 436,741 3,018,866
Capital expenditures....... 271,231 4,588 15,835 2,588 294,242
Depreciation and
amortization.............. 98,011 25,991 7,264 1,273 132,539
1998
Revenues................... $ 60,505 $ 23,315 $ 19,724 $ 103,544
Operating profit (loss).... 31,050 3,836 6,907 $ (88,635) (46,842)
Assets..................... 1,031,426 91,444 64,359 315,114 1,502,343
Capital expenditures....... 118,926 61 3,405 4,063 126,455
Depreciation and
amortization.............. 39,568 7,038 4,887 571 52,064
F-28
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Summarized geographical information related to the Company's operating revenues
and long-lived assets as of and for the year ended December 31 is as follows
(in thousands):
2000 1999
---------- ----------
Operating Revenues:
United States.......................................... $ 729,161 $ 258,081
Mexico................................................. 6,114
---------- ----------
Total operating revenues............................. $ 735,275 $ 258,081
========== ==========
Long-Lived Assets:
United States.......................................... $4,685,754 $2,489,870
Mexico................................................. 116,597 6,373
---------- ----------
Total long-lived assets.............................. $4,802,351 $2,496,243
========== ==========
The Company did not maintain operations or long-lived assets internationally
prior to 1999.
For the year ended December 31, 1999, one customer within the rental and
management and services segments, accounted for approximately 17% of the
Company's consolidated operating revenues. No single customer accounted for
more than 10% of consolidated operating revenues for the years ended
December 31, 2000 or 1998.
14. SUBSEQUENT EVENTS
The following is a description of significant transactions involving the
Company subsequent to December 31, 2000:
Financing Transactions:
Equity offering--In January 2001, the Company completed a public offering of
10.0 million shares of its Class A common stock at $36.50 per share. The net
proceeds of the offering (after deduction of offering expenses) were
approximately $360.8 million. Proceeds from the offering will be used to
finance the construction of towers, fund pending and future acquisitions and
for general corporate purposes.
9 3/8% Senior Notes offering--In January 2001, the Company completed a private
notes placement of $1.0 billion 9 3/8% Senior Notes (Senior Notes), issued at
100% of their face amount. The Senior Notes mature on February 1, 2009.
Interest on the Senior Notes is payable semiannually on February 1 and August
1, commencing on August 1, 2001. The indenture governing the Senior Notes
contains certain restrictive convenants including restrictions on the Company's
ability to incur more debt, guarantee debt, pay dividends and make certain
investments. Proceeds from the Senior Notes placement will be used to finance
construction of towers, fund pending and future acquisitions and for general
corporate purposes.
Mexican credit facility--In February 2001, the Company's Mexican subsidiary
consummated a loan agreement that will provide for borrowings of $95.0 million
(U.S. Dollars). If additional lenders are made party to the agreement, the size
of the facility may increase to $140.0 million. The Company has committed to
loan its Mexican subsidiary up to $45.0 million if additional lenders are not
made party to the agreement. The Company's committment will be reduced on a
dollar-for-dollar basis if additional lenders join the loan agreement. This
facility requires the maintenance of various covenants and ratios and is
guaranteed and collateralized by all of the assets of the Mexican subsidiary.
Interest rates on the loan are determined at the Mexican subsidiary's option at
either LIBOR plus margin or the Base Rate plus margin (as defined in the
agreement). Amounts borrowed under the loan will be due in 2003.
F-29
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Pending Transactions:
ALLTEL transaction--In December 2000, the Company entered into an agreement to
acquire the rights from ALLTEL to up to 2,193 communications towers through a
15-year sublease agreement. Under the agreement, the Company will sublease
these towers for consideration of up to $657.9 million in cash. ALLTEL also
granted the Company the option to acquire the rights through sublease
agreements, to approximately 200 additional towers to be selected by the
Company on a site-by-site basis for cash consideration of up to $300,000 per
tower. As the anchor tenant on the towers, ALLTEL will pay a site maintenance
fee of $1,200 per tower per month, escalating at a rate equal to the lower of
5% per annum or the increase in the Consumer Price Index plus 4% per annum.
Under the agreement with ALLTEL, the Company will have the option to purchase
the towers at the end of the 15-year sublease term. The purchase price per
tower will be $27,500 plus interest accrued at 3% per annum. At ALLTEL's
option, this price will be payable in cash or with 769 shares of the Company's
Class A common stock in the case of approximately 1,900 of the towers. In the
case of the approximately 300 other towers and any of the 200 additional towers
that the Company subleases, the per tower purchase price at the end of the
sublease term is subject to adjustment based on the cash consideration paid for
the sublease and the Company's Class A common stock price on the date the
Company agrees to the tower sublease terms. The Company expects the transaction
to close incrementally beginning in the second quarter of 2001.
Other transactions--In addition to the above, the Company is party to various
agreements relating to the acquisition of assets and businesses from third
parties (including certain remaining portions of the AirTouch and AT&T
transactions) for an estimated aggregate purchase price of approximately $211.0
million. The Company is also pursuing the acquisitions of other properties and
businesses in new and existing locations, although there are no definitive
material agreements with respect thereto.
F-30
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
15. INFORMATION PRESENTED PURSUANT TO THE INDENTURE FOR THE 9 3/8% SENIOR NOTES
(UNAUDITED)
The following table sets forth information that is presented solely to address
certain reporting requirements contained in the indenture for our Senior Notes.
This information presents certain financial data of the Company on a
consolidated basis and on a restricted group basis, as defined in the indenture
governing the Senior Notes. All of the Company's subsidiaries are part of the
restricted group, except its wholly owned subsidiary Verestar.
Consolidated Restricted Group
------------------- -------------------
Year Ended Year Ended
December 31, December 31,
------------------- -------------------
2000 1999 2000(1) 1999(1)
--------- -------- --------- --------
(in thousands)
Statement of Operations Data:
Operating revenues................... $ 735,275 $258,081 $ 590,074 $225,719
--------- -------- --------- --------
Operating expenses:
Operating expenses excluding
depreciation and amortization,
development and corporate general
and administrative expenses....... 524,074 155,857 414,009 131,759
Depreciation and amortization...... 283,360 132,539 256,286 125,275
Development expense................ 14,517 1,607 14,433 1,406
Corporate general and
administrative expense............ 14,958 9,136 14,958 9,136
--------- -------- --------- --------
Total operating expenses............. 836,909 299,139 699,686 267,576
--------- -------- --------- --------
Loss from operations................. (101,634) (41,058) (109,612) (41,857)
Interest expense..................... (156,839) (27,492) (155,006) (27,487)
Interest income and other, net....... 13,018 17,695 12,661 17,632
Interest income-TV Azteca, net of
interest expense of $1,047 in 2000.. 12,679 1,856 12,679 1,856
Premium on note conversion........... (16,968) (16,968)
Minority interest in net earnings of
subsidiaries........................ (202) (142) (202) (142)
--------- -------- --------- --------
Loss before income taxes and
extraordinary losses. $(249,946) $(49,141) $(256,448) $(49,998)
========= ======== ========= ========
December 31, 2000
-----------------------
Restricted
Consolidated Group
------------ ----------
(in thousands)
Balance Sheet Data:
Cash and cash equivalents.............................. $ 82,038 $ 66,547
Property and equipment, net............................ 2,296,670 2,013,270
Total assets........................................... 5,660,679 5,019,766
Long-term obligations, including current portion....... 2,468,223 2,355,911
Net debt(2)............................................ 2,386,185 2,289,364
Total stockholders' equity............................. 2,877,030 2,877,030
- --------
(1) Corporate overhead allocable to Verestar, Inc. and interest expense
related to intercompany borrowings to Verestar, Inc. (unrestricted
subsidiary) have not been excluded from results shown for the restricted
group.
(2) Net debt represents long-term obligations, including current portion, less
cash and cash equivalents.
F-31
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
16. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data for the years ended December 31, 2000 and
1999 is as follows:
Three Months Ended
--------------------------------------------------
March 31, June 30, September 30, December 31,(1)
--------- -------- ------------- ---------------
(in thousands, except per share data)
2000:
Operating revenues......... $115,517 $167,047 $208,958 $243,753
Gross profit............... (23,808) (26,985) (20,904) (29,937)
Loss before extraordinary
losses.................... (37,660) (58,632) (39,527) (54,471)
Net loss................... (41,998) (58,632) (39,527) (54,471)
Basic and diluted loss per
common share amounts:
Loss before extraordinary
losses.................. ($0.24) ($0.36) ($0.22) ($0.30)
Net loss................. ($0.27) ($0.36) ($0.22) ($0.30)
1999:
Operating revenues......... $ 42,408 $ 59,153 $ 67,539 $ 88,981
Gross profit .............. (9,271) (10,136) (10,332) (11,319)
Loss before extraordinary
losses.................... (9,500) (9,883) (13,091) (16,881)
Net loss................... (9,500) (9,883) (13,091) (18,253)
Basic and diluted loss per
common share amounts:
Loss before extraordinary
losses.................. ($0.07) ($0.06) ($0.08) ($0.11)
Net loss................. ($0.07) ($0.06) ($0.08) ($0.12)
- --------
(1) During the fourth quarter of 2000 the Company recorded a specific charge
for a bad debt reserve of approximately $7.0 million.
* * * *
F-32
EXHIBIT INDEX
Below are the exhibits which are included, either by being filed herewith or
by incorporation by reference, as part of this Annual Report on Form 10-K
Exhibits are identified according to the number assigned to them in Item 601
of Regulation S-K. Documents that are incorporated by reference are identified
by their Exhibit number as set forth in the filing from which they are
incorporated by reference. With respect to documents filed under Exhibit 2,
copies of schedules and exhibits have not been filed herewith, but will be
furnished supplementally to the Commission upon request. The filings of the
Registrant from which various exhibits are incorporated by reference into this
Annual Report are indicated by parenthetical numbering which correspondence to
the following key:
(1) Quarterly Report Form 10-Q (File No. 001-14195) filed on August 16,
1999;
(2) Registration Statement on Form S-3 (File No. 333-37988) filed on May
26, 2000;
(3) Registration Statement on Form S-3 (File No. 333-89345) filed on
October 20, 1999;
(4) Current Report on Form 8-K (File No. 001-14195) filed on February 24,
2000;
(5) Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-
50111) filed on May 8, 1998;
(6) Amendment No. 2 to Registration Statement on Form S-1 (File No. 333-
52481) filed on June 30, 1998;
(7) Registration Statement on Form S-4 (File No. 333-70683) filed on
January 15, 1999;
(8) Amendment No. 1 to Current Report on Form 8-K (File No. 001-14195)
filed on March 18, 1999.
(9) Annual Report on Form 10-K (File No. 001-14195) filed on March 19,
1999;
(10) Registration Statement on Form S-4 (File No. 333-46025) filed on
February 10, 1998;
(11) Current Report on Form 8-K (File No. 001-14195) filed on January 28,
2000;
(12) Annual Report on Form 10-K (File No. 001-14195) filed on March 29,
2000;
(13) Quarterly Report on Form 10-Q (File No. 001-14195) filed on August 14,
1998;
(14) Current Report on Form 8-K (File No. 001-14195) filed on September 17,
1999;
(15) Registration Statement on Form S-4 (File No. 333-39030) filed on
August 31, 2000; and
(16) Quarterly Report on Form 10-Q (File No. 001-14195) filed on November
13, 2000.
Exhibit
No. Description of Document Exhibit File No.
------- ----------------------- -----------------
2.1 Lease and Sublease by and among ALLTEL
Communications, Inc. and the other entities named
therein and American Towers, Inc. and American Filed herewith as
Towers Corporation, dated , 2000............. Exhibit 2.1
2.2 Agreement to Sublease by and among ALLTEL
Communications, Inc. the ALLTEL entities and
American Towers, Inc. and American Towers Filed herewith
Corporation, dated December 19, 2000............... as Exhibit 2.2
2.3 Build to Suit Agreement by and among ALLTEL
Communications, Inc. the ALLTEL entities named
therein, American Towers, Inc. and American Towers Filed herewith
Corporation, dated December 19, 2000............... as Exhibit 2.3
3.1 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........... 3(i)(1)
3.2 By-Laws, as amended as of March 15, 2001, of the Filed herewith
Company............................................ as Exhibit 3.2
Exhibit Exhibit File
No. Description of Document No.
------- ----------------------- ---------------
4.1 Indenture, by and between the Company and The Bank
of New York as Trustee, for the 6.25% Convertibles
Notes due 2009, dated as of October 4, 1999,
including form of 6.25% Note........................ 4.1(3)
4.2 Indenture by and between the Company and The Bank of
New York as Trustee, for the 2.25% Convertibles
Notes due 2009, dated as of October 4, 1999,
including the form of 2.25% Note.................... 4.2(3)
4.3 Form of 6.25% Note (included in Exhibit 4.1)........ 4.1(3)
4.4 Form of 2.25% Note (included in Exhibit 4.2)........ 4.4(3)
4.5 Registration Rights Agreement, by and between the
Company and the Initial Purchasers named therein,
dated as of October 4, 1999......................... 4.5(3)
4.6 Indenture, by and between the Company and The Bank
of New York as Trustee, for the 5.0% Convertibles
Notes due 2010, dated as of February 15, 2000,
including form of 5.0% Note......................... 4.1(4)
4.7 Form of 5.0% Note (included in Exhibit 4.6)......... 4.2(4)
4.8 Registration Rights Agreement, by and between the
Company and the Initial Purchasers named therein,
dated as of February 15, 2000....................... 4.3(4)
4.9 Indenture, by and between the Company and The Bank
of New York as Trustee, for the 9 3/8% Senior Notes
due 2009, dated January 31, 2001, including the form Filed herewith
of 9 3/8% Senior Note............................... as Exhibit 4.9
4.10 Registration Rights Agreement, by and between the
Company and the Initial Purchasers named therein Filed herewith
dated January 31, 2001.............................. as Exhibit 4.10
10.1 American Tower Systems Corporation 1997 Stock Option
Plan, dated as of November 5, 1997, as amended and
restated on April 27, 1998.......................... 10.26(5)
10.1A Amendment to the Amended and Restated American Tower
Corporation 1997 Stock Option Plan as Amended and
Restated on April 27, 1998.......................... 10.1A(12)*
10.2 American Tower Systems Corporation Stock Purchase
Agreement, dated as of January 8, 1998, by and among
ATC and the Purchasers.............................. 10.27(10)
10.3 Employment Agreement, dated as of January 22, 1998,
by and between ATC by and between ATI and J. Michael
Gearon, Jr.......................................... 10.28(10)**
10.4 Letter of Agreement, dated as of April 13, 1998, by
and between ATC and Douglas Wiest................... 10.22(7)**
10.5 ARS-ATS Separation Agreement, dated as of June 4,
1998 by and among American Radio Systems
Corporation, ("ARS'), ATC and CBS Corporation....... 10.30(6)
10.6 Securities Purchase Agreement, dated as of June 4,
1998 by and among ATC, Credit Suisse First Boston
Corporation and each of the Purchasers named
therein............................................. 10.31(6)
10.7 Registration Rights Agreement, dated June 4, 1998,
by and among ATC, Credit Suisse First Boston
Corporation and each of the Parties named therein... 10.32(6)
10.8 Registration Rights Agreement, dated as of January
22, 1998, by and among ATC and each of the Parties
named therein....................................... 10.3(13)
Exhibit Exhibit
No. Description of Document File No.
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10.9 Stock Purchase Agreement, dated as of February 4,
1999, by and among ATC and Credit Suisse First
Boston Corporation................................. 10.13(9)
10.10 Registration Rights Agreement, dated as of February
4, 1999, by and among ATC and Credit Suisse First
Boston Corporation................................. 10.14(9)
10.11 Amended and Restated Registration Rights Agreement,
dated as of February 25, 1999, by and among ATC and
each of the Parties named therein.................. 10.1(8)
10.12 Agreement to Sublease, dated as of August 6, 1999,
by and between AirTouch Communications, Inc., the
other parties named therein as Sublessors, ATC and
American Tower, L.P................................ 10.1(1)
10.13 Stock Purchase Agreement, dated as of August 11,
1999, between ATC Teleports, Inc., ICG Holdings,
Inc. and ICG Satellite Services.................... 10.2(1)
10.14 Purchase and Sale Agreement, dated as of September
10, 1999, by and among ATC and AT&T Corp., a New
York corporation................................... 10.1 (14)
10.15 Amended and Restated Loan Agreement, dated as of
January 6, 2000, among American Tower, L.P.,
American Towers, Inc. and ATC Teleports, Inc., as
Borrowers and Toronto Dominion (Texas) Inc., as
Administrative Agent, and the banks party thereto.. 10.1 (11)
10.16 First Amendment and Waiver Agreement, dated as of
February 9, 2000, by and among American Towers,
L.P., American Towers, Inc., and ATC Teleports,
Inc., as Borrowers and Toronto Dominion (Texas)
Inc., as Administrative Agent, and the banks party
thereto............................................ 10.1(16)
10.17 Second Amendment to Amended and Restated Loan
Agreement, dated as of May 11, 2000, by and among
American Towers, L.P., American Towers, Inc., and
ATC Teleports, Inc., as Borrowers and Toronto
Dominion (Texas) Inc., as Administrative Agent, and
the banks party thereto............................ 10.2(16)
10.18 Waiver and Third Amendment to Amended and Restated
Loan Agreement, dated as of October 13, 2000, by
and among American Towers, L.P., American Towers,
Inc., and ATC Teleports, Inc., as Borrowers and
Toronto Dominion (Texas) Inc., as Administrative
Agent, and the banks party thereto................. 10.3(16)
10.19 ATC Teleports Corporation 1999 Stock Option Plan... 10.16(12)*
10.20 American Tower Corporation 2000 Employee Stock
Purchase Plan...................................... 10.18(12)*
10.21 Purchase Agreement, dated as of January 24, 2001,
by and among the Company and the Purchasers named Filed herewith as
therein with respect to the 93/8% Senior Notes..... Exhibit 10.21
12 Statement Regarding Computation of Ratios of Filed herewith as
Earnings to Fixed Charges.......................... Exhibit 12
21 Subsidiaries of ATC................................ Filed herewith as
Exhibit 21
23 Independent Auditors' Consent--Deloitte & Touche Filed herewith as
LLP................................................ Exhibit 23
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* Compensatory Plan
** Management Contract