Document


 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
FORM 10-Q
 
 
 
(Mark One):
x
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended June 30, 2016.
¨

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Commission File Number: 001-14195
 
 
 
AMERICAN TOWER CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
 
65-0723837
(State or other jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
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  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):
Large accelerated filer
 
x
  
Accelerated filer
 
¨
 
 
 
 
Non-accelerated filer
 
¨
  
Smaller reporting company
 
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):    Yes  ¨    No  x
As of July 21, 2016, there were 425,489,212 shares of common stock outstanding.
 
 
 





AMERICAN TOWER CORPORATION
TABLE OF CONTENTS
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2016

 
 
 
Page Nos.
 
 
 
 
PART I. FINANCIAL INFORMATION
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
Item 3.
 
Item 4.
 
PART II. OTHER INFORMATION
 
 
Item 1.
 
Item 1A.
 
Item 6.
 
 
 





PART I.
FINANCIAL INFORMATION
ITEM 1.
UNAUDITED CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
 
 
June 30, 2016
 
December 31, 2015
ASSETS
 
 
 
 
CURRENT ASSETS:
 
 
 
 
Cash and cash equivalents
 
$
410,538

 
$
320,686

Restricted cash
 
142,761

 
142,193

Accounts receivable, net
 
285,422

 
227,354

Prepaid and other current assets
 
481,879

 
306,235

Total current assets
 
1,320,600

 
996,468

PROPERTY AND EQUIPMENT, net
 
10,575,425

 
9,866,424

GOODWILL
 
4,981,919

 
4,091,805

OTHER INTANGIBLE ASSETS, net
 
11,590,692

 
9,837,876

DEFERRED INCOME TAXES
 
229,273

 
212,041

DEFERRED RENT ASSET
 
1,233,002

 
1,166,755

NOTES RECEIVABLE AND OTHER NON-CURRENT ASSETS
 
809,287

 
732,903

TOTAL
 
$
30,740,198

 
$
26,904,272

LIABILITIES
 
 
 
 
CURRENT LIABILITIES:
 
 
 
 
Accounts payable
 
$
120,586

 
$
96,714

Accrued expenses
 
617,711

 
516,413

Distributions payable
 
227,594

 
210,027

Accrued interest
 
151,365

 
115,672

Current portion of long-term obligations
 
314,063

 
50,202

Unearned revenue
 
224,312

 
211,001

Total current liabilities
 
1,655,631

 
1,200,029

LONG-TERM OBLIGATIONS
 
18,403,013

 
17,068,807

ASSET RETIREMENT OBLIGATIONS
 
951,803

 
856,936

DEFERRED TAX LIABILITY
 
745,936

 
106,333

OTHER NON-CURRENT LIABILITIES
 
1,058,433

 
959,349

Total liabilities
 
22,814,816

 
20,191,454

COMMITMENTS AND CONTINGENCIES
 


 


REDEEMABLE NONCONTROLLING INTERESTS
 
1,085,157

 

EQUITY:
 
 
 
 
Preferred stock: $.01 par value; 20,000,000 shares authorized;
 
 
 
 
5.25%, Series A, 6,000,000 shares issued and outstanding; aggregate liquidation value of $600,000
 
60

 
60

5.50%, Series B, 1,375,000 shares issued and outstanding, respectively; aggregate liquidation value of $1,375,000
 
14

 
14

Common stock: $.01 par value; 1,000,000,000 shares authorized; 428,071,284 and 426,695,279 shares issued; and 425,261,258 and 423,885,253 shares outstanding, respectively
 
4,280

 
4,267

Additional paid-in capital
 
9,781,223

 
9,690,609

Distributions in excess of earnings
 
(1,033,324
)
 
(998,535
)
Accumulated other comprehensive loss
 
(1,770,998
)
 
(1,836,996
)
Treasury stock (2,810,026 shares at cost)
 
(207,740
)
 
(207,740
)
Total American Tower Corporation equity
 
6,773,515

 
6,651,679

Noncontrolling interests
 
66,710

 
61,139

Total equity
 
6,840,225

 
6,712,818

TOTAL
 
$
30,740,198

 
$
26,904,272

See accompanying notes to unaudited consolidated and condensed consolidated financial statements.

1



AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2016
 
2015
 
2016
 
2015
REVENUES:
 
 
 
 
 
 
 
 
Property
 
$
1,426,192

 
$
1,154,235

 
$
2,693,843

 
$
2,216,415

Services
 
16,035

 
20,140

 
37,431

 
37,150

Total operating revenues
 
1,442,227

 
1,174,375

 
2,731,274

 
2,253,565

 OPERATING EXPENSES:
 
 
 
 
 
 
 
 
Costs of operations (exclusive of items shown separately below):
 
 
 
 
 
 
 
 
Property (including stock-based compensation expense of $392, $390, $899 and $822, respectively)
 
452,571

 
314,285

 
794,861

 
573,542

Services (including stock-based compensation expense of $255, $98, $406 and $237, respectively)
 
7,140

 
8,173

 
16,295

 
13,556

Depreciation, amortization and accretion
 
397,765

 
328,356

 
739,399

 
591,876

Selling, general, administrative and development expense (including stock-based compensation expense of $21,260, $23,557, $48,681 and $52,847, respectively)
 
138,234

 
116,338

 
273,549

 
239,628

Other operating expenses
 
13,711

 
17,449

 
22,511

 
25,223

Total operating expenses
 
1,009,421

 
784,601

 
1,846,615

 
1,443,825

OPERATING INCOME
 
432,806

 
389,774

 
884,659

 
809,740

OTHER INCOME (EXPENSE):
 
 
 
 
 
 
 
 
Interest income, TV Azteca, net of interest expense of $284, $370, $567 and $740, respectively
 
2,748

 
2,662

 
5,464

 
5,258

Interest income
 
6,468

 
4,404

 
10,002

 
7,368

Interest expense
 
(181,036
)
 
(148,507
)
 
(340,916
)
 
(296,441
)
Gain (loss) on retirement of long-term obligations
 
830

 
(75,068
)
 
830

 
(78,793
)
Other expense (including unrealized foreign currency (losses) gains of ($24,585), $25,461, $4,777 and ($30,007), respectively)
 
(25,842
)
 
(2,129
)
 
(13,634
)
 
(56,632
)
Total other expense
 
(196,832
)
 
(218,638
)
 
(338,254
)
 
(419,240
)
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
 
235,974

 
171,136

 
546,405

 
390,500

Income tax provision
 
(43,510
)
 
(13,956
)
 
(72,634
)
 
(37,828
)
NET INCOME
 
192,464

 
157,180

 
473,771

 
352,672

Net income attributable to noncontrolling interests
 
(4,914
)
 
(1,124
)
 
(11,062
)
 
(3,299
)
NET INCOME ATTRIBUTABLE TO AMERICAN TOWER CORPORATION STOCKHOLDERS
 
187,550

 
156,056

 
462,709

 
349,373

Dividends on preferred stock
 
(26,782
)
 
(26,782
)
 
(53,563
)
 
(36,601
)
NET INCOME ATTRIBUTABLE TO AMERICAN TOWER CORPORATION COMMON STOCKHOLDERS
 
$
160,768

 
$
129,274

 
$
409,146

 
$
312,772

NET INCOME PER COMMON SHARE AMOUNTS:
 
 
 
 
 
 
 
 
Basic net income attributable to American Tower Corporation common stockholders
 
$
0.38

 
$
0.31

 
$
0.96

 
$
0.76

Diluted net income attributable to American Tower Corporation common stockholders
 
$
0.37

 
$
0.30

 
$
0.95

 
$
0.75

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
 
 
 
 
 
 
 
 
BASIC
 
424,909

 
423,154

 
424,484

 
414,182

DILUTED
 
429,004

 
426,933

 
428,529

 
418,303

DISTRIBUTIONS DECLARED PER COMMON SHARE
 
$
0.53

 
$
0.44

 
$
1.04

 
$
0.86

See accompanying notes to unaudited consolidated and condensed consolidated financial statements.

2



AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2016
 
2015
 
2016
 
2015
Net income
 
$
192,464

 
$
157,180

 
$
473,771

 
$
352,672

Other comprehensive (loss) income:
 
 
 
 
 
 
 
 
Changes in fair value of cash flow hedges, net of tax benefit (expense) of $0, ($42), $0 and $9, respectively
 
(9
)
 
597

 
65

 
(345
)
Reclassification of unrealized (gains) losses on cash flow hedges to net income, net of tax benefit of $0, $22, $0 and $46, respectively
 
(57
)
 
2,226

 
(65
)
 
2,613

Foreign currency translation adjustments, net of tax expense (benefit) of $2,695, $197, $6,883 and ($12,412), respectively
 
(177,966
)
 
(44,029
)
 
48,326

 
(476,990
)
Other comprehensive (loss) income
 
(178,032
)
 
(41,206
)
 
48,326

 
(474,722
)
Comprehensive income (loss)
 
14,432

 
115,974

 
522,097

 
(122,050
)
Comprehensive loss attributable to noncontrolling interests
 
12,712

 
17,421

 
6,610

 
37,123

Comprehensive income (loss) attributable to American Tower Corporation stockholders
 
$
27,144

 
$
133,395

 
$
528,707

 
$
(84,927
)

See accompanying notes to unaudited consolidated and condensed consolidated financial statements.



3


AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
 
Six Months Ended June 30,
 
 
2016
 
2015
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
Net income
 
$
473,771

 
$
352,672

Adjustments to reconcile net income to cash provided by operating activities
 
 
 
 
Depreciation, amortization and accretion
 
739,399

 
591,876

Stock-based compensation expense
 
49,986

 
53,906

(Gain) loss on early retirement of long-term obligations
 
(830
)
 
78,793

Other non-cash items reflected in statements of operations
 
53,464

 
75,531

Decrease in restricted cash
 
12,170

 
26,804

Increase in net deferred rent asset
 
(34,931
)
 
(46,653
)
Increase in assets
 
(32,984
)
 
(99,179
)
Increase in liabilities
 
51,271

 
2,710

Cash provided by operating activities
 
1,311,316

 
1,036,460

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
Payments for purchase of property and equipment and construction activities
 
(319,427
)
 
(311,122
)
Payments for acquisitions, net of cash acquired
 
(1,216,467
)
 
(670,246
)
Payment for Verizon transaction
 
(4,748
)
 
(5,060,416
)
Proceeds from sale of short-term investments and other non-current assets
 
2,601

 
781,469

Payments for short-term investments
 

 
(816,038
)
Deposits, restricted cash, investments and other
 
(5,360
)
 
(3,087
)
Cash used for investing activities
 
(1,543,401
)
 
(6,079,440
)
CASH FLOW FROM FINANCING ACTIVITIES
 
 
 
 
Repayments of short-term borrowings, net
 
(2,843
)
 

Borrowings under credit facilities
 
1,326,866

 
4,740,308

Proceeds from issuance of senior notes, net
 
2,237,503

 
1,492,298

Proceeds from term loan
 

 
500,000

Proceeds from other borrowings
 
70,806

 

Proceeds from issuance of securities in securitization transaction, net
 

 
875,000

Repayments of notes payable, credit facilities and capital leases
 
(2,858,415
)
 
(5,931,401
)
Distributions to noncontrolling interest holders, net
 
(503
)
 
(383
)
Proceeds from stock options and ESPP
 
60,361

 
17,364

Distributions paid on common stock
 
(426,564
)
 
(329,766
)
Distributions paid on preferred stock
 
(53,563
)
 
(31,085
)
Proceeds from the issuance of common stock, net
 


2,440,327

Proceeds from the issuance of preferred stock, net
 


1,337,946

Payment for early retirement of long-term obligations
 
(125
)
 
(86,107
)
Deferred financing costs and other financing activities
 
(23,264
)
 
(34,284
)
Cash provided by financing activities
 
330,259

 
4,990,217

Net effect of changes in foreign currency exchange rates on cash and cash equivalents
 
(8,322
)
 
13,973

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
 
89,852

 
(38,790
)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
 
320,686

 
313,492

CASH AND CASH EQUIVALENTS, END OF PERIOD
 
$
410,538

 
$
274,702

CASH PAID FOR INCOME TAXES (NET OF REFUNDS OF $14,011 AND $3,311, RESPECTIVELY)
 
$
50,413

 
$
29,911

CASH PAID FOR INTEREST
 
$
288,880

 
$
291,103

NON-CASH INVESTING AND FINANCING ACTIVITIES:
 
 
 
 
Decrease in accounts payable and accrued expenses for purchases of property and equipment and construction activities
 
$
(36,083
)
 
$
(20,632
)
Purchases of property and equipment under capital leases
 
$
21,651

 
$
10,510

Settlement of accounts receivable related to acquisitions
 
$

 
$
735

See accompanying notes to unaudited consolidated and condensed consolidated financial statements.

4



AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(in thousands, except share data)
 
 
Preferred Stock - Series A
 
Preferred Stock - Series B
 
Common Stock
 
Treasury Stock
 
Additional
Paid-in
Capital
 
Accumulated Other
Comprehensive
Loss
 
Distributions
in Excess of
Earnings
 
Noncontrolling
Interest
 
Total
Equity
 
 
Issued Shares
 
Amount
 
Issued Shares
 
Amount
 
Issued
Shares
 
Amount
 
Shares
 
Amount
 
BALANCE, JANUARY 1, 2015
 
6,000,000

 
$
60

 

 
$

 
399,508,751

 
$
3,995

 
(2,810,026
)
 
$
(207,740
)
 
$
5,788,786

 
$
(794,221
)
 
$
(837,320
)
 
$
99,792

 
$
4,053,352

Stock-based compensation related activity
 

 

 

 

 
672,300

 
6

 

 

 
49,155

 

 

 

 
49,161

Issuance of common stock—stock purchase plan
 

 

 

 

 
43,940

 

 

 

 
3,465

 

 

 

 
3,465

Issuance of common stock
 

 

 

 

 
25,850,000

 
259

 

 

 
2,440,068

 

 

 

 
2,440,327

Issuance of preferred stock
 

 

 
1,375,000

 
14

 

 

 

 

 
1,337,932

 

 

 

 
1,337,946

Changes in fair value of cash flow hedges, net of tax
 

 

 

 

 

 

 

 

 

 
(340
)
 

 
(5
)
 
(345
)
Reclassification of unrealized losses on cash flow hedges to net income, net of tax
 

 

 

 

 

 

 

 

 

 
2,583

 

 
30

 
2,613

Foreign currency translation adjustment, net of tax
 

 

 

 

 

 

 

 

 

 
(436,543
)
 

 
(40,447
)
 
(476,990
)
Contributions from noncontrolling interest holders
 

 

 

 

 

 

 

 

 

 

 

 
51

 
51

Distributions to noncontrolling interest holders
 

 

 

 

 

 

 

 

 

 

 

 
(434
)
 
(434
)
Common stock dividends/distributions declared
 

 

 

 

 

 

 

 

 

 

 
(365,450
)
 

 
(365,450
)
Preferred stock dividends declared
 

 

 

 

 

 

 

 

 

 

 
(23,210
)
 

 
(23,210
)
Net income
 

 

 

 

 

 

 

 

 

 

 
349,373

 
3,299

 
352,672

BALANCE, JUNE 30, 2015
 
6,000,000

 
$
60

 
1,375,000

 
$
14

 
426,074,991

 
$
4,260

 
(2,810,026
)
 
$
(207,740
)
 
$
9,619,406

 
$
(1,228,521
)
 
$
(876,607
)
 
$
62,286

 
$
7,373,158

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BALANCE, JANUARY 1, 2016
 
6,000,000

 
$
60

 
1,375,000

 
$
14

 
426,695,279

 
$
4,267

 
(2,810,026
)
 
$
(207,740
)
 
$
9,690,609

 
$
(1,836,996
)
 
$
(998,535
)
 
$
61,139

 
$
6,712,818

Stock-based compensation related activity
 

 

 

 

 
1,331,272

 
13

 

 

 
86,767

 

 

 

 
86,780

Issuance of common stock—stock purchase plan
 

 

 

 

 
44,733

 

 

 

 
3,847

 

 

 

 
3,847

Changes in fair value of cash flow hedges, net of tax
 

 

 

 

 

 

 

 

 

 
65

 

 

 
65

Reclassification of unrealized gains on cash flow hedges to net income
 

 

 

 

 

 

 

 

 

 
(65
)
 

 

 
(65
)
Foreign currency translation adjustment, net of tax
 

 

 

 

 

 

 

 

 

 
65,998

 

 
(665
)
 
65,333

Contributions from noncontrolling interest holders
 

 

 

 

 

 

 

 

 

 

 

 
13

 
13

Distributions to noncontrolling interest holders
 

 

 

 

 

 

 

 

 

 

 

 
(516
)
 
(516
)
Common stock dividends/distributions declared
 

 

 

 

 

 

 

 

 

 

 
(443,935
)
 

 
(443,935
)
Preferred stock dividends declared
 

 

 

 

 

 

 


 


 


 


 
(53,563
)
 

 
(53,563
)
Net income
 

 

 

 

 

 

 

 

 

 

 
462,709

 
6,739

 
469,448

BALANCE, JUNE 30, 2016
 
6,000,000

 
$
60

 
1,375,000

 
$
14

 
428,071,284

 
$
4,280

 
(2,810,026
)
 
$
(207,740
)
 
$
9,781,223

 
$
(1,770,998
)
 
$
(1,033,324
)
 
$
66,710

 
$
6,840,225


See accompanying notes to unaudited consolidated and condensed consolidated financial statements.

5



AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS






1.
DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
American Tower Corporation (together with its subsidiaries, “ATC” or the “Company”) is one of the largest global real estate investment trusts and a leading independent owner, operator and developer of multitenant communications real estate. The Company’s primary business is the leasing of space on communications sites to wireless service providers, radio and television broadcast companies, wireless data providers, government agencies and municipalities and tenants in a number of other industries, which the Company refers to as its property operations. Additionally, the Company offers tower-related services, referred to as its services operations, in the United States, including site acquisition, zoning and permitting and structural analysis, which primarily support its site leasing business, including the addition of new tenants and equipment on its sites.
The Company’s portfolio primarily consists of towers it owns and towers it operates pursuant to long-term lease arrangements, as well as distributed antenna system (“DAS”) networks, which provide seamless coverage solutions for in-building and outdoor wireless environments. In addition to the communications sites in its portfolio, the Company manages rooftop and tower sites for property owners under various contractual arrangements. The Company also holds property interests that it leases to communications service providers and third-party tower operators.

ATC is a holding company that conducts its operations through its directly and indirectly owned subsidiaries and its joint ventures. ATC’s principal domestic operating subsidiaries are American Towers LLC and SpectraSite Communications, LLC. ATC conducts its international operations primarily through its subsidiary, American Tower International, Inc., which in turn conducts operations through its various international holding and operating subsidiaries and joint ventures.

On April 21, 2016, the Company significantly expanded its Asia segment portfolio by acquiring a 51% controlling ownership interest in Viom Networks Limited (“Viom”), a telecommunications infrastructure company that owns and operates over 42,000 wireless communications towers and 200 indoor DAS networks in India (the “Viom Acquisition”). Subsequent to the closing, Viom was renamed ATC Telecom Infrastructure Private Limited (“ATC TIPL”).

The Company operates as a real estate investment trust for U.S. federal income tax purposes (“REIT”). Accordingly, the Company generally is not subject to U.S. federal income taxes on income generated by its REIT operations, including the income derived from leasing space on its towers, as the Company receives a dividends paid deduction for distributions to stockholders that generally offsets its income and gains.  However, the Company remains obligated to pay U.S. federal income taxes on earnings from its domestic taxable REIT subsidiaries (“TRSs”). In addition, the Company’s international assets and operations, regardless of their designation for U.S. tax purposes, continue to be subject to taxation in the foreign jurisdictions where those assets are held or those operations are conducted.

The use of TRSs enables the Company to continue to engage in certain businesses while complying with REIT qualification requirements. The Company may, from time to time, change the election of previously designated TRSs to be included as part of the REIT. As of June 30, 2016, the Company’s REIT-qualified businesses included its U.S. tower leasing business, most of its operations in Costa Rica, Germany and Mexico and a majority of its services segment and indoor DAS networks business.

The accompanying consolidated and condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. The financial information included herein is unaudited. However, the Company believes that all adjustments considered necessary for a fair presentation of its financial position and results of operations for such periods have been included herein. The consolidated and condensed consolidated financial statements and related notes should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 (the “2015 Form 10-K”). The results of operations for the three and six months ended June 30, 2016 are not necessarily indicative of the results that may be expected for the entire year.

Principles of Consolidation and Basis of Presentation—The accompanying consolidated and condensed consolidated financial statements include the accounts of the Company and those entities in which it has a controlling interest. Investments in entities that the Company does not control are accounted for using the equity or cost method, depending

6



AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





upon the Company’s ability to exercise significant influence over operating and financial policies. All intercompany accounts and transactions have been eliminated. As of June 30, 2016, the Company has a controlling interest in
two joint ventures in Ghana and Uganda with MTN Group Limited (“MTN Group”). The joint ventures are controlled by a holding company of which a wholly owned subsidiary of the Company holds a 51% interest and a wholly owned subsidiary of MTN Group holds a 49% interest. In addition, the Company holds an approximate 75% controlling interest in a subsidiary of the Company in South Africa and the South African investors hold an approximate 25% noncontrolling interest. The Company also holds a 51% controlling interest in ATC TIPL.

Significant Accounting Policies—The Company’s significant accounting policies are described in note 1 to the Company’s consolidated financial statements included in the 2015 Form 10-K. There have been no material changes to the Company’s significant accounting policies during the six months ended June 30, 2016.
Accounting Standards Updates—In May 2014, the Financial Accounting Standards Board (the “FASB”) issued new revenue recognition guidance, which requires an entity to recognize revenue in an amount that reflects the consideration to which the entity expects to be entitled in exchange for the transfer of promised goods or services to customers. The standard will replace most existing revenue recognition guidance and will become effective for the Company on January 1, 2018. Early adoption is permitted for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2016. The standard permits the use of either the retrospective or cumulative effect transition method. Leases are not included in the scope of this standard. The Company is evaluating the impact this standard will have on its financial statements.

In January 2016, the FASB issued new guidance on the recognition and measurement of financial assets and financial liabilities. The guidance amends certain aspects of recognition, measurement, presentation and disclosure of financial instruments. This standard is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017. The Company does not expect the adoption of this guidance to have a material effect on its financial statements.

In February 2016, the FASB issued new guidance on the accounting for leases. The guidance amends the existing accounting standards for lease accounting, including the requirement that lessees recognize assets and liabilities for leases with terms greater than twelve months in the statement of financial position. Under the new guidance, lessor accounting is largely unchanged. This guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018. The standard is required to be applied using a modified retrospective approach for all leases existing at, or entered into after, the beginning of the earliest comparative period presented. The Company is evaluating the impact this standard will have on its financial statements.

In March 2016, the FASB issued new guidance on the accounting for share-based payment transactions. The guidance amends the accounting for taxes related to stock-based compensation, including how excess tax benefits and a company’s payments for tax withholdings should be classified. This guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2016. The Company early adopted this standard in the second quarter of 2016 and elected to account for forfeitures as they occur, effective January 1, 2016. The adoption of this guidance was not material to the Company’s consolidated financial statements. Additionally, the Company elected to apply the prospective transition method to the amendments related to the presentation of excess tax benefits in the statements of cash flows.


7



AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





2.    PREPAID AND OTHER CURRENT ASSETS
Prepaid and other current assets consisted of the following (in thousands):
 
As of
 
June 30, 2016
 
December 31, 2015
Prepaid income tax
$
151,828

 
$
45,056

Prepaid operating ground leases
132,629

 
128,542

Unbilled receivables
59,124

 
34,173

Prepaid assets
59,063

 
32,892

Value added tax and other consumption tax receivables
32,258

 
30,239

Other miscellaneous current assets
46,977

 
35,333

Total
$
481,879

 
$
306,235


3.    GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in the carrying value of goodwill for the Company’s business segments were as follows (in thousands):

 
 
Property
 
Services
 
Total
 
 
U.S.
 
Asia (1)
 
EMEA
 
Latin America
 
Balance as of January 1, 2016
 
$
3,379,163

 
$
170,719

 
$
132,570

 
$
407,365

 
$
1,988

 
$
4,091,805

Additions
 
289

 
856,110

 
3,200

 
4,615

 

 
864,214

Effect of foreign currency translation
 

 
(16,714
)
 
(18,417
)
 
61,031

 

 
25,900

Balance as of June 30, 2016
 
$
3,379,452

 
$
1,010,115

 
$
117,353

 
$
473,011

 
$
1,988

 
$
4,981,919

_______________
(1)
Includes approximately $856.1 million of goodwill assumed in the Viom Acquisition (see note 13).

The Company’s other intangible assets subject to amortization consisted of the following:
 
 
 
 
As of June 30, 2016
 
As of December 31, 2015
 
Estimated Useful
Lives
 
Gross
Carrying
Value
 
Accumulated
Amortization
 
Net Book
Value
 
Gross
Carrying
Value
 
Accumulated
Amortization
 
Net Book
Value
 
(years)
 
(in thousands)
Acquired network location intangibles (1)
Up to 20

 
$
4,589,425

 
$
(1,175,676
)
 
$
3,413,749

 
$
3,980,281

 
$
(1,052,393
)
 
$
2,927,888

Acquired customer-related intangibles
15-20

 
10,139,104

 
(1,996,896
)
 
8,142,208

 
8,640,554

 
(1,763,853
)
 
6,876,701

Acquired licenses and other intangibles
3-20

 
28,756

 
(3,725
)
 
25,031

 
28,293

 
(5,486
)
 
22,807

Economic Rights, TV Azteca
70

 
20,267

 
(10,563
)
 
9,704

 
21,688

 
(11,208
)
 
10,480

Total other intangible assets
 
 
$
14,777,552

 
$
(3,186,860
)
 
$
11,590,692

 
$
12,670,816

 
$
(2,832,940
)
 
$
9,837,876

_______________
(1)
Acquired network location intangibles are amortized over the shorter of the term of the corresponding ground lease taking into consideration lease renewal options and residual value or up to 20 years, as the Company considers these intangibles to be directly related to the tower assets.
The acquired network location intangibles represent the value to the Company of the incremental revenue growth that could potentially be obtained from leasing the excess capacity on acquired communications sites. The acquired

8



AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





customer-related intangibles typically represent the value to the Company of customer contracts and relationships in place at the time of an acquisition or similar transaction, including assumptions regarding estimated renewals.
The Company amortizes its acquired network location intangibles and customer-related intangibles on a straight-line basis over their estimated useful lives. As of June 30, 2016, the remaining weighted average amortization period of the Company’s intangible assets, excluding the TV Azteca Economic Rights detailed in note 5 to the Company’s consolidated financial statements included in the 2015 Form 10-K, was 16 years. Amortization of intangible assets for the three and six months ended June 30, 2016 was $185.3 million and $337.1 million, respectively, and amortization of intangible assets for the three and six months ended June 30, 2015 was $147.6 million and $258.1 million, respectively. Based on current exchange rates, the Company expects to record amortization expense as follows over the remaining current year and the five subsequent years (in millions):
 
Fiscal Year
 
Remainder of 2016
$
356.6

2017
710.8

2018
708.6

2019
705.6

2020
686.8

2021
677.5


4.    ACCRUED EXPENSES
Accrued expenses consisted of the following (in thousands):
 
As of
 
June 30, 2016
 
December 31, 2015
Accrued property and real estate taxes
$
108,636

 
$
75,827

Accrued income tax payable
70,490

 
11,704

Payroll and related withholdings
52,844

 
62,334

Accrued rent
50,449

 
54,732

Accrued construction costs
16,550

 
19,857

Other accrued expenses
318,742

 
291,959

Total
$
617,711

 
$
516,413



9



AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





5.    LONG-TERM OBLIGATIONS

Outstanding amounts under the Company’s long-term obligations, reflecting discounts, premiums and debt issuance costs, consisted of the following (in thousands):
 
As of
 
 
 
June 30, 2016
 
December 31, 2015
 
Maturity Date
Series 2013-1A securities (1)
$
498,060

 
$
497,478

 
March 15, 2018
Series 2013-2A securities (2)
1,289,478

 
1,288,689

 
March 15, 2023
Series 2015-1 notes (3)
346,685

 
346,262

 
June 15, 2020
Series 2015-2 notes (4)
519,106

 
518,776

 
June 16, 2025
2012 GTP notes (5)
182,233

 
281,902

 
March 15, 2019
Unison notes (6)
201,054

 
201,930

 
Various
Viom indebtedness (7)
698,274

 

 
Various
Viom preference shares (8)
24,682

 

 
Various
Shareholder loans (9)
154,387

 
145,540

 
Various
BR Towers debentures (10)
105,191

 
85,219

 
October 15, 2023
Colombian credit facility (11)
61,060

 
59,640

 
April 24, 2021
South African facility (12)
50,230

 
53,175

 
December 17, 2020
Brazil credit facility (13)
31,293

 
21,868

 
January 15, 2022
Indian working capital facility (14)
5,688

 
8,752

 
July 31, 2016
Total American Tower subsidiary debt
4,167,421

 
3,509,231

 
 
 
 
 
 
 
 
2013 Credit Facility
72,203

 
1,225,000

 
June 28, 2019
Term Loan
1,994,238

 
1,993,601

 
January 29, 2021
2014 Credit Facility
1,840,000

 
1,980,000

 
January 29, 2021
4.500% senior notes
997,944

 
997,693

 
January 15, 2018
3.40% senior notes
999,532

 
999,769

 
February 15, 2019
7.25% senior notes
296,389

 
296,242

 
May 15, 2019
2.800% senior notes
744,239

 
743,557

 
June 1, 2020
5.050% senior notes
696,916

 
697,216

 
September 1, 2020
3.300% senior notes
744,121

 

 
February 15, 2021
3.450% senior notes
643,216

 
642,786

 
September 15, 2021
5.900% senior notes
497,037

 
497,188

 
November 1, 2021
4.70% senior notes
695,671

 
695,374

 
March 15, 2022
3.50% senior notes
988,231

 
987,966

 
January 31, 2023
5.00% senior notes
1,002,735

 
1,003,453

 
February 15, 2024
4.000% senior notes
739,539

 
739,057

 
June 1, 2025
4.400% senior notes
494,957

 

 
February 15, 2026
3.375% senior notes
982,645

 

 
October 15, 2026
Total American Tower Corporation debt
14,429,613

 
13,498,902

 
 
Other debt, including capital lease obligations
120,042

 
110,876

 
 
Total
18,717,076

 
17,119,009

 
 
Less current portion of long-term obligations
(314,063
)
 
(50,202
)
 
 
Long-term obligations
$
18,403,013

 
$
17,068,807

 
 
_______________
(1)    Maturity date represents anticipated repayment date; final legal maturity is March 15, 2043.
(2)    Maturity date represents anticipated repayment date; final legal maturity is March 15, 2048.
(3)
Maturity date represents anticipated repayment date; final legal maturity is June 15, 2045.
(4)
Maturity date represents anticipated repayment date; final legal maturity is June 15, 2050.
(5)
Secured debt assumed by the Company in connection with its acquisition of MIP Tower Holdings LLC. Maturity date represents anticipated repayment date; final legal maturity is March 15, 2042. During the six months ended June 30, 2016, the Company repaid the $94.1 million outstanding under the Secured Tower Cellular Site Revenue Notes, Series 2012-1 Class A and released 472 sites in connection with the repayment.

10



AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





(6)
Secured debt assumed by the Company in connection with its acquisition of certain legal entities from Unison Holdings LLC and Unison Site Management II, L.L.C. Anticipated repayment dates begin April 15, 2017; final legal maturity date is April 15, 2040.
(7)
Debt primarily assumed by the Company in connection with the Viom Acquisition. Maturity dates begin March 31, 2017. In June 2016, the Company refinanced 4.75 billion Indian Rupees (“INR”) of Viom assumed indebtedness with a new short-term committed loan facility with a borrowing capacity of 5.80 billion INR ($85.9 million as of June 30, 2016). Denominated in INR.
(8)
Mandatorily redeemable preference shares issued by Viom. The shares are to be redeemed in equal parts on March 26, 2017 and March 26, 2018.
(9)
Reflects balances owed to the Company’s joint venture partners in Ghana and Uganda. The Ghana loan is denominated in Ghanaian Cedi and the Uganda loan is denominated in U.S. Dollars.
(10)
Publicly issued debentures assumed by the Company in connection with its acquisition of BR Towers S.A. Denominated in Brazilian Reais (“BRL”).
(11)
Denominated in Colombian Pesos and amortizes through April 24, 2021.
(12)
Denominated in South African Rand and amortizes through December 17, 2020.
(13)
Denominated in BRL.
(14)
Denominated in INR. This agreement provides that the maturity date may be extended for additional 30-day periods.

Current portion of long-term obligations—The Company’s current portion of long-term obligations includes (i)13.1 billion INR ($194.7 million) of indebtedness primarily assumed by the Company in connection with the Viom Acquisition, including 4.75 billion INR ($70.3 million) outstanding under a short-term committed loan facility which was used to refinance a Viom term loan, (ii) 0.8 billion INR ($12.3 million) related to Viom preference shares, and (iii) $67.4 million outstanding under the Secured Cellular Site Revenue Notes, Series 2010-1 Class C (included in the Unison notes) assumed in connection with the acquisition of Unison.

Viom indebtedness—Amounts outstanding and key terms of the Viom indebtedness consisted of the following as of June 30, 2016 (in millions):
 
 
 
Amount Outstanding (INR)
 
Amount Outstanding (USD)
 
Interest Rate (Range)
 
Maturity Date (Range)
Term loans
 
39,745

 
$
588.6

 
8.75% - 11.20%

 
March 31, 2017 - November 30, 2024
Debenture
 
6,000

 
$
88.9

 
9.90
%
 
April 28, 2020
Working capital facilities
 
1,406

 
$
20.8

 
11.05% - 11.60%

 
October 23, 2016 - March 18, 2017
The Viom indebtedness includes several term loans, ranging from one to ten years, which are generally secured by the borrower’s short-term and long-term assets. The term loans bear interest at the bank’s Marginal Cost of Funds based Lending Rate or the bank’s base rate, plus spreads ranging from 1.00% to 1.55%. Interest rates on the term loans are fixed until certain annual reset dates. Generally, the term loans can be repaid without penalty on the annual reset dates; earlier repayments require notice to the lenders and are subject to prepayment penalties, typically of 1% to 2%. Scheduled repayment terms include either ratable or staggered amortization with repayments typically commencing between six and 36 months after the initial disbursement of funds.
The debenture is secured by the borrower’s long-term assets, including property and equipment and intangible assets. The debenture bears interest at a base rate plus a spread of 0.6%. The base rate is set in advance for each quarterly coupon period. Should the actual base rate be less than 10.25% or greater than 9.75%, the revised base rate is assumed to be 10.00% for purposes of the reset. Additionally, the spread is subject to reset 36 and 48 months from the issuance date of April 27, 2015. The holders of the debenture must reach a consensus on the revised spread and the borrower must redeem all of the debentures held by holders from whom consensus is not achieved. Additionally, the debenture is required to be redeemed by the borrower if it does not maintain a minimum credit rating.
The Viom indebtedness includes several working capital facilities, most of which are subject to annual renewal, which are generally secured by the borrower’s short-term and long-term assets. The working capital facilities bear interest at rates that are comprised of base rates plus spreads ranging from 1.60% to 2.30%. Generally, the working capital facilities are payable on demand prior to maturity.
Viom preference shares—As of June 30, 2016, ATC TIPL had 166,666,666 mandatorily redeemable preference shares (the “Preference Shares”) outstanding, which are required to be redeemed in cash. Accordingly, the Company recognized debt of 1.67 billion INR ($24.7 million) related to the Preference Shares outstanding on the consolidated balance sheet.
Unless redeemed earlier, the Preference Shares will be redeemed in two equal installments on March 26, 2017 and March 26, 2018 in an amount equal to ten INR per share along with a redemption premium, as defined in the investment

11



AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





agreement, which equates to a compounded return of 13.5% per annum. ATC TIPL, at its option, may redeem the Preference Shares prior to the aforementioned dates, subject to an additional 2% redemption premium.
Senior Notes Offerings
3.300% Senior Notes and 4.400% Senior Notes Offering—On January 12, 2016, the Company completed a registered public offering of $750.0 million aggregate principal amount of 3.300% senior unsecured notes due 2021 (the “3.300% Notes”) and $500.0 million aggregate principal amount of 4.400% senior unsecured notes due 2026 (the “4.400% Notes”). The net proceeds from this offering were approximately $1,237.2 million, after deducting commissions and estimated expenses. The Company used the proceeds to repay existing indebtedness under its multicurrency senior unsecured revolving credit facility entered into in June 2013, as amended (the “2013 Credit Facility”) and for general corporate purposes.

The 3.300% Notes will mature on February 15, 2021 and bear interest at a rate of 3.300% per annum. The 4.400% Notes will mature on February 15, 2026 and bear interest at a rate of 4.400% per annum. Accrued and unpaid interest on the notes will be payable in U.S. Dollars semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2016. Interest on the notes is computed on the basis of a 360-day year comprised of twelve 30-day months and commenced accruing on January 12, 2016.
3.375% Senior Notes Offering—On May 13, 2016, the Company completed a registered public offering of $1.0 billion aggregate principal amount of 3.375% senior unsecured notes due 2026 (the “3.375% Notes”). The net proceeds from this offering were approximately $981.5 million, after deducting commissions and estimated expenses. The Company used the proceeds to repay existing indebtedness under the 2013 Credit Facility.

The 3.375% Notes will mature on October 15, 2026 and bear interest at a rate of 3.375% per annum. Accrued and unpaid interest on the notes will be payable in U.S. Dollars semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2016. Interest on the notes is computed on the basis of a 360-day year comprised of twelve 30-day months and commenced accruing on May 13, 2016.

The Company may redeem each series of notes at any time, in whole or in part, at a redemption price equal to 100% of the principal amount of the notes plus a make-whole premium, together with accrued interest to the redemption date. If the Company redeems the 3.300% Notes on or after January 15, 2021, the 4.400% Notes on or after November 15, 2025 or the 3.375% Notes on or after July 15, 2026, it will not be required to pay a make-whole premium. In addition, if the Company undergoes a change of control and corresponding ratings decline, each as defined in the applicable supplemental indenture, it may be required to repurchase all of the applicable notes at a purchase price equal to 101% of the principal amount of such notes, plus accrued and unpaid interest (including additional interest, if any), up to but not including the repurchase date. The notes rank equally with all of the Company’s other senior unsecured debt and are structurally subordinated to all existing and future indebtedness and other obligations of its subsidiaries.

The supplemental indentures contain certain covenants that restrict the Company’s ability to merge, consolidate or sell assets and its (together with its subsidiaries’) ability to incur liens. These covenants are subject to a number of exceptions, including that the Company, and its subsidiaries, may incur certain liens on assets, mortgages or other liens securing indebtedness, if the aggregate amount of such liens does not exceed 3.5x Adjusted EBITDA, as defined in the applicable supplemental indenture.

Bank Facilities
2013 Credit Facility—During the six months ended June 30, 2016, the Company borrowed an aggregate of $1.2 billion and repaid an aggregate of $2.4 billion of revolving indebtedness under the 2013 Credit Facility. The Company primarily used the borrowings to fund the Viom Acquisition. On July 15, 2016, the Company borrowed $110.0 million under the 2013 Credit Facility.

2014 Credit Facility—During the six months ended June 30, 2016, the Company borrowed an aggregate of $80.0 million and repaid an aggregate of $220.0 million of revolving indebtedness under its senior unsecured revolving credit facility entered into in January 2012 and amended and restated in September 2014, as further amended (the “2014 Credit Facility”).

12



AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS






As of June 30, 2016, the key terms under the 2013 Credit Facility, the 2014 Credit Facility and the Company’s unsecured term loan entered into in October 2013, as amended (the “Term Loan”) were as follows:

 
Outstanding Principal Balance (in millions)
 
Undrawn letters of credit (in millions)
 
Maturity Date
 
Current margin over LIBOR (1)
 
Current commitment fee (2)
2013 Credit Facility
$
72.2

 
$
3.2

 
June 28, 2019 (3)
 
1.250
%
 
0.150
%
2014 Credit Facility
$
1,840.0

 
$
7.4

 
January 29, 2021 (3)
 
1.250
%
 
0.150
%
Term Loan
$
2,000.0

 
N/A

 
January 29, 2021
 
1.250
%
 
N/A

_______________
(1)    LIBOR means the London Interbank Offered Rate.
(2)    Fee on undrawn portion of each credit facility.
(3)    Subject to two optional renewal periods.


6.    FAIR VALUE MEASUREMENTS
The Company determines the fair value of its financial instruments based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Below are the three levels of inputs that may be used to measure fair value:
 
 
Level 1
Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
 
 
 
 
Level 2
Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
 
 
 
 
Level 3
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Items Measured at Fair Value on a Recurring Basis—The fair value of the Company’s financial assets and liabilities that are required to be measured on a recurring basis at fair value was as follows (in thousands):
 
 
 
June 30, 2016
 
December 31, 2015
 
 
Fair Value Measurements Using
 
Fair Value Measurements Using
 
 
Level 2
 
Level 3
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
 
 
Interest rate swap agreements
 
$
751

 

 
$
692

 

Embedded derivative in lease agreement
 

 
$
13,735

 

 
$
14,176

Liabilities:
 
 
 
 
 
 
 
 
Acquisition-related contingent consideration
 

 
$
12,225

 

 
$
12,436


During the six months ended June 30, 2016, the Company has made no changes to the methods described in note 11 to the Company’s consolidated financial statements in the 2015 Form 10-K that it used to measure the fair value of its interest rate swap agreements, the embedded derivative in one of its lease agreements and acquisition-related contingent consideration. The changes in fair value during the six months ended June 30, 2016 and 2015 were not material to the consolidated financial statements.  As of June 30, 2016, the Company estimated the value of all potential acquisition-related contingent consideration required payments to be between zero and $26.3 million.
 

13



AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





Redeemable Noncontrolling Interests
In connection with the Viom Acquisition, the Company entered into a shareholders’ agreement that provides for put options held by certain noncontrolling shareholders (see note 9). The fair value of the Company’s noncontrolling interests reflected on the consolidated balance sheet are determined using a discounted cash flow approach, which takes into consideration Level 3 unobservable inputs and applies a discount factor.

The fair value of the redeemable noncontrolling interests was $1.1 billion at the date of acquisition and was recorded in  
Redeemable noncontrolling interests in the consolidated balance sheet.

See notes 9 and 13 for more information.

Items Measured at Fair Value on a Nonrecurring Basis
Assets Held and Used—The Company’s long-lived assets are recorded at amortized cost and, if impaired, are adjusted to fair value using Level 3 inputs. During the three and six months ended June 30, 2016 and 2015, the Company did not record any material asset impairment charges.

There were no other items measured at fair value on a nonrecurring basis during the six months ended June 30, 2016.

Fair Value of Financial Instruments—The Company’s financial instruments for which the carrying value reasonably approximates fair value at June 30, 2016 and December 31, 2015 include cash and cash equivalents, restricted cash, accounts receivable and accounts payable. The Company’s estimates of fair value of its long-term obligations, including the current portion, are based primarily upon reported market values. For long-term debt not actively traded, fair value is estimated using either indicative price quotes or a discounted cash flow analysis using rates for debt with similar terms and maturities. As of June 30, 2016 and December 31, 2015, the carrying value of long-term obligations, including the current portion, was $18.7 billion and $17.1 billion, respectively. As of June 30, 2016, the fair value of long-term obligations, including the current portion, was $19.5 billion, of which $11.3 billion was measured using Level 1 inputs and $8.2 billion was measured using Level 2 inputs. As of December 31, 2015, the fair value of long-term obligations, including the current portion, was $17.4 billion, of which $8.7 billion was measured using Level 1 inputs and $8.7 billion was measured using Level 2 inputs.

7.    INCOME TAXES
The Company provides for income taxes at the end of each interim period based on the estimated effective tax rate (“ETR”) 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 ETR is determined. As a REIT, the Company continues to be subject to income taxes on the income of its TRSs and income taxes in foreign jurisdictions where it conducts international operations. Under the provisions of the Internal Revenue Code of 1986, as amended, the Company may deduct amounts distributed to stockholders against the income generated by its REIT operations. In addition, the Company is able to offset certain income by utilizing its net operating losses, subject to specified limitations.
The Company provides valuation allowances if, based on the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets.

As described in note 1, effective January 1, 2016, the Company adopted new guidance on the accounting for share-based payment transactions. As part of this new guidance, excess windfall tax benefits and tax deficiencies related to the Company’s stock option exercises and restricted stock unit vestings are recognized as an income tax benefit or expense in the consolidated statements of operations in the period in which the deduction occurs. Excess windfall tax benefits and tax deficiencies are, therefore, not anticipated when determining the annual ETR and are instead recognized in the interim period in which those items occur.
As of June 30, 2016 and December 31, 2015, the total unrecognized tax benefits that would impact the ETR, if recognized, were approximately $68.6 million and $28.1 million, respectively. The amount of unrecognized tax benefits during the three and six months ended June 30, 2016 includes additions to the Company’s existing tax positions of $32.8

14



AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





million and $39.3 million, respectively, both of which include $23.8 million of tax positions assumed through acquisition, and foreign currency fluctuations of $0.4 million and $1.2 million, respectively. The Company expects the unrecognized tax benefits to change over the next 12 months if certain tax matters ultimately settle with the applicable taxing jurisdiction during this time frame, as described in note 12 to the Company’s consolidated financial statements included in the 2015 Form 10-K. The impact of the amount of these changes to previously recorded uncertain tax positions could range from zero to $14.1 million.
The Company recorded penalties and income tax-related interest expense during the three and six months ended June 30, 2016 of $2.2 million and $5.2 million, respectively, and during the three and six months ended June 30, 2015 of $0.6 million and $1.5 million, respectively. As of June 30, 2016 and December 31, 2015, the total amount of accrued income tax related interest and penalties included in the consolidated balance sheets was $25.0 million and $20.2 million, respectively.

8.    STOCK-BASED COMPENSATION
Summary of Stock-Based Compensation Plans—The Company maintains equity incentive plans that provide for the grant of stock-based awards to its directors, officers and employees. The 2007 Equity Incentive Plan (the “2007 Plan”) provides for the grant of non-qualified and incentive stock options, as well as restricted stock units, restricted stock and other stock-based awards. Exercise prices in the case of non-qualified and incentive stock options are not less than the fair value of the underlying common stock on the date of grant. Equity awards typically vest ratably, generally over four years for time-based restricted stock units (“RSUs”) and stock options and three years for performance-based restricted stock units (“PSUs”). Stock options generally expire ten years from the date of grant. As of June 30, 2016, the Company had the ability to grant stock-based awards with respect to an aggregate of 9.4 million shares of common stock under the 2007 Plan. In addition, the Company maintains an employee stock purchase plan (“ESPP”) pursuant to which eligible employees may purchase shares of the Company’s common stock on the last day of each bi-annual offering period at a 15% discount of the lower of the closing market value on the first or last day of such offering period. The offering periods run from June 1 through November 30 and from December 1 through May 31 of each year.
The Company recognized stock-based compensation expense of $21.9 million and $50.0 million during the three and six months ended June 30, 2016, respectively, and recognized stock-based compensation expense of $24.0 million and $53.9 million during the three and six months ended June 30, 2015, respectively. The Company capitalized $0.1 million and $0.8 million of stock-based compensation expense as property and equipment during the three and six months ended June 30, 2016, respectively, and capitalized $0.6 million and $1.1 million of stock-based compensation expense as property and equipment during the three and six months ended June 30, 2015, respectively.
Stock Options—The fair value of each option granted during the six months ended June 30, 2016 was estimated on the date of grant using the Black-Scholes option pricing model based on the assumptions noted in the table below. The expected life of stock options (estimated period of time outstanding) was estimated using the vesting term and historical exercise behavior of the Company’s employees. The risk-free interest rate was based on the U.S. Treasury yield with a term that approximated the estimated life in effect at the accounting measurement date. The expected volatility of the underlying stock price was based on historical volatility for a period equal to the expected life of the stock options. The expected annual dividend yield was the Company’s best estimate of expected future dividend yield.

Key assumptions used to apply this pricing model during the six months ended June 30, 2016 were as follows:
 
Range of risk-free interest rate
 
1.45% - 1.73%
Weighted average risk-free interest rate
 
1.45%
Range of expected life of stock options
 
4.5 - 5.2 years
Range of expected volatility of the underlying stock price
 
20.64% - 21.45%
Weighted average expected volatility of underlying stock price
 
21.45%
Range of expected annual dividend yield
 
1.85% - 2.40%
The weighted average grant date fair value per share during the six months ended June 30, 2016 was $14.56. As of June 30, 2016, total unrecognized compensation expense related to unvested stock options was $34.8 million, which is expected to be recognized over a weighted average period of approximately two years.

15



AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





The Company’s option activity for the six months ended June 30, 2016 was as follows:
 
 
 
Number of Options
Outstanding as of January 1, 2016
 
7,680,819

Granted
 
1,132,596

Exercised
 
(907,829
)
Forfeited
 
(16,320
)
Expired
 
(500
)
Outstanding as of June 30, 2016
 
7,888,766

 
Restricted Stock Units—As of June 30, 2016, total unrecognized compensation expense related to unvested RSUs granted under the 2007 Plan was $115.6 million and is expected to be recognized over a weighted average period of approximately three years.

Performance-Based Restricted Stock Units—During the six months ended June 30, 2016, the Compensation Committee granted an aggregate of 169,340 PSUs to its executive officers (the “2016 PSUs”) and established the performance metrics for this award. During the six months ended June 30, 2015, the Compensation Committee granted an aggregate of 70,135 PSUs to its executive officers (the “2015 PSUs”) and established the performance metric for this award. Threshold, target and maximum parameters were established for the metrics for a three-year performance period with respect to the 2016 PSUs and for each year in the three-year performance period with respect to the 2015 PSUs and will be used to calculate the number of shares that will be issuable when the award vests, which may range from zero to 200% of the target amount. At the end of the three-year performance period, the number of shares that vest will depend on the degree of achievement against the pre-established performance goals. PSUs will be paid out in common stock at the end of the performance period, subject generally to the executive’s continued employment. PSUs will accrue dividend equivalents prior to vesting, which will be paid out only in respect of shares actually vested.
 
The performance metric related to the 2015 PSUs is tied to year-over-year growth, and actual results for the metric cannot be determined until the end of each respective fiscal year. As a result, as of June 30, 2016, the Company was unable to determine the annual target for the third year of the performance period for this award. Accordingly, an aggregate of 23,377 PSUs was not included in the table below.
Restricted Stock Units and Performance-Based Restricted Stock Units—The Company’s RSU and PSU activity for the six months ended June 30, 2016 was as follows: 
 
RSUs
 
PSUs
Outstanding as of January 1, 2016 (1)
1,656,993

 
33,377

Granted (2)
767,421

 
192,719

Vested
(635,126
)
 

Forfeited
(54,053
)
 

Outstanding as of June 30, 2016
1,735,235

 
226,096

_______________
(1)
PSUs represent the shares issuable for the 2015 PSUs at the end of the three-year performance cycle based on exceeding the performance metric for the first year’s performance period.
(2)
PSUs represent the target number of shares issuable at the end of the three-year performance cycle attributable to the second year’s performance period for the 2015 PSUs and the target number of shares issuable at the end of the three-year performance cycle for the 2016 PSUs.

During the three and six months ended June 30, 2016, the Company recorded $2.4 million and $3.2 million, respectively, in stock-based compensation expense for equity awards in which the performance goals had been established and were probable of being achieved. The remaining unrecognized compensation expense related to these awards at June 30, 2016 was $16.6 million based on the Company’s current assessment of the probability of achieving the performance goals. The weighted-average period over which the cost will be recognized is approximately two years.

9.    REDEEMABLE NONCONTROLLING INTERESTS

Redeemable Noncontrolling Interests—In connection with the Viom Acquisition, the Company, through one of its subsidiaries, entered into a shareholders agreement (the “Shareholders Agreement”) with Viom and the following remaining Viom shareholders: Tata Sons Limited, Tata Teleservices Limited, IDFC Private Equity Fund III, Macquarie SBI Investments Pte Limited and SBI Macquarie Infrastructure Trust (collectively, the “Remaining Shareholders”). The Shareholders Agreement provides for, among other things, put options held by certain of the Remaining Shareholders, which allow the Remaining Shareholders to sell outstanding shares of ATC TIPL, and call options held by the Company, which allow the Company to buy the nonontrolling shares of ATC TIPL. The put options, which are not under the Company’s control, cannot be separated from the noncontrolling interests. As a result, the combination of the noncontrolling interests and the redemption feature require classification as redeemable noncontrolling interests in the consolidated balance sheet, separate from equity.

Given the provisions governing the put rights, the redeemable noncontrolling interests are recorded outside of permanent equity at their redemption value. The noncontrolling interests become redeemable after the passage of time, and therefore the Company records the carrying amount of the noncontrolling interests at the greater of (i) the initial carrying amount, increased or decreased for the noncontrolling interests’ share of net income or loss, and (ii) the redemption value. If required, the Company will adjust the redeemable noncontrolling interests to redemption value on each balance sheet date with changes in redemption value recognized as an adjustment to Distributions in excess of earnings.

The put options may be exercised, requiring the Company to purchase the Remaining Shareholders’ equity interests, on specified dates beginning April 1, 2018 through March 31, 2021. The price of the put options will be based on the fair market value of the exercising Remaining Shareholder’s interest in the Company’s India operations at the time the option is exercised. Put options held by certain of the Remaining Shareholders are subject to a floor price of 216 INR per share.

The following is a reconciliation of the changes in the Redeemable noncontrolling interests (in thousands):
Balance as of January 1, 2016
 
$

Fair value at acquisition
 
1,097,841

Net income attributable to noncontrolling interests
 
4,323

Foreign currency translation adjustment attributable to noncontrolling interests
 
(17,007
)
Balance as of June 30, 2016
 
$
1,085,157



16



AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





10.    EQUITY

Series A Preferred Stock—The Company has 6,000,000 shares of its 5.25% Mandatory Convertible Preferred Stock, Series A, par value $0.01 per share (the “Series A Preferred Stock”) outstanding, which were issued in May 2014. 

Unless converted or redeemed earlier, each share of the Series A Preferred Stock will automatically convert on May 15, 2017, into between 0.9272 and 1.1591 shares of the Company’s common stock, depending on the applicable market value of the Company’s common stock and subject to anti-dilution adjustments. Subject to certain restrictions, at any time prior to May 15, 2017, holders of the Series A Preferred Stock may elect to convert all or a portion of their shares into common stock at the minimum conversion rate then in effect.

Dividends on shares of the Series A Preferred Stock are payable on a cumulative basis when, as and if declared by the Company’s Board of Directors at an annual rate of 5.25% on the liquidation preference of $100.00 per share, on February 15, May 15, August 15 and November 15 of each year, commencing on August 15, 2014 to, and including, May 15, 2017.

Series B Preferred Stock—The Company has 13,750,000 depositary shares, each representing a 1/10th interest in a share of its 5.50% Mandatory Convertible Preferred Stock, Series B, par value $0.01 per share (the “Series B Preferred Stock” and, together with the Series A Preferred Stock, the “Mandatory Convertible Preferred Stock”) outstanding, which were issued in March 2015.

Unless converted or redeemed earlier, each share of the Series B Preferred Stock will automatically convert on February 15, 2018, into between 8.5911 and 10.3093 shares of the Company’s common stock, depending on the applicable market value of the Company’s common stock and subject to anti-dilution adjustments. Subject to certain restrictions, at any time prior to February 15, 2018, holders of the Series B Preferred Stock may elect to convert all or a portion of their shares into common stock at the minimum conversion rate then in effect.

Dividends on shares of the Series B Preferred Stock are payable on a cumulative basis when, as and if declared by the Company’s Board of Directors at an annual rate of 5.50% on the liquidation preference of $1,000.00 per share (and, correspondingly, $100.00 per share with respect to the depositary shares) on February 15, May 15, August 15 and November 15 of each year, commencing on May 15, 2015 to, and including, February 15, 2018.

The Company may pay dividends in cash or, subject to certain limitations, in shares of common stock or any combination of cash and shares of common stock. The terms of the Mandatory Convertible Preferred Stock provide that, unless full cumulative dividends have been paid or set aside for payment on all outstanding Mandatory Convertible Preferred Stock for all prior dividend periods, no dividends may be declared or paid on common stock.

Sales of Equity Securities—The Company receives proceeds from the sale of its equity securities pursuant its ESPP and upon exercise of stock options granted under its equity incentive plan. During the six months ended June 30, 2016, the Company received an aggregate of $60.4 million in proceeds upon exercises of stock options and ESPP.

17



AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS






Distributions—During the six months ended June 30, 2016, the Company declared or paid the following cash distributions:
Declaration Date
 
Payment Date
 
Record Date
 
Distribution per share
 
Aggregate Payment Amount (in millions)
Common Stock
 
 
 
 
 
 
 
 
December 3, 2015
 
January 13, 2016
 
December 16, 2015
 
$
0.49

 
$
207.7

March 9, 2016
 
April 28, 2016
 
April 12, 2016
 
$
0.51

 
$
216.5

June 2, 2016
 
July 15, 2016
 
June 17, 2016
 
$
0.53

 
$
225.4

 
 
 
 
 
 
 
 
 
Series A Preferred Stock
 
 
 
 
 
 
 
 
January 14, 2016
 
February 16, 2016
 
February 1, 2016
 
$
1.3125

 
$
7.9

April 16, 2016
 
May 16, 2016
 
May 1, 2016
 
$
1.3125

 
$
7.9

 
 
 
 
 
 
 
 
 
Series B Preferred Stock
 
 
 
 
 
 
 
 
January 14, 2016
 
February 16, 2016
 
February 1, 2016
 
$
13.75

 
$
18.9

April 16, 2016
 
May 16, 2016
 
May 1, 2016
 
$
13.75

 
$
18.9

The Company accrues distributions on unvested restricted stock units, which are payable upon vesting. As of June 30, 2016, the amount accrued for distributions payable related to unvested restricted stock units was $4.8 million. During the six months ended June 30, 2016, the Company paid $2.4 million of distributions upon the vesting of restricted stock units. To maintain its qualification for taxation as a REIT, the Company expects to continue paying distributions, the amount, timing and frequency of which will be determined, and subject to adjustment, by the Company’s Board of Directors.

11.    EARNINGS PER COMMON SHARE

The following table sets forth basic and diluted net income per common share computational data (in thousands, except per share data):
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
Net income attributable to American Tower Corporation stockholders
$
187,550

 
$
156,056

 
$
462,709

 
$
349,373

Dividends on preferred stock
(26,782
)
 
(26,782
)
 
(53,563
)
 
(36,601
)
Net income attributable to American Tower Corporation common stockholders
160,768

 
129,274

 
409,146

 
312,772

Basic weighted average common shares outstanding
424,909

 
423,154

 
424,484

 
414,182

Dilutive securities
4,095

 
3,779

 
4,045

 
4,121

Diluted weighted average common shares outstanding
429,004

 
426,933

 
428,529

 
418,303

Basic net income attributable to American Tower Corporation common stockholders per common share
$
0.38

 
$
0.31

 
$
0.96

 
$
0.76

Diluted net income attributable to American Tower Corporation common stockholders per common share
$
0.37

 
$
0.30

 
$
0.95

 
$
0.75



18



AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





Shares Excluded From Dilutive Effect—The following shares were not included in the computation of diluted earnings per share because the effect would be anti-dilutive (in thousands, on a weighted average basis):

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
Restricted stock awards

 

 
1

 

Stock options
1,120

 
1,734

 
1,974

 
1,229

Preferred stock
17,444

 
17,349

 
17,444

 
13,364


12.    COMMITMENTS AND CONTINGENCIES
Litigation—The Company periodically becomes involved in various claims, lawsuits and proceedings that are incidental to its business. In the opinion of Company management, after consultation with counsel, there are no matters currently pending that would, in the event of an adverse outcome, materially impact the Company’s consolidated financial position, results of operations or liquidity.
Verizon Transaction—In March 2015, the Company entered into an agreement with various operating entities of Verizon Communications Inc. (“Verizon”) that provides for the lease, sublease or management of 11,286 wireless communications sites commencing March 27, 2015. The average term of the lease or sublease for all sites at the inception of the agreement was approximately 28 years, assuming renewals or extensions of the underlying ground leases for the sites. The Company has the option to purchase the leased sites in tranches, subject to the applicable lease, sublease or management rights upon its scheduled expiration. Each tower is assigned to an annual tranche, ranging from 2034 to 2047, which represents the outside expiration date for the sublease rights to the towers in that tranche. The purchase price for each tranche is a fixed amount stated in the lease for such tranche plus the fair market value of certain alterations made to the related towers. The aggregate purchase option price for the towers leased and subleased is approximately $5.0 billion. Verizon will occupy the sites as a tenant for an initial term of ten years with eight optional successive five-year terms; each such term shall be governed by standard master lease agreement terms established as a part of the transaction.
AT&T Transaction—The Company has an agreement with SBC Communications Inc., a predecessor entity to AT&T Inc. (“AT&T”), that currently provides for the lease or sublease of approximately 2,370 towers commencing between December 2000 and August 2004. Substantially all of the towers are part of the Company’s 2013 securitization transaction. The average term of the lease or sublease for all sites at the inception of the agreement was approximately 27 years, assuming renewals or extensions of the underlying ground leases for the sites. The Company has the option to purchase the sites subject to the applicable lease or sublease upon its expiration. Each tower is assigned to an annual tranche, ranging from 2013 to 2032, which represents the outside expiration date for the sublease rights to that tower. The purchase price for each site is a fixed amount stated in the lease for that site plus the fair market value of certain alterations made to the related tower by AT&T. As of June 30, 2016, the Company has purchased an aggregate of 60 of the subleased towers upon expiration of the applicable agreement. The aggregate purchase option price for the remaining towers leased and subleased is $730.5 million and will accrete at a rate of 10% per annum through the applicable expiration of the lease or sublease of a site. For all such sites purchased by the Company prior to June 30, 2020, AT&T will continue to lease the reserved space at the then-current monthly fee, which shall escalate in accordance with the standard master lease agreement for the remainder of AT&T’s tenancy. Thereafter, AT&T shall have the right to renew such lease for up to four successive five-year terms. For all such sites purchased by the Company subsequent to June 30, 2020, AT&T has the right to continue to lease the reserved space for successive one-year terms at a rent equal to the lesser of the agreed upon market rate and the then-current monthly fee, which is subject to an annual increase based on changes in the U.S. Consumer Price Index.
ALLTEL Transaction—In December 2000, the Company entered into an agreement with ALLTEL, a predecessor entity to Verizon Wireless, to acquire towers through a 15-year sublease agreement. Pursuant to the agreement, as amended, with Verizon Wireless, the Company acquired rights to approximately 1,800 towers in tranches between April 2001 and March 2002. The Company has the option to purchase each tower at the expiration of the applicable sublease. The Company exercised the purchase options for approximately 1,525 towers in a single closing to occur on or before November 30, 2016. The Company has provided notice to the tower owner of its intent to exercise the purchase options

19



AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





related to the remaining towers. As of June 30, 2016, the purchase price per tower was $42,844 payable in cash or, at Verizon Wireless’s or its assignee’s option, as applicable, with 769 shares of the Company’s common stock per tower. The aggregate cash purchase option price for the subleased towers was $75.7 million as of June 30, 2016.
Other Contingencies—The Company is subject to income tax and other taxes in the geographic areas where it operates, and periodically receives notifications of audits, assessments or other actions by taxing authorities. The Company evaluates the circumstances of each notification based on the information available and records a liability for any potential outcome that is probable or more likely than not unfavorable if the liability is also reasonably estimable.
Tenant Leases—The Company’s lease agreements with its tenants vary depending upon the region and the industry of the tenant, and typically have initial terms of ten years with multiple renewal terms at the option of the tenant.
Future minimum rental receipts expected from tenants under non-cancellable operating lease agreements in effect at June 30, 2016 were as follows (in millions):
Remainder of 2016
$
2,424

2017
4,594

2018
4,413

2019
4,149

2020
3,794

Thereafter
12,485

Total
$
31,859

Lease Obligations—The Company leases certain land, office and tower space under operating leases that expire over various terms. Many of the leases contain renewal options with specified increases in lease payments upon exercise of the renewal option. Escalation clauses present in operating leases, excluding those tied to a consumer price index or other inflation-based indices, are recognized on a straight-line basis over the non-cancellable term of the leases.
Future minimum rental payments under non-cancellable operating leases include payments for certain renewal periods at the Company’s option because failure to renew could result in a loss of the applicable communications sites and related revenues from tenant leases, thereby making it reasonably assured that the Company will renew the leases. Such payments at June 30, 2016 are as follows (in millions):