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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 10-Q
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(Mark One):
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. For the quarterly period ended September 30, 2001.
[_] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission File Number: 001-14195
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American Tower Corporation
(Exact name of registrant as specified in its charter)
Delaware 65-0723837
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
116 Huntington Avenue
Boston, Massachusetts 02116
(Address of principal executive offices)
Telephone Number (617) 375-7500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days: Yes [X] No [_]
Outstanding
at
November 1,
Class of Common Stock 2001
- --------------------- -----------
Class A Common Stock................................................ 184,826,952
Class B Common Stock................................................ 8,001,769
Class C Common Stock................................................ 2,267,813
-----------
Total............................................................. 195,096,534
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AMERICAN TOWER CORPORATION
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 2001 and
December 31, 2000................................................. 1
Condensed Consolidated Statements of Operations for the three and
nine months ended September 30, 2001 and 2000..................... 2
Condensed Consolidated Statements of Cash Flows for the nine months
ended September 30, 2001 and 2000................................. 3
Notes to Condensed Consolidated Financial Statements............... 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................. 12
Item 3. Quantitative and Qualitative Disclosures about Market Risk..... 30
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.............................................. 32
Item 2. Changes in Securities and Use of Proceeds...................... 32
Item 5. Other Information.............................................. 32
Item 6. Exhibits and Reports on Form 8-K............................... 32
Signatures............................................................. 34
PART I. FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS--Unaudited
(In Thousands, Except Share Data)
September 30, December 31,
2001 2000
------------- ------------
ASSETS
Current Assets:
Cash and cash equivalents.......................... $ 276,094 $ 82,038
Restricted cash and investments.................... 62,225 46,036
Accounts receivable, net of allowance for doubtful
accounts of $28,565 and $19,809, respectively..... 204,273 194,011
Prepaid and other current assets................... 64,068 42,377
Inventories........................................ 50,414 47,872
Cost and earnings in excess of billings on
uncompleted contracts and unbilled receivables.... 67,943 43,652
Deferred income taxes.............................. 15,175 15,166
---------- ----------
Total current assets............................... 740,192 471,152
---------- ----------
Property and equipment, net......................... 3,177,651 2,296,670
Goodwill and other intangible assets, net........... 2,513,923 2,505,681
Deferred income taxes............................... 226,642 140,395
Other long-term assets.............................. 260,101 246,781
---------- ----------
Total.............................................. $6,918,509 $5,660,679
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term obligations........... $ 12,169 $ 11,178
Accounts payable and accrued expenses.............. 171,331 161,337
Accrued tower construction costs................... 29,639 45,315
Accrued interest................................... 39,825 31,708
Billings in excess of costs on uncompleted
contracts and unearned revenue.................... 50,948 48,248
---------- ----------
Total current liabilities.......................... 303,912 297,786
---------- ----------
Long-term obligations............................... 3,536,018 2,457,045
Other long-term liabilities......................... 57,145 12,472
---------- ----------
Total liabilities.................................. 3,897,075 2,767,303
---------- ----------
Minority interest in subsidiaries................... 5,411 16,346
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock; $0.01 par value; 20,000,000 shares
authorized; no shares issued or outstanding........
Class A Common Stock; $0.01 par value; 500,000,000
shares authorized; 184,961,549 and 170,180,549
shares issued, 184,816,952 and 170,035,952 shares
outstanding, respectively.......................... 1,850 1,701
Class B Common Stock; $0.01 par value; 50,000,000
shares authorized; 8,001,769 and 8,095,005 shares
issued and outstanding, respectively............... 80 81
Class C Common Stock; $0.01 par value; 10,000,000
shares authorized; 2,267,813 shares issued and
outstanding, respectively.......................... 23 23
Additional paid-in capital.......................... 3,636,142 3,174,622
Accumulated other comprehensive loss................ (22,290)
Accumulated deficit................................. (595,442) (295,057)
Less: Treasury stock (144,597 shares of Class A
Common Stock at cost)............................. (4,340) (4,340)
---------- ----------
Total stockholders' equity......................... 3,016,023 2,877,030
---------- ----------
Total.............................................. $6,918,509 $5,660,679
========== ==========
See notes to condensed consolidated financial statements.
1
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS--Unaudited
(In Thousands, Except Per Share Data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- --------------------
2001 2000 2001 2000
--------- -------- --------- ---------
REVENUES:
Rental and management............. $ 120,032 $ 75,535 $ 317,736 $ 192,475
Network development services...... 118,762 91,185 325,705 203,363
Satellite and fiber network access
services......................... 57,402 42,238 178,191 95,684
--------- -------- --------- ---------
Total operating revenues...... 296,196 208,958 821,632 491,522
--------- -------- --------- ---------
OPERATING EXPENSES:
Operating expenses excluding
depreciation and amortization,
and development and corporate
general and administrative
expenses:
Rental and management........... 58,605 37,335 155,742 97,117
Network development services.... 105,609 75,741 290,190 173,068
Satellite and fiber network
access services................ 55,353 32,060 169,467 74,318
Depreciation and amortization..... 118,898 75,973 317,853 198,264
Development expense............... 1,736 5,311 7,038 10,495
Corporate general and
administrative expense........... 7,353 3,442 18,887 9,957
--------- -------- --------- ---------
Total operating expenses...... 347,554 229,862 959,177 563,219
--------- -------- --------- ---------
LOSS FROM OPERATIONS................ (51,358) (20,904) (137,545) (71,697)
--------- -------- --------- ---------
OTHER INCOME (EXPENSE):
Interest expense.................. (73,483) (41,752) (210,223) (112,339)
Interest income and other, net.... 720 6,560 13,578 12,997
Interest income, TV Azteca, net... 3,627 3,607 10,747 9,070
Loss on investment in US
Wireless......................... (1,182) (23,408)
Note conversion expense........... (26,336) (26,336) (16,968)
Minority interest in net
(earnings) losses of
subsidiaries..................... (19) 140 (16) 82
--------- -------- --------- ---------
Total other expense........... (96,673) (31,445) (235,658) (107,158)
--------- -------- --------- ---------
LOSS BEFORE INCOME TAXES AND EX-
TRAORDINARY LOSSES................. (148,031) (52,349) (373,203) (178,855)
INCOME TAX BENEFIT.................. 23,093 12,822 72,818 43,036
--------- -------- --------- ---------
LOSS BEFORE EXTRAORDINARY LOSSES.... (124,938) (39,527) (300,385) (135,819)
EXTRAORDINARY LOSSES ON
EXTINGUISHMENT OF DEBT,
NET OF INCOME TAX BENEFIT OF
$2,892............................. (4,338)
--------- -------- --------- ---------
NET LOSS............................ $(124,938) $(39,527) $(300,385) $(140,157)
========= ======== ========= =========
BASIC AND DILUTED LOSS PER COMMON
SHARE AMOUNTS
Loss before extraordinary losses.. $ (0.65) $ (0.22) $ (1.58) $ (0.82)
Extraordinary losses.............. (0.03)
--------- -------- --------- ---------
NET LOSS............................ $ (0.65) $ (0.22) $ (1.58) $ (0.85)
========= ======== ========= =========
WEIGHTED AVERAGE COMMON SHARES OUT-
STANDING........................... 193,135 178,056 190,380 165,244
========= ======== ========= =========
See notes to condensed consolidated financial statements.
2
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS--Unaudited
(In Thousands)
Nine Months Ended
September 30,
----------------------
2001 2000
---------- ----------
CASH FLOWS USED FOR OPERATING ACTIVITIES
Net loss............................................. $ (300,385) $ (140,157)
Non-cash items reflected in statement of operations.. 343,293 190,862
Increase in current assets........................... (52,371) (114,837)
(Decrease) increase in current liabilities........... (11,555) 26,351
---------- ----------
Cash used for operating activities..................... (21,018) (37,781)
---------- ----------
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Payments for purchase of property and equipment and
construction activities............................. (441,867) (346,161)
Payments for acquisitions, net of cash acquired...... (688,557) (1,163,281)
Deposits, investments and other...................... (72,116) (97,435)
---------- ----------
Cash used for investing activities..................... (1,202,540) (1,606,877)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit facilities and other debt.... 181,500 1,377,500
Proceeds from senior notes offering.................. 1,000,000
Proceeds from convertible notes offering............. 450,000
Repayment of notes payable and credit facilities..... (77,691) (496,729)
Net proceeds from equity offerings and stock
options............................................. 365,684 532,548
Deferred financing costs, restricted cash and
investments and other............................... (51,879) (37,403)
---------- ----------
Cash provided by financing activities.................. 1,417,614 1,825,916
---------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS.............. 194,056 181,258
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD......... 82,038 25,212
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD............... $ 276,094 $ 206,470
========== ==========
CASH PAID FOR INCOME TAXES............................. $ 4,998 $ 2,772
========== ==========
CASH PAID FOR INTEREST................................. $ 196,586 $ 93,848
========== ==========
NON-CASH TRANSACTIONS:
Issuance of common stock, warrants and options for
acquisitions........................................ $ 7,077 $ 145,852
Issuance of common stock for equity investment....... 2,464
Treasury stock transactions.......................... 2,752
Note conversion transaction (including note
conversion expense)................................. 60,107 136,400
TV Azteca transaction................................ 25,819
Capital leases....................................... 31,853 38,529
Note receivable converted to investment.............. 7,772
See notes to condensed consolidated financial statements.
3
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--Unaudited
1. Basis of Presentation and Accounting Policies
The accompanying condensed consolidated financial statements have been
prepared by American Tower Corporation (the Company) without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission (SEC).
The financial information included herein is unaudited; however, the Company
believes such information and the disclosures are adequate to make the
information presented not misleading and reflect all adjustments (consisting
only of normal recurring adjustments) that are necessary for a fair
presentation of financial position and results of operations for such periods.
Results of interim periods may not be indicative of results for the full year.
These condensed consolidated financial statements and related notes should be
read in conjunction with the Company's 2000 Annual Report on Form 10-K.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the condensed consolidated
financial statements and accompanying notes. Actual results may differ from
those estimates, and such differences could be material to the accompanying
condensed consolidated financial statements.
Loss Per Common Share--Basic and diluted 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 outstanding during the period, if any. In
computing diluted per share amounts, the Company uses the treasury stock
method, whereby unexercised options and warrants are assumed to be exercised
at the beginning of the period or at issuance, if later. The assumed proceeds
are then used to purchase common shares at the average market price during the
period. Shares issuable upon exercise of options, warrants and other dilutive
securities have been excluded from the computation of diluted loss per common
share as the effect is anti-dilutive. Had options, warrants and other dilutive
securities been included in the computation, weighted average shares for the
diluted computation would have increased by approximately 29.5 million and
38.4 million for the three months ended September 30, 2001 and 2000,
respectively, and 32.3 million and 40.3 million for the nine months ended
September 30, 2001 and 2000, respectively.
Recent Accounting Pronouncements--On January 1, 2001, the Company adopted
the provisions of Statement of Financial Accounting Standard (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 market value of a derivative (that is unrealized gains or
losses) is recorded as a component of an entity's net income or other
comprehensive income, depending upon designation (as defined in the
statement). The cumulative effect of adopting this statement resulted in a
charge to other comprehensive income of $7.9 million, net of tax.
The Company is exposed to interest rate risk relating to variable interest
rates on its credit facilities. As part of its overall strategy to manage the
level of exposure to the risk of interest rate fluctuations, the Company uses
interest rate swaps, caps and collars, which qualify and are designated as
cash flow hedges. The Company also uses swaptions to manage interest rate
risk, which have not been designated as cash flow hedges.
During the nine months ended September 30, 2001, the Company recorded an
unrealized loss, excluding the charge for the cumulative effect of adopting
SFAS No. 133, of approximately $21.1 million (net of a tax benefit of
approximately $11.4 million) in other comprehensive loss for the change in
fair value of cash flow hedges and reclassified $6.1 million (net of a tax
benefit of approximately $3.3 million) into results of operations. Hedge
ineffectiveness resulted in a gain of approximately $1.6 million for the nine
months ended September 30, 2001 and was recorded in "interest income and
other, net". The Company records the changes in fair value of its derivative
instruments that are not accounted for as hedges in "interest income and
other, net". At September 30, 2001 the
4
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--Unaudited--(Continued)
fair value of the Company's derivative instruments represented a liability of
approximately $39.8 million and is included in "other long-term liabilities".
The Company estimates that approximately $16.5 million of derivative losses
(net of tax benefit) included in other comprehensive loss will be reclassified
into the statement of operations within the next twelve months.
In June 2001, SFAS No. 141, "Business Combinations" was approved by the
Financial Accounting Standards Board (FASB). SFAS No. 141 requires that the
purchase method of accounting be used for all business combinations initiated
after June 30, 2001. Goodwill and certain intangible assets will remain on the
balance sheet and not be amortized. On an annual basis, and when there is
reason to suspect that their values have been diminished or impaired, these
assets must be tested for impairment, and write-downs may be necessary. The
Company has not determined the impact that this statement will have on its
consolidated financial position or results of operations.
In June 2001, SFAS No. 142, "Goodwill and Other Intangible Assets" was
approved by the FASB. SFAS No. 142 changes the accounting for goodwill and
certain other intangibles from an amortization method to an impairment-only
approach. Amortization of goodwill and certain other intangibles will cease
upon adoption of this statement. The Company is required to implement SFAS No.
142 on January 1, 2002 and it has not determined the impact that this
statement will have on its consolidated financial position or results of
operations.
Reclassifications--Certain reclassifications have been made to the 2000
condensed consolidated financial statements and related notes to conform to
the 2001 presentation.
2. Income Taxes
The Company provides for income taxes at the end of each interim period
based on the estimated effective tax rate for the full fiscal year. Cumulative
adjustments to the Company's estimate are recorded in the interim period in
which a change in the estimated annual effective rate is determined.
3. Inventories
Inventories are stated at the lower of cost or market, with cost being
determined on the first-in, first-out (FIFO) basis. The components of
inventories are as follows (in thousands):
September 30, 2001 December 31, 2000
------------------- -----------------
Raw materials............................. $ 28,708 $ 20,887
Finished goods............................ 19,910 25,947
Work in process........................... 1,796 1,038
-------- --------
Total................................... $ 50,414 $ 47,872
======== ========
5
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--Unaudited--(Continued)
4. Acquisitions
General--The acquisitions consummated during the nine month period ended
September 30, 2001 have been accounted for by the purchase method of
accounting. The purchase prices have been allocated to the net assets
acquired, principally intangible and tangible assets, and the liabilities
assumed based on their estimated fair values at the date of acquisition. The
excess of purchase price over the estimated fair value of the net assets
acquired has been recorded as goodwill and other intangible assets. For
certain acquisitions, the condensed consolidated financial statements reflect
the preliminary allocation of purchase prices, as the appraisals of assets
acquired have not been finalized. The Company does not expect any changes in
depreciation and amortization as a result of such appraisals to be material to
the Company's consolidated results of operations.
During the nine month period ended September 30, 2001, the Company acquired
various communication sites and related businesses and satellite and fiber
network access service assets for an aggregate preliminary purchase price of
approximately $690.9 million. The total purchase price includes the payment of
$683.8 million in cash and the issuance of 342,069 shares of Class A common
stock valued at approximately $7.1 million. Included in the above are amounts
paid by the Company in connection with our agreement with ALLTEL. With the
exception of the ALLTEL transaction discussed below, none of the individual
acquisitions consummated during the nine months ended September 30, 2001 was
deemed significant. The following summarizes the ALLTEL transaction to date.
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 fifteen-year sublease agreement. Under the agreement, the Company will
sublease these towers for cash consideration of up to $657.9 million. ALLTEL
also granted the Company the option to sublease 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. Under the agreement, the Company
has the option to purchase the towers at the end of the fifteen-year term.
During the nine months ended September 30, 2001, the Company subleased 1,406
towers and paid ALLTEL $421.8 million in cash. In addition, early in the
fourth quarter of 2001, the Company subleased 259 towers and paid ALLTEL
approximately $77.7 million in cash. The Company anticipates that it will only
exercise its rights to sublease up to 1,850 towers in total under the ALLTEL
agreement. The remaining closings are expected to occur during the balance of
2001 and in the first quarter of 2002.
The following unaudited pro forma summary for the nine months ended
September 30, 2001 and 2000 presents the condensed consolidated results of
operations as if all of the acquisitions closing prior to September 30, 2001
(as referred to in the second paragraph of this note) had occurred as of
January 1, 2000, after giving effect to certain adjustments, including
depreciation and amortization and interest expense on debt incurred to fund
the acquisitions. These unaudited pro forma results have been prepared for
comparative purposes only and do not purport to be indicative of what would
have occurred had the acquisitions been made as of January 1, 2000 or of
results which may occur in the future.
Nine Months Nine Months
Ended Ended
September 30, September 30,
2001 2000
------------- -------------
In thousands, except
per share data:
Revenues..................................... $ 838,254 $ 522,713
Net loss before extraordinary losses......... $(317,527) $(176,698)
Net loss..................................... $(317,527) $(181,036)
Basic and diluted loss per common share
before
extraordinary losses........................ $ (1.67) $ (1.07)
Basic and diluted loss per common share...... $ (1.67) $ (1.09)
As of January 1, 2000, the Company had recorded a liability of approximately
$1.2 million related primarily to contractual obligations assumed in its
acquisition of towers from AT&T. During the nine month period ended
6
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--Unaudited--(Continued)
September 30, 2001, the Company recorded an additional liability of
approximately $7.4 million related primarily to contractual obligations
assumed in connection with its acquisition of Interpacket Networks, Inc.
During that same period, the Company recorded charges against these
liabilities of approximately $2.7 million. In addition, the Company reversed
approximately $1.9 million related to these liabilities against goodwill and
other intangible assets. As of September 30, 2001, the Company has a remaining
liability of approximately $4.0 million all of which is related primarily to
contractual obligations assumed in the Interpacket Networks, Inc. acquisition.
Since October 1, 2001 (excluding the ALLTEL transaction discussed above),
the Company has consummated acquisitions for an aggregate preliminary purchase
price of $16.3 million. In addition, the Company is party to various
agreements, including the remaining portions of the ALLTEL transaction (not
disclosed above), relating to the acquisition of assets and businesses from
third parties for an estimated aggregate cost of approximately $68.1 million.
Such transactions are subject to the satisfaction of customary closing
conditions, which are expected to be met during the balance of 2001 and in the
first quarter of 2002.
The Company may pursue the acquisition of other properties and businesses in
new and existing locations, although we have not entered into any definitive
material agreements with respect to such acquisitions.
5. Business Segments
The Company operates in three business segments: rental and management (RM),
network development services (Services), and satellite and fiber network
access services (SFNA). The RM segment provides for leasing and subleasing of
antennae sites on multi-tenant towers and the leasing of other properties to a
diverse range of customers primarily in the wireless communications and
broadcast industries. The Services segment offers a broad range of network
development services, including radio frequency engineering, network design,
site acquisition, construction, zoning and other regulatory approvals,
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, both domestic and
international.
The accounting policies applied in compiling segment information below are
similar to those described in the Company's 2000 Annual Report on Form 10-K.
In evaluating financial performance, management focuses on operating profit
(loss), excluding depreciation and amortization, development and corporate
general and administrative expenses. This measure of operating profit (loss)
is also before interest income and other, net, interest expense, loss on
investment in US Wireless, note conversion expense, minority interest in net
earnings of subsidiaries, income taxes and extraordinary losses. For reporting
purposes, the RM segment includes interest income, TV Azteca, net.
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. All reported segment
revenues are generated from external customers.
Summarized financial information concerning the Company's reportable
segments as of and for the three and nine months ended September 30, 2001 and
2000 is shown in the following table (in thousands). The "Other" column below
represents amounts excluded from specific segments such as income taxes,
extraordinary losses, corporate general and administrative expense,
development expense, depreciation and amortization, loss on investment in US
Wireless, note conversion expense, minority interest in net earnings of
subsidiaries and interest. In addition, "Other" includes corporate assets such
as cash and cash equivalents, restricted cash and investments, tangible and
intangible assets and income tax accounts which have not been allocated to
specific segments.
7
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--Unaudited--(Continued)
Three Months Ended
September 30, RM Services SFNA Other Total
- ------------------ ---------- -------- -------- --------- ----------
2001
Revenues................. $ 120,032 $118,762 $ 57,402 $ 296,196
Operating profit (loss)
........................ 65,054 13,153 2,049 $(205,194) (124,938)
Assets................... 4,783,644 785,979 631,705 717,181 6,918,509
2000
Revenues................. $ 75,535 $ 91,185 $ 42,238 $ 208,958
Operating profit (loss).. 41,807 15,444 10,178 $(106,956) (39,527)
Assets................... 3,600,576 566,411 386,072 595,464 5,148,523
Nine Months Ended
September 30, RM Services SFNA Other Total
- ----------------- ---------- -------- -------- --------- ----------
2001
Revenues................. $ 317,736 $325,705 $178,191 $ 821,632
Operating profit (loss)
........................ 172,741 35,515 8,724 $(517,365) (300,385)
Assets................... 4,783,644 785,979 631,705 717,181 6,918,509
2000
Revenues................. $ 192,475 $203,363 $ 95,684 $ 491,522
Operating profit (loss).. 104,428 30,295 21,366 $(296,246) (140,157)
Assets................... 3,600,576 566,411 386,072 595,464 5,148,523
6. 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 have been and 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. The
Senior Notes rank equally with the Company's convertible notes and rank junior
to all indebtedness of its subsidiaries including amounts outstanding under
the Company's credit facilities. 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 covenants
and ratios 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 have been and will be used to finance the construction
of towers, fund pending and future acquisitions and for general corporate
purposes. The amount outstanding under the Senior Notes was $1.0 billion as of
September 30, 2001 and is included in long-term obligations in the
accompanying September 30, 2001 condensed consolidated balance sheet.
Mexican credit facility--In February 2001, the Company's Mexican subsidiary
consummated a loan agreement that provides 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 commitment 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 (each as defined in
the agreement). The loan is due in 2003. The amount outstanding under the
Mexican credit facility was approximately $95.0 million as of September 30,
2001 and is included in long-term obligations in the accompanying September
30, 2001 condensed consolidated balance sheet.
8
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--Unaudited--(Continued)
7. Information Presented Pursuant to the Indenture for the Senior Notes
The following table sets forth information that is presented solely to
address certain reporting requirements contained in the indenture for the
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 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.
Three Months Ended Nine Months Ended
September 30, 2001 September 30, 2001
----------------------- -----------------------
Restricted Restricted
Consolidated Group (1) Consolidated Group (1)
------------ ---------- ------------ ----------
Statement of Operations Data
(in thousands):
Operating revenues........... $ 296,196 $ 238,794 $ 821,632 $ 643,441
--------- --------- --------- ---------
Operating expenses:
Operating expenses excluding
depreciation and
amortization, and
development and corporate
general and administrative
expenses.................... 219,567 164,214 615,399 445,932
Depreciation and
amortization................ 118,898 100,296 317,853 267,327
Development expense.......... 1,736 1,701 7,038 6,303
Corporate general and
administrative expense...... 7,353 7,353 18,887 18,887
--------- --------- --------- ---------
Total operating expenses... 347,554 273,564 959,177 738,449
--------- --------- --------- ---------
Loss from operations......... (51,358) (34,770) (137,545) (95,008)
Interest expense............. (73,483) (70,543) (210,223) (202,014)
Interest income and other,
net......................... 720 4,331 13,578 17,339
Interest income, TV Azteca,
net of interest expense of
$289 and $873 for the three
and nine months ended
September 30, 2001,
respectively ............... 3,627 3,627 10,747 10,747
Loss on investment in US
Wireless.................... (1,182) (1,182) (23,408) (23,408)
Note conversion expense...... (26,336) (26,336) (26,336) (26,336)
Minority interest in net
earnings of subsidiaries.... (19) (19) (16) (16)
--------- --------- --------- ---------
Loss before income taxes and
extraordinary losses........ $(148,031) $(124,892) $(373,203) $(318,696)
========= ========= ========= =========
September 30, 2001
-----------------------
Restricted
Consolidated Group
------------ ----------
Balance Sheet Data (in thousands):
Cash and cash equivalents.............................. $ 276,094 $ 264,311
Restricted cash and investments........................ 62,225 62,225
Property and equipment, net............................ 3,177,651 2,884,786
Total assets........................................... 6,918,509 6,286,804
Long-term obligations, including current portion....... 3,548,187 3,431,700
Net debt(2)............................................ 3,209,868 3,105,164
Total stockholders' equity............................. 3,016,023 3,016,023
- --------
(1) Corporate overhead allocable to Verestar and interest expense related to
intercompany borrowings by Verestar (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 and restricted cash and investments.
9
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--Unaudited--(Continued)
8. Comprehensive Loss
Other comprehensive loss consists primarily of foreign currency translation
adjustments, derivative instruments accounted for as cash flow hedges, and the
impact of the Company's adoption of SFAS No. 133 discussed in note 1. The
components of the Company's comprehensive loss are as follows (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- --------------------
2001 2000 2001 2000
--------- -------- --------- ---------
Net loss............................ $(124,938) $(39,527) $(300,385) $(140,157)
Other comprehensive loss, net of
tax:
Foreign currency translation
adjustments and other............ 683 527
Derivative instruments:
Net change in fair value of cash
flow hedges.................... (12,667) (21,086)
Amounts reclassified into
results of operations.......... 5,583 6,121
--------- -------- --------- ---------
Comprehensive loss before cumulative
effect adjustment.................. (131,339) (39,527) (314,823) (140,157)
Cumulative effect adjustment
recorded upon the adoption of SFAS
No. 133 (net of an income tax
benefit of $4,227)................. (7,852)
--------- -------- --------- ---------
Comprehensive loss.................. $(131,339) $(39,527) $(322,675) $(140,157)
========= ======== ========= =========
9. 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 an adverse outcome, have a material impact on the Company's
consolidated financial position, the results of its operations or liquidity.
10. Loss on Investment in US Wireless
During the nine months ended September 30, 2001, the Company wrote-off its
entire investment in US Wireless. The majority of the charge, $22.2 million,
occurred in the second quarter 2001 as a result of an assessment that a loss
in value of the Company's preferred stock investment had occurred that was
other than temporary. The remaining portion of the Company's investment, $1.2
million, was written off in the third quarter after US Wireless filed for
protection under Chapter 11 of the United States Bankruptcy Code.
11. Convertible Note Exchanges
During the third quarter, the Company acquired approximately $82.5 million
face amount ($61.6 million carrying amount) of its 2.25% convertible notes.
The transactions were pursuant to exchange agreements which the Company
negotiated with a limited number of noteholders. Pursuant to these exchange
agreements, the Company issued an aggregate of 2.4 million shares of Class A
common stock that these noteholders were entitled to receive based on the
conversion price set forth in the applicable indenture, plus an additional
1.5 million shares of Class A common stock to induce them to convert their
holdings prior to the first scheduled redemption date. As a result of these
transactions, in the third quarter the Company recorded a non-cash charge of
$26.3 million, which represents the fair market value of the inducement
shares. The Company may negotiate similar exchanges for its outstanding
convertible notes during the fourth quarter and from time to time in the
future, subject to market conditions. To the extent that inducement shares are
issued by the Company as part of any future exchanges, the Company expects to
record additional non-cash charges.
10
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--Unaudited--(Continued)
12. Restructuring
On November 6, 2001, the Company announced a restructuring of the
organization to include a reduction in the scope of its tower development
activities and the centralization of certain operating functions. As a result
of these initiatives, the Company expects to record a restructuring charge of
approximately $41.0 million to $44.0 million. Approximately $9.0 million of
the charge is associated with consolidating operations and employee reductions
within all of the Company's business segments and includes employee separation
costs and office closings. The Company expects to record this component of the
charge in the fourth quarter of 2001 and in the first quarter of 2002. The
remaining component of the restructuring charge, $32.0 million to $35.0
million, will be a non-cash write off of construction in progress related to
project sites that will be abandoned as a result of the overall reduction in
the Company's tower construction activity. The entire construction in progress
charge will be recorded in the fourth quarter of 2001.
13. Subsequent Events
On October 21, 2001, the Company amended its credit facilities agreement to
provide for a total borrowing capacity of up to $2.25 billion. That capacity
is subject to covenant and ratio restrictions relating to operating cash flow
and tower construction cost levels. The credit facilities now include a $650.0
million credit facility (fully available, subject to covenant and ratio
restrictions), an $850.0 million multi-draw Term Loan A (fully drawn), a
$500.0 million Term Loan B (fully drawn) and a $250.0 million multi-draw Term
Loan C (fully available, subject to covenant and ratio restrictions).
In addition, on October 11, 2001 the Company consummated the sale of 8.7% of
its Mexican subsidiary, ATC Mexico Holding Corp. (ATC Mexico), to J. Michael
Gearon, Jr., an executive officer and director of the Company, for $8.4
million. Under the terms of the sale the consideration paid by Mr. Gearon is
in the form of $1.7 million in cash and a $6.7 million note. The note, which
accrues interest and is payable quarterly, is secured by approximately 411,000
shares of Class A common stock of the Company owned by Mr. Gearon and his
interest in ATC Mexico. The purchase price represented the fair market value
of an 8.7% interest in ATC Mexico on the date of the sale as determined with
the assistance of an independent appraiser. Mr. Gearon may require the Company
to purchase his interest in ATC Mexico for its then fair market value, as
determined by an independent appraiser, any time after the soonest to occur of
July 1, 2004, a Change in Control (as defined in a stockholder agreement) of
the Company or ATC Mexico, or Mr. Gearon's death or disability. The Company
has the right to purchase Mr. Gearon's interest in ATC Mexico for its then
fair market value, as determined by an independent appraiser, after the
soonest to occur of July 1, 2005, Mr. Gearon's death or disability or on
either a Gearon Termination Event or a Forfeiture Event (each as defined in a
stockholder agreement).
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q 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," "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 information under the caption entitled "Factors that May Affect
Future Results" below for important factors that could cause actual results to
differ materially from those indicated by our forward-looking statements made
herein. 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.
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, Internet service
providers, broadcasters and maritime customers, both domestic and
international.
Results of Operations
As of September 30, 2001, the Company owned and/or operated approximately
13,800 communications sites, as compared to approximately 10,300
communications sites as of September 30, 2000. The acquisitions consummated in
2001 and 2000 have significantly affected operations for the three and nine
months ended September 30, 2001, as compared to the three and nine months
ended September 30, 2000. See the notes to the condensed consolidated
financial statements and the Company's Annual Report on Form 10-K for a
description of the acquisitions consummated in 2001 and 2000.
12
Three Months Ended September 30, 2001 and 2000 (dollars in thousands)--
Unaudited
Three Months Ended
September 30, Amount of Percentage
------------------- Increase Increase
2001 2000 (Decrease) (Decrease)
--------- -------- ---------- ----------
Revenues:
Rental and management............... $ 120,032 $ 75,535 $44,497 59%
Network development services........ 118,762 91,185 27,577 30
Satellite and fiber network access
services........................... 57,402 42,238 15,164 36
--------- -------- -------
Total revenues...................... 296,196 208,958 87,238 42
--------- -------- -------
Operating Expenses:
Rental and management............... 58,605 37,335 21,270 57
Network development services........ 105,609 75,741 29,868 39
Satellite and fiber network access
services........................... 55,353 32,060 23,293 73
--------- -------- -------
Total operating expenses excluding
depreciation and amortization,
development and corporate general
and administrative expenses........ 219,567 145,136 74,431 51
--------- -------- -------
Depreciation and amortization....... 118,898 75,973 42,925 57
Development expense................. 1,736 5,311 (3,575) (67)
Corporate general and administrative
expense............................ 7,353 3,442 3,911 114
Interest expense.................... 73,483 41,752 31,731 76
Interest income and other, net...... 720 6,560 (5,840) (89)
Interest income, TV Azteca, net of
$289 and $296 of interest expense,
respectively ...................... 3,627 3,607 20 1
Loss on investment in US Wireless... 1,182 1,182 N/A
Note conversion expense............. 26,336 26,336 N/A
Minority interest in net (earnings)
losses of subsidiaries............. (19) 140 (159) (114)
Income tax benefit.................. 23,093 12,822 10,271 80
--------- -------- -------
Net loss............................ $(124,938) $(39,527) $85,411 216%
========= ======== =======
Rental and Management Revenue
Rental and management revenue for the three months ended September 30, 2001
was $120.0 million, an increase of $44.5 million from the three months ended
September 30, 2000. The increase resulted primarily from two factors: the
leasing activity on towers acquired and constructed from the period October 1,
2000 to September 30, 2001 and increased leasing activity on towers that
existed as of September 30, 2000. From the period October 1, 2000 to September
30, 2001, we acquired approximately 2,200 towers and constructed more than
1,500 towers. Additionally, during that same period, we added approximately
4,900 broadband equivalent tenants to both newly acquired/constructed and
existing towers. The Company anticipates that the majority of lease up
activity moving into the fourth quarter of 2001 and into 2002 will continue to
come from broadband type customers. This acquisition, construction and leasing
activity has not only significantly increased revenue, but has also increased
the scope, depth and strength of our national and international tower network,
providing us with a much larger base of tower revenue for the three months
ended September 30, 2001 as compared to the three months ended September 30,
2000.
In the fourth quarter of 2001, the Company announced an initiative to reduce
the scope of its tower development activities. This reduction will result in a
significant decrease in new tower construction in the near term and in a more
selective criteria in evaluating acquisitions. The intention of this
initiative is twofold: to accelerate our overall return on investment and to
preserve capital. We believe in any event, that our existing portfolio will
continue to provide us with a solid foundation for future revenue growth.
Notwithstanding our proposed scaleback of tower development activities,
however, we continue to believe that our leasing revenues, which comprise our
core business, 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.
13
Network Development Services Revenue
Network development services revenue for the three months ended September
30, 2001 was $118.8 million, an increase of $27.6 million from the three
months ended September 30, 2000. The growth in revenues during the three
months ended September 30, 2001 as compared to the three months ended
September 30, 2000 resulted primarily from increased volume of services such
as construction management, installation and related colocation services,
tower maintenance services, and an increase in component sales driven
primarily from an acquisition.
Satellite and Fiber Network Access Services Revenue
Satellite and fiber network access services revenue for the three months
ended September 30, 2001 was $57.4 million, an increase of $15.2 million from
the three months ended September 30, 2000. The majority of the increase
resulted from the consummation of several key acquisitions that occurred in
2001 and 2000 including: Publicom, Interpacket Networks and a Satellite
Network Access Point (SNAP) facility in Switzerland. These acquisitions
significantly increased our service capabilities, revenue base, and
geographical scope of customers, leading to significant incremental revenues
in 2001. This increase in revenue was partially offset by the non-renewal of
service contracts of several key customers and a decrease in demand for
services in Latin America and from emerging telecommunications carriers.
Rental and Management Expense
Rental and management expense for the three months ended September 30, 2001
was $58.6 million, an increase of $21.3 million from the three months ended
September 30, 2000. The majority of the increase resulted from incremental
operating expenses incurred in the three months ended September 30, 2001 for
the more than 3,700 towers that were acquired or constructed from the period
October 1, 2000 to September 30, 2001 as discussed above. The balance of the
increase reflects, to a lesser extent, increased bad debt expense for the
segment as a whole and higher operating expenses for the three months ended
September 30, 2001 related to towers that existed as of September 30, 2000.
Network Development Services Expense
Network development services expense for the three months ended September
30, 2001 was $105.6 million, an increase of $29.9 million from the three
months ended September 30, 2000. The increase is primarily due to overall
increases in the service volume discussed above, increases in the overhead
costs necessary to support both internal construction and external sales and
incremental expenses related to the consummation of an acquisition.
Satellite and Fiber Network Access Services Expense
Satellite and fiber network access services expense for the three months
ended September 30, 2001 was $55.4 million, an increase of $23.3 million from
the three months ended September 30, 2000. The primary reason for the increase
relates to the incremental expenses attributable to the strategic acquisitions
discussed above. Other components of the increase include increased personnel
and infrastructure costs to help manage the growth of this segment and
increased overhead related to the development and marketing of new product
lines and, to a lesser extent, increased bad debt expense.
Depreciation and Amortization
Depreciation and amortization for the three months ended September 30, 2001
was $118.9 million, an increase of $42.9 million from the three months ended
September 30, 2000. The principal component of the increase is an increase in
depreciation expense of $28.1 million. This is primarily a result of the
Company's purchase and acquisition of approximately $1.4 billion of property
and equipment from the period October 1, 2000 to September 30, 2001. The other
component of the increase is the increased amortization of $14.8 million,
resulting from our recording and amortizing approximately $473.7 million of
goodwill and other intangible assets related to acquisitions consummated from
the period October 1, 2000 to September 30, 2001.
14
Development Expense
Development expense for the three months ended September 30, 2001 was $1.7
million, a decrease of $3.6 million from the three months ended September 30,
2000. The majority of the decrease results from reduced expenses related to
tower site inspections, data gathering and acquisition integration in the
three months ended September 30, 2001.
Corporate General and Administrative Expense
Corporate general and administrative expense for the three months ended
September 30, 2001 was $7.4 million, an increase of $3.9 million from the
three months ended September 30, 2000. The majority of the increase is a
result of expenses incurred to implement a new company-wide Enterprise
Resource Planning (ERP) system, coupled with increased information technology
and personnel costs related to supporting the Company's overall growth.
Interest Expense
Interest expense for the three months ended September 30, 2001 was $73.5
million, an increase of $31.7 million from the three months ended September
30, 2000. The majority of the increase, $26.9 million, resulted primarily from
increased borrowings outstanding related to our credit facilities and senior
notes, offset by a decrease in interest rates on our credit facilities. The
remaining component of the increase represents increases in interest on
capital leases and other notes payable and increased deferred financing
amortization.
Interest Income and Other, net
Interest income and other, net for the three months ended September 30,
2001, was $0.7 million, a decrease of $5.8 million from the three months ended
September 30, 2000. The decrease relates primarily to increased losses on
equity investments and a decrease in interest earned on invested cash on-hand,
offset, to a lesser extent, by foreign currency gains.
Loss on Investment in US Wireless
During the three months ended September 30, 2001, the Company wrote off the
remaining portion, $1.2 million, of its investment in US Wireless. The non-
cash charge was recorded after US Wireless filed for protection under Chapter
11 of the United States Bankruptcy Code on August 29, 2001. The Company had
previously written off $22.2 million of its investment in the second quarter
of 2001 after making an assessment that a loss in value in the Company's
preferred stock investment had occurred that was other than temporary.
Note Conversion Expense
During the three months ended September 30, 2001, the Company acquired a
portion of its 2.25% convertible notes in exchange for shares of its Class A
common stock. As a consequence of those negotiated exchanges with certain of
its noteholders, the Company recorded a non-cash charge of $26.3 million. The
note conversion expense represents the fair value of incremental stock issued
as an inducement to noteholders to convert their holdings prior to the first
scheduled redemption date. There were no such exchanges during the three
months ended September 30, 2000. See "Liquidity and Capital Resources--
Convertible Note Exchanges" for more information.
Income Tax Benefit
The income tax benefit for the three months ended September 30, 2001 was
$23.1 million, an increase of $10.3 million from the three months ended
September 30, 2000. The primary reason for the increase is a result of the
increase in our loss before income taxes partially offset by an increase in
amortization of non-deductible intangible assets arising from stock
acquisitions, non-deductible note conversion expense and the valuation
allowance related to our state net operating loss carryforwards. The effective
tax rate differs in both periods from the statutory rate primarily due to the
valuation allowance related to our state net operating loss carryforwards and
the effect of non-deductible items, principally the amortization of intangible
assets on certain stock acquisitions and non-deductible note conversion
expense on which the Company has recorded no tax benefit.
In assessing the realizability of the deferred tax asset, we analyzed our
forecast of future taxable income and potential tax planning strategies and
concluded that recoverability of the net deferred tax asset is more likely
than not.
15
Nine Months Ended September 30, 2001 and 2000 (dollars in thousands)--
Unaudited
Nine Months Ended
September 30, Amount of Percentage
-------------------- Increase Increase
2001 2000 (Decrease) (Decrease)
--------- --------- ---------- ----------
Revenues:
Rental and management.............. $ 317,736 $ 192,475 $125,261 65%
Network development services....... 325,705 203,363 122,342 60
Satellite and fiber network access
services.......................... 178,191 95,684 82,507 86
--------- --------- --------
Total revenues..................... 821,632 491,522 330,110 67
--------- --------- --------
Operating Expenses:
Rental and management.............. 155,742 97,117 58,625 60
Network development services....... 290,190 173,068 117,122 68
Satellite and fiber network access
services.......................... 169,467 74,318 95,149 128
--------- --------- --------
Total operating expenses excluding
depreciation and amortization,
development and corporate general
and administrative expenses....... 615,399 344,503 270,896 79
Depreciation and amortization...... 317,853 198,264 119,589 60
Development expense................ 7,038 10,495 (3,457) (33)
Corporate general and administra-
tive expense...................... 18,887 9,957 8,930 90
Interest expense................... 210,223 112,339 97,884 87
Interest income and other, net..... 13,578 12,997 581 4
Interest income, TV Azteca, net of
$873 and $753 of interest expense,
respectively ..................... 10,747 9,070 1,677 18
Loss on investment in US Wireless.. 23,408 23,408 N/A
Note conversion expense............ 26,336 16,968 9,368 55
Minority interest in net (earnings)
losses of subsidiaries............ (16) 82 (98) (120)
Income tax benefit................. 72,818 43,036 29,782 69
Extraordinary losses on extinguish-
ment of debt...................... 4,338 (4,338) (100)
--------- --------- --------
Net loss........................... $(300,385) $(140,157) $160,228 114%
========= ========= ========
Rental and Management Revenue
Rental and management revenue for the nine months ended September 30, 2001
was $317.7 million, an increase of $125.3 million from the nine months ended
September 30, 2000. The increase resulted primarily from two factors: the
leasing activity on towers acquired and constructed from the period October 1,
2000 to September 30, 2001 and increased leasing activity on towers that
existed as of September 30, 2000. From the period October 1, 2000 to September
30, 2001, we acquired approximately 2,200 towers and constructed more than
1,500 towers. Additionally, during that same period, we added approximately
4,900 broadband equivalent tenants to both newly acquired/constructed and
existing towers. The Company anticipates that the majority of lease up
activity moving into the fourth quarter and into 2002 will continue to come
from broadband type customers. This acquisition, construction and leasing
activity has not only significantly increased revenue, but has also increased
the scope, depth and strength of our national and international tower network,
providing us with a much larger base of tower revenue for the nine months
ended September 30, 2001 as compared to the nine months ended September 30,
2000.
16
Network Development Services Revenue
Network development services revenue for the nine months ended September 30,
2001 was $325.7 million, an increase of $122.3 million from the nine months
ended September 30, 2000. The growth in revenues during the nine months ended
September 30, 2001 as compared to the nine months ended September 30, 2000
resulted primarily from strategic acquisitions and increased volume for
services such as construction management, installation and related colocation
services, and tower maintenance services.
Satellite and Fiber Network Access Services Revenue
Satellite and fiber network access services revenue for the nine months
ended September 30, 2001 was $178.2 million, an increase of $82.5 million from
the nine months ended September 30, 2000. The majority of the increase
resulted from the consummation of several key acquisitions that occurred in
2001 and 2000 including: General Telecom, U.S. Electrodynamics, Publicom,
Interpacket Networks and a SNAP facility in Switzerland. These acquisitions
significantly increased our service capabilities, revenue base and
geographical scope of customers, leading to significant incremental revenues
in 2001. This increase in revenue was partially offset by the non-renewal of
service contracts of several key customers and a decrease in demand for
services in Latin America and from emerging telecommunications carriers.
Rental and Management Expense
Rental and management expense for the nine months ended September 30, 2001
was $155.7 million, an increase of $58.6 million from the nine months ended
September 30, 2000. The majority of the increase resulted from incremental
operating expenses incurred in the nine months ended September 30, 2001 for
the more than 3,700 towers that were acquired or constructed from the period
October 1, 2000 to September 30, 2001 as discussed above. The remaining
increase reflects, to a lesser extent, increased bad debt expense for the
segment as a whole and higher operating expenses related to towers that
existed as of September 30, 2000.
Network Development Services Expense
Network development services expense for the nine months ended September 30,
2001 was $290.2 million, an increase of $117.1 million from the nine months
ended September 30, 2000. The majority of the increase is due to incremental
expenses related to the consummation of strategic acquisitions, overall
increases in the volume of services work performed, increases in the overhead
costs necessary to support both internal construction and external sales and,
to a lesser extent, increased bad debt expense.
Satellite and Fiber Network Access Services Expense
Satellite and fiber network access services expense for the nine months
ended September 30, 2001 was $169.5 million, an increase of $95.1 million from
the nine months ended September 30, 2000. The majority of the increase is due
to incremental expenses related to the consummation of the strategic
acquisitions discussed above. Other components of the increase include
increased personnel and infrastructure costs to help manage the growth of this
segment, increased overhead related to the development and marketing of new
product lines and, to a lesser extent, increased bad debt expense.
Depreciation and Amortization
Depreciation and amortization for the nine months ended September 30, 2001
was $317.9 million, an increase of $119.6 million from the nine months ended
September 30, 2000. The principal component of the increase is an increase in
depreciation expense of $71.3 million. This is primarily a result of the
Company's purchase and acquisition of approximately $1.4 billion of property
and equipment from the period October 1, 2000 to September 30, 2001. The other
component of the increase is the increased amortization of $48.3 million,
resulting from our recording and amortizing approximately $473.7 million of
goodwill and other intangible assets related to acquisitions consummated from
the period October 1, 2000 to September 30, 2001.
Development Expense
Development expense for the nine months ended September 30, 2001 was $7.0
million, a decrease of $3.5 million from the nine months ended September 30,
2000. The decrease resulted primarily from reduced
17
tower site inspection, data gathering costs and acquisition integration
expenses incurred in the nine months ended September 30, 2001.
Corporate General and Administrative Expense
Corporate general and administrative expense for the nine months ended
September 30, 2001 was $18.9 million, an increase of $8.9 million from the
nine months ended September 30, 2000. The majority of the increase is a result
of expenses incurred to implement a new company-wide ERP system, coupled with
increased information technology and personnel costs related to supporting the
Company's overall growth.
Interest Expense
Interest expense for the nine months ended September 30, 2001 was $210.2
million, an increase of $97.9 million from the nine months ended September 30,
2000. The majority of the increase, $84.2 million, resulted primarily from
increased borrowings outstanding related to our credit facilities and senior
notes, offset by a decrease in interest rates on our credit facilities. The
remaining component of the increase represents interest on capital leases and
other notes payable and additional deferred financing amortization.
Interest Income and Other, net
Interest income and other, net for the nine months ended September 30, 2001,
was $13.6 million, an increase of $0.6 million from the nine months ended
September 30, 2000. The increase resulted primarily from interest earned on
invested cash on hand, offset by losses on equity investments and decreases in
the fair value of derivative instruments not accounted for as hedges.
Interest Income, TV Azteca, net
Interest income, TV Azteca, net for the nine months ended September 30, 2001
was $10.7 million, an increase of $1.7 million from the nine months ended
September 30, 2001. The increase results from interest earned on the entire
principal amount of the note, $119.0 million, during the nine months ended
September 30, 2001 as compared to less than the entire principal amount of the
note outstanding for a portion of the nine months ended September 30, 2000.
Loss on Investment in US Wireless
During the nine months ended September 30, 2001, the Company wrote off its
entire investment in US Wireless. The non-cash charge resulted from an
assessment that a loss in value on its preferred stock investment had occurred
that was other than temporary.
Note Conversion Expense
During the nine months ended September 30, 2001, the Company acquired a
portion of its 2.25% convertible notes in exchange for shares of its Class A
common stock. As a consequence of these negotiated exchanges with certain of
its noteholders, the Company recorded a non-cash charge of $26.3 million. In a
similar transaction during the nine-month period ended September 30, 2000, the
Company acquired a portion of its 6.25% and 2.25% convertible notes in
exchange for shares of its Class A common stock. As a result, the Company
recorded a non-cash charge of $17.0 million during that period. These charges
represent the fair value of incremental stock issued as an inducement to
noteholders to convert their holdings prior to the first scheduled redemption
date.
Income Tax Benefit
The income tax benefit for the nine months ended September 30, 2001 was
$72.8 million, an increase of $29.8 million from the nine months ended
September 30, 2000. The primary reason for the increase is a result of the
increase in our loss before income taxes and extraordinary losses partially
offset by an increase in amortization of non-deductible goodwill arising from
stock acquisitions, non-deductible note conversion expense
18
and the valuation allowance related to our state net operating loss
carryforwards. The effective tax rate differs in both periods from the
statutory rate primarily due to the valuation allowance related to our state
net operating loss carryforwards and the effect of non-deductible items,
principally the amortization of intangible assets on certain stock
acquisitions and non-deductible note conversion expense on which the Company
has recorded no tax benefit.
In assessing the realizability of the deferred tax asset, we analyzed our
forecast of future taxable income and potential tax planning strategies and
concluded that recoverability of the net deferred tax asset is more likely
than not.
Extraordinary Losses on Extinguishment of Debt, net
The Company incurred extraordinary losses on the extinguishment of debt, net
in the first quarter 2000 of $4.3 million. The losses were incurred as a
result of an amendment and restatement of our primary credit facility ($3.0
million, net of a tax benefit of $2.0 million) and our early retirement of
debt assumed as part of the UNISite, Inc. merger ($1.3 million, net of a tax
benefit of $1.0 million).
Restructuring
On November 6, 2001, the Company announced a restructuring of the
organization to include a reduction in the scope of its tower development
activities and the centralization of certain operating functions. As a result
of these initiatives, the Company expects to record a restructuring charge of
approximately $41.0 million to $44.0 million. Approximately $9.0 million of
the charge is associated with consolidating operations and employee reductions
within all of the Company's business segments and includes employee separation
costs and office closings. The Company expects to record this component of the
charge in the fourth quarter of 2001 and in the first quarter of 2002. The
remaining component of the restructuring charge, $32.0 million to $35.0
million, will be a non-cash write off of construction in progress related to
project sites that will be abandoned as a result of the overall reduction in
the Company's tower construction activity. The entire construction in progress
charge will be recorded in the fourth quarter of 2001.
Liquidity and Capital Resources
Our liquidity needs arise from our acquisition-related activities, debt
service, working capital needs, and capital expenditures associated
principally with our tower construction program. As of September 30, 2001, we
had approximately $338.3 million in cash and cash equivalents (including $62.2
million of restricted cash), working capital of approximately $436.3 million
and approximately $330.0 million of borrowings available under our credit
facilities after giving effect to covenants and ratio restrictions.
Historically, we have met our operational liquidity needs primarily with
internally generated funds and bank borrowings and have financed our
acquisitions and our construction program with a combination of capital funds
from sales of our equity and debt securities and bank borrowings. Through the
remainder of 2001 and into 2002 we expect that operational liquidity needs
will continue to be met as they have in the past. However, we expect that
acquisition and construction programs which will be on a reduced scale from
prior levels will be financed with available cash and bank borrowings. If
funding through the equity and debt markets can be obtained on attractive
terms, we would consider financing our acquisition and construction activity
by such means.
Our 2001 capital expenditures are expected to be approximately $575.0
million to $600.0 million ($442.0 million of which has already been incurred
as of September 30, 2001). This includes towers to be built under existing
build-to-suit agreements. In addition, as of September 30, 2001, we were
subject to various agreements relating to acquisitions of assets (including
ALLTEL) or businesses from various third parties that were pending. Based on
these agreements, we expect to close $162.1 million in transactions during the
fourth quarter of 2001 and the first quarter of 2002. Lastly, we believe that
debt service requirements will be significant for the remainder of 2001 and
into the forseeable future. We believe our current cash and cash equivalents
(including restricted cash and investments) and anticipated borrowing capacity
under our credit facilities will be sufficient to meet these cash
requirements.
19
For the nine months ended September 30, 2001, cash flows used for operating
activities were $21.0 million, as compared to cash flows used for operating
activities of $37.8 million for the nine months ended September 30, 2000. The
change is primarily related to a decreased investment in working capital.
For the nine months ended September 30, 2001, cash flows used for investing
activities were $1.2 billion, as compared to $1.6 billion for the nine months
ended September 30, 2000. The decrease in 2001 is primarily due to a decrease
in cash expended for mergers and acquisitions, offset by an increase in
property and equipment expenditures.
For the nine months ended September 30, 2001, cash flows provided by
financing activities were $1.4 billion as compared to $1.8 billion for the
nine months ended September 30, 2000. The decrease is primarily related to a
reduction in the aggregate net cash inflows from bank borrowings and external
debt and equity offerings.
As of September 30, 2001, we had outstanding indebtedness of $3.5 billion,
certain of which is described below under "Credit Facilities" and "Equity
Offering and Note Placement". As of September 30, 2001, we had outstanding
$212.7 million principal amount of our 6.25% convertible notes due October 15,
2009, $202.5 million principal amount of our 2.25% convertible notes due
October 15, 2009, $450.0 million principal amount of our 5% convertible notes
due February 1, 2010 and other debt of approximately $237.8 million. 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. In October 2001, we amended our credit facilities to
provide us with a borrowing capacity of up to $2.25 billion. Borrowings under
the credit facilities are subject to certain covenant and ratio restrictions,
relating to operating cash flow and tower construction cost levels. The credit
facilities now include a $650.0 million credit facility which was fully
available (subject to the covenant and ratio restrictions) as of September 30,
2001, maturing on June 30, 2007, an $850.0 million multi-draw Term Loan A,
which was fully drawn as of September 30, 2001, maturing on June 30, 2007, a
$500.0 million Term Loan B, which was fully drawn as of September 30, 2001
maturing on December 31, 2007 and a multi-draw $250.0 million Term Loan C,
which was not available to the Company on September 30, 2001, but is fully
available now (subject to covenant and ratio restrictions). 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 restricted
subsidiaries must comply, whether or not there are any borrowings outstanding.
The parent company is also restricted with respect to indebtedness. 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
interest reserves 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 September 30, 2001 we had
approximately $62.2 million of restricted cash and investments related to such
interest reserves.
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 commitment will
be reduced on a dollar-for-dollar basis if additional lenders join the
ATC Mexico loan agreement. This loan agreement 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 the 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 September 30, 2001, an aggregate of
$95.0 million was outstanding under the loan agreement.
20
Equity Offering and Note Placement. 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 senior notes that mature in February 2009 for
total net proceeds of $969.0 million. These notes require semiannual interest
payments and contain certain financial and operational covenants and other
restrictions similar to those in our credit facilities. We have used and will
use the proceeds from these two transactions to finance the construction of
towers, fund pending and future acquisitions and for general corporate
purposes.
Convertible Note Exchanges. In the third quarter of 2001, the Company
acquired a portion of its outstanding convertible notes. During this period,
approximately $82.5 million in face amount ($61.6 million carrying amount) of
the Company's 2.25% convertible notes was converted into shares of Class A
common stock. All of these conversions were pursuant to exchange agreements
which the Company negotiated with a limited number of noteholders. Pursuant to
these exchange agreements, the Company has issued an aggregate of 2.4 million
shares of Class A common stock that these noteholders were entitled to receive
based on the conversion price set forth in the applicable indenture, plus an
additional 1.5 million shares of Class A common stock to induce them to
convert their holdings prior to the first scheduled redemption date. As a
result of these transactions, in the third quarter of 2001 the Company
recorded a non-cash charge of $26.3 million, which represents the fair market
value of the inducement shares. The Company may negotiate similar exchanges
for its outstanding convertible notes during the fourth quarter of 2001 and
from time to time in the future, subject to market conditions. To the extent
that inducement shares are issued by the Company as part of any future
exchanges, the Company expects to record additional non-cash charges.
ATC Separation--We continue to be obligated under the ATC Separation
agreement for certain tax liabilities to CBS Corporation and American Radio
Systems. As of September 30, 2001 no material matters covered under this
indemnification have been brought to our attention.
Acquisitions and Construction. In the fourth quarter of 2001, the Company
announced an initiative to reduce the scope of our tower development
activities. This reduction will result in a significant decrease in new tower
construction in the near term and in a more selective criteria in evaluating
future development and acquisitions. The intention of this initiative is
twofold: to accelerate our overall return on investment and to preserve
capital. We continue to believe that our 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 September 30,
2001, we were a party to various agreements relating to the acquisition 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 (see note 4 of the condensed consolidated financial
statements).
Economic Conditions. The slow down in the economy could reduce consumer
demand for wireless services or negatively impact the availability of debt and
equity capital, thereby causing providers to delay or abandon implementation
of new systems and technologies. We believe that the economic slow down in
2001 has harmed, and may continue to harm, the financial condition of some
wireless service providers, certain of which, including customers of ours,
have filed for bankruptcy.
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 market value of a
derivative (that is unrealized gains or losses) is recorded as a component of
an entity's net income or other comprehensive income, depending upon
designation (as defined in the statement). Such adoption resulted in a charge
to other comprehensive income of $7.9 million, net of tax, from the cumulative
effect of adopting this standard.
21
The Company is exposed to interest rate risk relating to variable interest
rates on its credit facilities. As part of its overall strategy to manage the
level of exposure to the risk of interest rate fluctuations, the Company uses
interest rate swaps, caps and collars, which qualify and are designated as
cash flow hedges. The Company also uses swaptions to manage interest rate
risk, which have not been designated as cash flow hedges.
During the nine months ended September 30, 2001, the Company recorded an
unrealized loss, excluding the charge for the cumulative effect of adopting
SFAS No. 133, of approximately $21.1 million (net of a tax benefit of
approximately $11.4 million) in other comprehensive loss for the change in
fair value of cash flow hedges and reclassified $6.1 million (net of a tax
benefit of approximately $3.3 million) into results of operations. Hedge
ineffectiveness resulted in a gain of approximately $1.6 million for the nine
months ended September 30, 2001 and was recorded in "interest income and
other, net". The Company records the changes in fair value of its derivative
instruments that are not accounted for as hedges in "interest income and
other, net". At September 30, 2001 the fair value of the Company's derivative
instruments represented a liability of approximately $39.8 million and is
included in "other long-term liabilities". The Company estimates that
approximately $16.5 million of derivative losses (net of tax benefit) included
in other comprehensive loss will be reclassified into the statement of
operations within the next twelve months.
In June 2001, SFAS No. 141, "Business Combinations" was approved by the
Financial Accounting Standards Board (FASB). SFAS No. 141 requires that the
purchase method of accounting be used for all business combinations initiated
after June 30, 2001. Goodwill and certain intangible assets will remain on the
balance sheet and not be amortized. On an annual basis, and when there is
reason to suspect that their values have been diminished or impaired, these
assets must be tested for impairment, and write-downs may be necessary.
The Company has not determined the impact that this statement will have on its
consolidated financial position or results of operations.
In June 2001, SFAS No. 142, "Goodwill and Other Intangible Assets" was
approved by the FASB. SFAS No. 142 changes the accounting for goodwill and
certain other intangibles from an amortization method to an impairment-only
approach. Amortization of goodwill and certain other intangibles will cease
upon adoption of this statement. The Company is required to implement SFAS No.
142 on January 1, 2002 and it has not determined the impact that this
statement will have on its consolidated financial position or results of
operations.
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. This number could be affected by the easing of
spectrum limitation restrictions by the FCC;
. 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;
22
. zoning, environmental and other government regulations;
. any new legislation, or interpretation of existing federal
communications laws, that would give wireless service providers the
right to place their antennae on public utility poles and other
structures at regulated rates; 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.
CONTINUATION OF THE CURRENT U.S. ECONOMIC SLOW DOWN COULD MATERIALLY AND
ADVERSELY AFFECT OUR BUSINESS
The significant general slow down in the U.S. economy has negatively
affected the factors described in the prior heading, influencing demand for
tower space and tower related services. For example, this slow down could
reduce consumer demand for wireless services, or negatively impact the debt
and equity markets, thereby causing providers to delay or abandon
implementation of new systems and technologies. We believe that the economic
slow down in 2001 has already harmed, and may continue to harm, the financial
condition of some wireless service providers, certain of which, including
customers of ours, have filed for bankruptcy.
OUR SUBSTANTIAL LEVERAGE AND DEBT SERVICE OBLIGATIONS MAY ADVERSELY AFFECT OUR
CASH FLOW AND OUR ABILITY TO MAKE PAYMENTS ON OUR INDEBTEDNESS
As of September 30, 2001, we had outstanding $3.5 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, primarily for our reduced but nevertheless significant
construction program. 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 DOMESTIC CREDIT FACILITIES AND OUR SENIOR NOTES
COULD ADVERSELY AFFECT OUR BUSINESS BY LIMITING FLEXIBILITY
The indenture for our senior notes and our domestic credit facilities
contain restrictive covenants that limit our ability to borrow funds and to
take various other 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;
23
. issuing stock of some types of subsidiaries;
. making specified types of 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. In particular, if our debt covenants restricted our
ability to borrow additional funds we might be required to curtail our
construction activities with adverse consequences. See "If we are unable to
construct or acquire new towers at the pace, in the locations and at the costs
we desire, our business would be adversely affected" below.
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
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, 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 CONSTRUCTION PROGRAM INCREASES OUR EXPOSURE TO RISKS THAT COULD INCREASE
COSTS AND ADVERSELY AFFECT OUR EARNINGS AND GROWTH
Our construction activities involve substantial risks. These risks include:
. increasing our debt and the amount of payments required on it;
. 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 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, thereby incurring
substantial penalties and possibly contract terminations. In addition, 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;
24
. 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 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 teleport businesses. We cannot
assure you, however, that we will be able to integrate successfully acquired
businesses and assets into our existing business. Our growth has placed, and
will continue to place, a significant strain on our management and our
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.
EXPANDING OPERATIONS INTO FOREIGN COUNTRIES COULD CREATE EXPROPRIATION,
GOVERNMENTAL REGULATION, FUNDS INACCESSIBILITY, FOREIGN EXCHANGE EXPOSURE AND
MANAGEMENT PROBLEMS
Our expansion into Mexico and Brazil, 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 have acquired and are constructing a sizable number
of towers in that country. We also acquired the rights to 156 communications
towers in Brazil and entered into a build-to-suit agreement for an additional
400 towers in that country. As a result of acquisitions by Verestar, we have
network operation centers in Europe, Asia, South America and Africa. 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 these operations.
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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 Communications
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
As the owner, lessee and operator of real property and facilities, we are
subject to federal, state and local and foreign environmental laws relating to
the management, use, storage, disposal, emission and remediation of, and
exposure to, hazardous and non-hazardous substances, materials and waste. We
are also subject to related registration, permitting, record keeping and
financial assurance requirements. See "Legal Proceedings" for a description of
a civil complaint filed against us by the District Attorney for the County of
Santa Clara, California regarding certain alleged recordkeeping, registration,
hazardous materials management and filing violations under California
environmental laws. Various environmental laws require us to investigate,
remove or remediate soil and groundwater contaminated by hazardous substances
or wastes on property we own or lease or which is associated with tower
operations, and may subject us to penalties and fines for violations of those
environmental laws. Some of those laws impose cleanup responsibility and
liability without regard to whether the owner, lessee or operator of the
property or facility knew of or was responsible for the contamination, or
whether operations at the property have been discontinued or the property has
been transferred. The owner, lessee or operator of contaminated property 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, lease or operation of our properties,
we may be liable for those types of environmental costs. Fines or penalties
resulting from any failure to comply with those environmental laws and
addressing claims or obligations arising under them could have a material
adverse effect on our financial condition, results of operations and
liquidity.
OUR BUSINESS IS SUBJECT TO GOVERNMENT REGULATIONS AND CHANGES IN CURRENT OR
FUTURE LAWS OR REGULATIONS COULD HARM OUR BUSINESS
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 licenses and regulates wireless communication devices and
television and radio stations operating from towers. Similar regulations exist
in Mexico and other foreign jurisdictions regarding wireless communications
and the operation of communications towers. As previously disclosed, we
entered into a Consent Decree with the FCC in August 2001 which requires us to
maintain an approved compliance program for 3 years. Failure to comply with
these applicable regulatory requirements and the terms of the Consent Decree
may lead to monetary penalties and other sanctions, including being
disqualified from holding licenses for our Verestar business or registrations
for our towers 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.
26
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.
27
Information Presented Pursuant to the Indenture for the Senior Notes
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 for us on a
consolidated basis and on a restricted group basis, which means only for the
Company and its subsidiaries that comprise the restricted group under the
indenture. 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.
Three months ended Nine months ended
September 30, 2001 September 30, 2001
----------------------- -----------------------
Restricted Restricted
Consolidated Group (1) Consolidated Group(1)
------------ ---------- ------------ ----------
Statement of Operations Data
(in thousands):
Operating revenues........... $ 296,196 $ 238,794 $ 821,632 $ 643,441
--------- --------- --------- ---------
Operating expenses:
Operating expenses excluding
depreciation and
amortization, and
development and corporate
general and administrative
expenses.................... 219,567 164,214 615,399 445,932
Depreciation and
amortization................ 118,898 100,296 317,853 267,327
Development expense.......... 1,736 1,701 7,038 6,303
Corporate general and
administrative expense...... 7,353 7,353 18,887 18,887
--------- --------- --------- ---------
Total operating expenses... 347,554 273,564 959,177 738,449
--------- --------- --------- ---------
Loss from operations......... (51,358) (34,770) (137,545) (95,008)
Interest expense............. (73,483) (70,543) (210,223) (202,014)
Interest income and other,
net......................... 720 4,331 13,578 17,339
Interest income, TV Azteca,
net of interest expense of
$289 and $873 for the three
and nine months ended
September 30, 2001,
respectively................ 3,627 3,627 10,747 10,747
Loss on investment in US
Wireless.................... (1,182) (1,182) (23,408) (23,408)
Note conversion expense...... (26,336) (26,336) (26,336) (26,336)
Minority interest in net
earnings of subsidiaries.... (19) (19) (16) (16)
--------- --------- --------- ---------
Loss before income taxes and
extraordinary losses........ $(148,031) $(124,892) $(373,203) $(318,696)
========= ========= ========= =========
September 30, 2001
-----------------------------
Consolidated Restricted Group
------------ ----------------
Balance Sheet Data (in thousands):
Cash and cash equivalents....................... $ 276,094 $ 264,311
Restricted cash and investments................. 62,225 62,225
Property and equipment, net..................... 3,177,651 2,884,786
Total assets.................................... 6,918,509 6,286,804
Long-term obligations, including current
portion........................................ 3,548,187 3,431,700
Net debt(2)..................................... 3,209,868 3,105,164
Total stockholders' equity...................... 3,016,023 3,016,023
- --------
(1) Corporate overhead allocable to Verestar and interest expense related to
intercompany borrowings by Verestar (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 and restricted cash and investments.
28
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 senior notes, are as follows:
Tower Cash Flow, for the three months ended September 30, 2001..... $ 65,054
=========
Consolidated Cash Flow, for the twelve months ended September 30,
2001.............................................................. $ 255,568
Less: Tower Cash Flow, for the twelve months ended September 30,
2001............................................................ (219,905)
Plus: four times Tower Cash Flow, for the three months ended
September 30, 2001.............................................. 260,216
---------
Adjusted Consolidated Cash Flow, for the twelve months ended
September 30, 2001................................................ $ 295,879
=========
Non-Tower Cash Flow, for the twelve months ended September 30,
2001.............................................................. $ 25,342
=========
29
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk from changes in interest rates on our long-
term debt obligations. We attempt to reduce these risks by utilizing
derivative financial instruments, namely interest rate caps, swaps, collars
and swaptions pursuant to our policies. All derivative financial instruments
are for purposes other than trading. For the nine months ended September 30,
2001, we increased our borrowings under our credit facilities by approximately
$95.0 million. In addition, we completed a private placement of $1.0 billion
of our senior notes issued at 100% of their face amount. The proceeds from the
above have and will be used to finance construction and acquisitions. In the
short-term, we invested any unused proceeds in marketable debt securities,
commercial paper and cash and cash equivalents. In June 2001 we entered into
an interest rate collar agreement with a total notional amount of $47.5
million expiring in June 2003. Lastly, in August 2001 the Company acquired an
aggregate of $82.5 million face amount ($61.6 million carrying amount) of its
2.25% convertible notes for shares of its Class A common stock.
The following table provides information as of September 30, 2001 about our
market risk exposure associated with changing interest rates. For long-term
debt obligations, the table presents principal cash flows and related average
interest rates by contractual maturity dates. For interest rate caps, swaps,
collars and swaptions, the table presents notional principal amounts and
weighted-average interest rates by contractual maturity dates.
Twelve Month Period Ended September 30,
Principal Payments and Interest Rate Detail by Contractual Maturity Dates (in
thousands)
Long-Term Debt 2002 2003 2004 2005 2006 Thereafter Total Fair Value
- -------------- ---------- ---------- -------- -------- -------- ---------- ---------- ----------
Fixed Rate Debt(a)...... $ $ $ $ $ $1,865,211 $1,865,211 $1,493,128
Average Interest
Rate(a)................ 7.62%
Variable Rate Debt(a)... $ $ 137,000 $158,000 $230,250 $252,563 $ 667,187 $1,445,000 $1,445,000
Aggregate Notional Amounts Associated with Interest Rate Caps, Swaps, Collars
and Swaptions in Place during the Twelve Month
Period Ended September 30, and Interest Rate Detail by Contractual Maturity
Dates (in thousands)
Interest Rate CAPS
- ------------------
Notional Amount......... $364.980(c)
Cap Rate................ 9.00%
Interest Rate SWAPS
- -------------------
Notional Amount......... $395,000(d) $365,000(e) $ (20,427)
Weighted-
Average Fixed Rate
Payable(b)............. 6.69% 6.67%
Interest Rate COLLARS
- ---------------------
Notional Amount......... $512,500(f) $232,500(g) $ (19,404)
Weighted-
Average Below Floor
Rate Payable, Above Cap
Rate Receivable(b)..... 6.14%-8.54% 5.51%-7.62%
- --------
(a) September 30, 2001 variable rate debt consists of our domestic and
Mexican credit facilities ($1.45 billion) and fixed rate debt consists of
the 2.25% and 6.25% convertible notes ($415.2 million), the 5.0%
convertible notes ($450.0 million) and the senior notes ($1.0 billion).
Interest on the credit facilities is payable in accordance with the
applicable London Interbank Offering Rate (LIBOR) agreement or quarterly
and accrues at our option either at LIBOR plus margin (as defined) or the
Base Rate plus margin (as defined). The average interest rate in effect
at September 30, 2001 for the credit facilities was 6.54%. For the nine
months ended September 30, 2001, the weighted average interest rate under
the credit facilities was 7.91%. 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%. Interest on the 2.25%
and 6.25% notes is payable semiannually on April 15 and October 15 of
each year. The 5.0% convertible notes bear interest at 5.0% which is
payable semiannually on February 15 and August 15 of each year. The
senior notes bear interest at 9 3/8% which is payable semiannually on
February 1 and August 1 of each year beginning August 1, 2001.
(b) Represents the weighted-average fixed 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 and $47,500 that will expire in May
and June 2003, respectively.
30
As discussed above, we maintain a portion of our cash and cash equivalents
and short-term investments in financial instruments that are subject to
interest rate risks. Due to the relatively short duration of such instruments,
fluctuations in interest rates should not materially affect our financial
condition or results of operations.
The effect of foreign currency fluctuations on our foreign operations, which
primarily include Mexico and Brazil, have not been significant to date. This
has been the case in Mexico primarily because most contracts are denominated
in U.S. dollars, and in Brazil because we are in the early stages of
developing our network. Accordingly, foreign currency risk has not been
material for the nine months ended September 30, 2001.
31
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As previously disclosed by the Company in its Quarterly Report on Form 10-Q
for the quarter ended March 31, 2001, on April 23, 2001 the District Attorney
for the County of Santa Clara, California filed a civil complaint against the
Company in the Superior Court of California. The complaint alleges record
keeping, registration, hazardous materials management and filing violations
under California environmental laws. The complaint does not allege any
contamination of the environment occurred as a result of the alleged
violations. The Company has taken measures to ensure that these sites are in
compliance with applicable California environmental laws and believes that
they are currently in compliance with such laws. On May 23, 2001, the Company
filed an answer to the complaint formally denying the allegations. The Company
believes that the resolution of the violations alleged in the complaint will
not have a material adverse effect on its financial conditions or results of
operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In the third quarter of 2001, the Company entered into exchange agreements
with a limited number of holders of the Company's 2.25% convertible notes due
2009 (the "2.25% Notes"). Pursuant to the exchange agreements, the noteholders
exchanged an aggregate of $82.5 million face amount of the Company's 2.25%
Notes for an aggregate of 3,962,537 shares of the Company's Class A common
stock in reliance upon the exemption from registration set forth in Section
3(a)(9) of the Securities Act. No underwriters were engaged in connection with
such issuances.
On October 4, 2001, the Company consummated an acquisition pursuant to which
the Company issued an aggregate of 35,325 shares of Class A Common Stock as
consideration for the acquisition. The Company issued these shares in reliance
on the exemption from registration provided by Section 4(2) of the Securities
Act of 1933. As a basis for doing so, the Company relied on the following
facts: (1) the Company offered the securities to a limited number of offerees
without any general solicitation, (2) the Company obtained representations
from the purchasers regarding their financial suitability and investment
intent, and (3) the Company issued all of the securities with restrictive
legends on the certificates to limit resales.
ITEM 5. OTHER INFORMATION
The following information updates the status of the ALLTEL transaction as
previously disclosed by us in Current Reports on Form 8-K filed on December
20, 2000, April 17, 2001, June 11, 2001, July 9, 2001, September 14, 2001 and
October 4, 2001 and in Quarterly Reports on Form 10-Q filed by us on May 15,
2001 and August 14, 2001.
On November 2, 2001, we closed on the sublease of 149 towers pursuant to our
agreement with ALLTEL. These towers were used by ALLTEL primarily in
connection with its business of providing consumer wireless services. We plan
to lease space on the towers to third parties. In connection with this
closing, we paid consideration of approximately $44.7 million in cash. The
amount of consideration and the terms of the agreement were based upon arms-
length negotiations between unaffiliated parties. There are no material
relationships between us and ALLTEL or any of its respective affiliates,
officers or directors. We financed the transaction through available cash-on-
hand, including proceeds from our January 2001 equity and debt financings. For
more information about our agreement with ALLTEL, see our Current Reports on
Form 8-K filed on December 20, 2000, April 17, 2001, June 11, 2001, July 9,
2001, September 14, 2001 and October 4, 2001; our Quarterly Reports on Form
10-Q filed May 15, 2001 and August 14, 2001; note 4 to the condensed
consolidated financial statements set forth herein; and the exhibits
incorporated by reference into this Quarterly Report on Form 10-Q.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Listed below are the exhibits which are filed as part of this Form 10-Q
(according to the number assigned to them in Item 601 of Regulation S-K).
32
Exhibit No. Description of Exhibit
----------- ----------------------
10.1 Amended and Restated Registration Rights Agreement, dated as of February 25,
1999, by and among American Tower Corporation and each of the Parties named
therein.
10.2 Amended and Restated Loan Agreement dated as of January 6, 2000, by and 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 (incorporated by reference to Exhibit 10.1 from the
Registrant's Current Report on Form 8-K (File No. 001-14195) filed on January
28, 2000).
10.3 First Amendment and Waiver Agreement, dated as of February 9, 2000, by and 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 (incorporated by reference to Exhibit 10.1 from the
Registrant's Quarterly Report on Form 10-Q (File No. 001-14195) filed on
November 13, 2000).
10.4 Second Amendment to Amended and Restated Loan Agreement, dated as of May 11,
2000, by and 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 (incorporated by reference to
Exhibit 10.2 from the Registrant's Quarterly Report on Form 10-Q (File No. 001-
14195) filed on November 13, 2000).
10.5 Waiver and Third Amendment to Amended and Restated Loan Agreement, dated as of
October 13, 2000, by and 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 (incorporated by reference to
Exhibit 10.3 from the Registrant's Quarterly Report on Form 10-Q (File No. 001-
14195) filed on November 13, 2000).
10.6 Fourth Amendment to Amended and Restated Loan Agreement, dated as of January 23,
2000, by and among American Tower, L.P., American Towers, Inc. and Verestar,
Inc., as Borrowers, and Toronto Dominion (Texas) Inc., as Administrative Agent,
and the banks party thereto (incorporated by reference to Exhibit 10.5 from the
Registrants' Registration Statement on Form S-4 (File No. 333-59852)).
10.7 Fifth Amendment and Waiver to Amended and Restated Loan Agreement, dated as of
March 26, 2001, by and among American Tower, L.P., American Towers, Inc. and
Verestar, Inc., as Borrowers, and Toronto Dominion (Texas) Inc., as
Administrative Agent, and the banks party thereto (incorporated by reference to
Exhibit 10.6 from the Registrants' Registration Statement on Form S-4 (File No.
333-59852)).
10.8 Sixth Amendment to Amended and Restated Loan Agreement, dated as of October 26,
2001, by and among American Tower, L.P., American Towers, Inc., Verestar, Inc.,
and Towersites Monitoring, Inc., as Borrowers and Toronto Dominion (Texas) Inc.,
as Administrative Agent, and the banks party thereto.
10.9 Notice of Incremental Facility Commitment, dated as of October 26, 2001, by and
among American Towers, Inc., American Tower, L.P., Verestar, Inc., Towersites
Monitoring, Inc., and American Tower International, Inc., as Borrowers and
Toronto Dominion (Texas) Inc., as Administrative Agent, and the banks party
thereto.
(b) Reports on Form 8-K.
During the quarter ended September 30, 2001, the Registrant filed with the
Commission the following Current Reports on Form 8-K:
1.Form 8-K (Item 2) filed on July 9, 2001.
2.Form 8-K (Item 9) filed on September 6, 2001.
3.Form 8-K (Item 2) filed on September 14, 2001.
33
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
American Tower Corporation
By: /s/ Joseph L. Winn
Date: November 14, 2001 ----------------------------------
Joseph L. Winn
Chief Financial Officer and
Treasurer
(Duly Authorized Officer)
Date: November 14, 2001 By: /s/ Justin D. Benincasa
----------------------------------
Justin D. Benincasa
Senior Vice President and
Corporate Controller
(Duly Authorized Officer)
34