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 September 30, 2018.
¨

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
x
  
Accelerated filer
 
¨
 
 
 
 
Non-accelerated filer
 
¨
  
Smaller reporting company
 
¨
 
 
 
 
 
 
 
Emerging growth company
 
¨
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ¨
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 October 23, 2018, there were 440,487,861 shares of common stock outstanding.
 
 
 




AMERICAN TOWER CORPORATION
TABLE OF CONTENTS
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2018

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




PART I.
FINANCIAL INFORMATION
ITEM 1.
UNAUDITED CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in millions, except share count and per share data)
 
 
September 30, 2018
 
December 31, 2017
ASSETS
 
 
 
 
CURRENT ASSETS:
 
 
 
 
Cash and cash equivalents
 
$
1,026.5

 
$
802.1

Restricted cash
 
266.8

 
152.8

Short-term investments
 
68.2

 
1.0

Accounts receivable, net
 
511.1

 
513.6

Prepaid and other current assets
 
564.4

 
568.6

Total current assets
 
2,437.0

 
2,038.1

PROPERTY AND EQUIPMENT, net
 
10,996.3

 
11,101.0

GOODWILL
 
5,463.4

 
5,638.4

OTHER INTANGIBLE ASSETS, net
 
11,481.7

 
11,783.3

DEFERRED TAX ASSET
 
173.1

 
204.4

DEFERRED RENT ASSET
 
1,547.4

 
1,499.0

NOTES RECEIVABLE AND OTHER NON-CURRENT ASSETS
 
978.3

 
950.1

TOTAL
 
$
33,077.2

 
$
33,214.3

LIABILITIES
 
 
 
 
CURRENT LIABILITIES:
 
 
 
 
Accounts payable
 
$
122.9

 
$
142.9

Accrued expenses
 
863.1

 
854.3

Distributions payable
 
354.2

 
304.4

Accrued interest
 
121.6

 
166.9

Current portion of long-term obligations
 
2,841.3

 
774.8

Unearned revenue
 
276.6

 
268.8

Total current liabilities
 
4,579.7

 
2,512.1

LONG-TERM OBLIGATIONS
 
18,422.9

 
19,430.3

ASSET RETIREMENT OBLIGATIONS
 
1,196.5

 
1,175.3

DEFERRED TAX LIABILITY
 
706.2

 
898.1

OTHER NON-CURRENT LIABILITIES
 
1,288.4

 
1,244.2

Total liabilities
 
26,193.7

 
25,260.0

COMMITMENTS AND CONTINGENCIES
 


 


REDEEMABLE NONCONTROLLING INTERESTS
 
954.8

 
1,126.2

EQUITY (shares in thousands):
 
 
 
 
Preferred stock: $.01 par value; 20,000 shares authorized;
 
 
 
 
5.50%, Series B, 1,375 shares issued, 0 and 1,375 shares outstanding; aggregate liquidation value of $0.0 and $1.4, respectively
 
—

 
0.0

Common stock: $.01 par value; 1,000,000 shares authorized; 451,030 and 437,729 shares issued; and 440,775 and 428,820 shares outstanding, respectively
 
4.5

 
4.4

Additional paid-in capital
 
10,310.0

 
10,247.5

Distributions in excess of earnings
 
(1,104.3
)
 
(1,058.1
)
Accumulated other comprehensive loss
 
(2,696.3
)
 
(1,978.3
)
Treasury stock (10,255 and 8,909 shares at cost, respectively)
 
(1,163.2
)
 
(974.0
)
Total American Tower Corporation equity
 
5,350.7

 
6,241.5

Noncontrolling interests
 
578.0

 
586.6

Total equity
 
5,928.7

 
6,828.1

TOTAL
 
$
33,077.2

 
$
33,214.3

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

1


AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except share and per share data)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2018
 
2017
 
2018
 
2017
REVENUES:
 
 
 
 
 
 
 
 
Property
 
$
1,751.6

 
$
1,655.4

 
$
5,211.4

 
$
4,887.6

Services
 
33.9

 
25.3

 
96.8

 
71.8

Total operating revenues
 
1,785.5

 
1,680.7

 
5,308.2

 
4,959.4

 OPERATING EXPENSES:
 
 
 
 
 
 
 
 
Costs of operations (exclusive of items shown separately below):
 
 
 
 
 
 
 
 
 Property (including stock-based compensation expense of $0.8, $0.5, $2.0 and $1.8, respectively)
 
543.1

 
511.2

 
1,597.7

 
1,504.6

 Services (including stock-based compensation expense of $0.2, $0.2, $0.7 and $0.6, respectively)
 
13.6

 
8.6

 
39.2

 
25.1

Depreciation, amortization and accretion
 
448.9

 
432.3

 
1,344.9

 
1,249.8

Selling, general, administrative and development expense (including stock-based compensation expense of $42.8, $23.7, $108.6 and $84.0, respectively)
 
177.9

 
148.0

 
540.7

 
465.9

Other operating expenses
 
34.8

 
19.5

 
269.6

 
44.6

Total operating expenses
 
1,218.3

 
1,119.6

 
3,792.1

 
3,290.0

OPERATING INCOME
 
567.2

 
561.1

 
1,516.1

 
1,669.4

OTHER INCOME (EXPENSE):
 
 
 
 
 
 
 
 
Interest income (expense), TV Azteca (net of interest expense of $0.9, $0.3, $1.2 and $0.9, respectively)
 
0.6

 
2.7

 
(0.1
)
 
8.2

Interest income
 
10.1

 
8.4

 
43.9

 
26.6

Interest expense
 
(209.2
)
 
(188.8
)
 
(616.7
)
 
(559.5
)
Loss on retirement of long-term obligations
 
—

 
(14.2
)
 
—

 
(69.9
)
Other income (expense) (including unrealized foreign currency gains (losses) of $7.4, ($5.3), ($6.8) and $30.4, respectively)
 
21.1

 
(1.1
)
 
14.1

 
39.9

Total other expense
 
(177.4
)
 
(193.0
)
 
(558.8
)
 
(554.7
)
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
 
389.8

 
368.1

 
957.3

 
1,114.7

Income tax (provision) benefit
 
(12.5
)
 
(33.4
)
 
14.7

 
(84.1
)
NET INCOME
 
377.3

 
334.7

 
972.0

 
1,030.6

Net income attributable to noncontrolling interests
 
(10.4
)
 
(17.4
)
 
(13.2
)
 
(30.2
)
NET INCOME ATTRIBUTABLE TO AMERICAN TOWER CORPORATION STOCKHOLDERS
 
366.9

 
317.3

 
958.8

 
1,000.4

Dividends on preferred stock
 
—

 
(18.9
)
 
(9.4
)
 
(68.5
)
NET INCOME ATTRIBUTABLE TO AMERICAN TOWER CORPORATION COMMON STOCKHOLDERS
 
$
366.9

 
$
298.4

 
$
949.4

 
$
931.9

NET INCOME PER COMMON SHARE AMOUNTS:
 
 
 
 
 
 
 
 
Basic net income attributable to American Tower Corporation common stockholders
 
$
0.83

 
$
0.70

 
$
2.16

 
$
2.18

Diluted net income attributable to American Tower Corporation common stockholders
 
$
0.83

 
$
0.69

 
$
2.15

 
$
2.16

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (in thousands):
 
 
 
 
 
 
 
 
BASIC
 
440,889

 
429,281

 
439,191

 
427,960

DILUTED
 
444,121

 
432,831

 
442,468

 
431,319

DISTRIBUTIONS DECLARED PER COMMON SHARE
 
$
0.79

 
$
0.66

 
$
2.31

 
$
1.92

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

2


AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2018
 
2017
 
2018
 
2017
Net income
 
$
377.3

 
$
334.7

 
$
972.0

 
$
1,030.6

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
Changes in fair value of cash flow hedges, net of tax expense of $0.0 for all periods
 
0.0

 
0.0

 
0.0

 
(0.3
)
Reclassification of unrealized gains on cash flow hedges to net income, net of tax expense of $0.0 for all periods
 
0.0

 
0.0

 
0.2

 
(0.1
)
Adjustment to redeemable noncontrolling interest
 
—

 
—

 
78.8

 
—

Purchase of noncontrolling interest
 
—

 
—

 
0.5

 
—

Foreign currency translation adjustments, net of tax expense (benefit) of $1.0, $2.3, ($2.8) and $4.7, respectively
 
(248.5
)
 
12.6

 
(957.1
)
 
252.0

Other comprehensive (loss) income
 
(248.5
)
 
12.6

 
(877.6
)
 
251.6

Comprehensive income
 
128.8

 
347.3

 
94.4

 
1,282.2

Comprehensive loss (income) attributable to noncontrolling interests
 
51.9

 
(20.2
)
 
146.4

 
(121.5
)
Comprehensive income attributable to American Tower Corporation stockholders
 
$
180.7

 
$
327.1

 
$
240.8

 
$
1,160.7


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



3

AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
 
 
Nine Months Ended September 30,
 
 
2018
 
2017
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
Net income
 
$
972.0

 
$
1,030.6

Adjustments to reconcile net income to cash provided by operating activities
 
 
 
 
Depreciation, amortization and accretion
 
1,344.9

 
1,249.8

Stock-based compensation expense
 
111.3

 
86.4

Loss on early retirement of long-term obligations
 
—

 
69.9

Other non-cash items reflected in statements of operations
 
194.5

 
(6.6
)
Increase in net deferred rent balances
 
(23.9
)
 
(106.0
)
Increase in assets
 
(143.6
)
 
(265.6
)
Increase in liabilities
 
29.9

 
78.1

Cash provided by operating activities
 
2,485.1

 
2,136.6

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
Payments for purchase of property and equipment and construction activities
 
(610.4
)
 
(555.0
)
Payments for acquisitions, net of cash acquired
 
(1,437.8
)
 
(956.9
)
Proceeds from sale of short-term investments and other non-current assets
 
1,097.0

 
10.1

Payments for short-term investments
 
(1,072.2
)
 
—

Deposits and other
 
(31.7
)
 
(8.7
)
Cash used for investing activities
 
(2,055.1
)
 
(1,510.5
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
Borrowings under credit facilities
 
2,913.3

 
3,667.0

Proceeds from issuance of senior notes, net
 
584.9

 
1,279.4

Proceeds from term loan
 
1,500.0

 
—

Proceeds from issuance of securities in securitization transaction
 
500.0

 
—

Repayments of notes payable, credit facilities, senior notes, secured debt and capital leases
 
(4,329.2
)
 
(4,295.7
)
(Distributions to) contributions from noncontrolling interest holders, net
 
(14.3
)
 
264.7

Purchases of common stock
 
(181.2
)
 
(669.7
)
Proceeds from stock options and ESPP
 
54.1

 
105.7

Distributions paid on common stock
 
(975.1
)
 
(789.5
)
Distributions paid on preferred stock
 
(18.9
)
 
(72.5
)
Payment for early retirement of long-term obligations
 
—

 
(75.3
)
Deferred financing costs and other financing activities
 
(47.4
)
 
(28.0
)
Purchase of noncontrolling interest
 
(20.5
)
 
—

Cash used for financing activities
 
(34.3
)
 
(613.9
)
Net effect of changes in foreign currency exchange rates on cash and cash equivalents, and restricted cash
 
(57.3
)
 
6.0

NET INCREASE IN CASH AND CASH EQUIVALENTS, AND RESTRICTED CASH
 
338.4

 
18.2

CASH AND CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD
 
954.9

 
936.5

CASH AND CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD
 
$
1,293.3

 
$
954.7

CASH PAID FOR INCOME TAXES (NET OF REFUNDS OF $24.9 AND $19.8, RESPECTIVELY)
 
$
75.3

 
$
87.7

CASH PAID FOR INTEREST
 
$
640.8

 
$
584.3

NON-CASH INVESTING AND FINANCING ACTIVITIES:
 
 
 
 
(Decrease) increase in accounts payable and accrued expenses for purchases of property and equipment and construction activities
 
$
(22.9
)
 
$
21.0

Purchases of property and equipment under capital leases
 
$
39.4

 
$
33.7

Acquisition of Commercialization Rights
 
$
24.8

 
$
—

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

4


AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(in millions, share counts in thousands)
 
 
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, 2017
 
6,000

 
$
0.1

 
1,375

$
0.0

 
429,913

 
$
4.3

 
(2,810
)
 
$
(207.7
)
 
$
10,043.5

 
$
(1,999.3
)
 
$
(1,077.0
)
 
$
212.3

 
$
6,976.2

Stock-based compensation related activity
 
—

 
—

 
—

 
—

 
1,942

 
0.0

 
—

 
—

 
164.4

 
—

 
—

 
—

 
164.4

Issuance of common stock—stock purchase plan
 
—

 
—

 
—

 
—

 
53

 
0.0

 
—

 
—

 
4.6

 
—

 
—

 
—

 
4.6

Conversion of preferred stock
 
(6,000
)
 
(0.1
)
 
0

 
0.0

 
5,602

 
0.1

 
—

 
—

 
(0.0
)
 
—

 
—

 
—

 
0.0

Treasury stock activity
 
—

 
—

 
—

 
—

 
—

 
—

 
(5,457
)
 
(676.9
)
 
—

 
—

 
—

 
—

 
(676.9
)
Changes in fair value of cash flow hedges, net of tax
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(0.3
)
 
—

 
—

 
(0.3
)
Reclassification of unrealized gains on cash flow hedges to net income
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(0.1
)
 
—

 
—

 
(0.1
)
Foreign currency translation adjustment, net of tax
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
160.7

 
—

 
47.9

 
208.6

Contributions from noncontrolling interest
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
314.1

 
314.1

Distributions to noncontrolling interest
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(0.8
)
 
(0.8
)
Common stock distributions declared
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(826.1
)
 
—

 
(826.1
)
Preferred stock dividends declared
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(72.5
)
 
—

 
(72.5
)
Net income
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
1,000.4

 
18.0

 
1,018.4

BALANCE, SEPTEMBER 30, 2017
 
—

 
$
—

 
1,375

$
0.0

 
437,510

 
$
4.4

 
(8,267
)
 
$
(884.6
)
 
$
10,212.5

 
$
(1,839.0
)
 
$
(975.2
)
 
$
591.5

 
$
7,109.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BALANCE, JANUARY 1, 2018
 
—

 
$
—

 
1,375

$
0.0

 
437,729

 
$
4.4

 
(8,909
)
 
$
(974.0
)
 
$
10,247.5

 
$
(1,978.3
)
 
$
(1,058.1
)
 
$
586.6

 
$
6,828.1

Stock-based compensation related activity
 
—

 
—

 
—

 
—

 
1,236

 
0.0

 
—

 
—

 
124.5

 
—

 
—

 
—

 
124.5

Issuance of common stock—stock purchase plan
 
—

 
—

 
—

 
—

 
45

 
0.0

 
—

 
—

 
5.3

 
—

 
—

 
—

 
5.3

Conversion of preferred stock
 
—

 
—

 
(1,375
)
 
0.0

 
12,020

 
0.1

 
—

 
—

 
(0.1
)
 
—

 
—

 
—

 
—

Treasury stock activity
 
—

 
—

 
—

 
—

 
—

 
—

 
(1,346
)
 
(189.2
)
 
—

 
—

 
—

 
—

 
(189.2
)
Changes in fair value of cash flow hedges, net of tax
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
0.0

 
—

 
—

 
0.0

Reclassification of unrealized losses on cash flow hedges to net income
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
0.2

 
—

 
—

 
0.2

Foreign currency translation adjustment, net of tax
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(797.5
)
 
—

 
(30.1
)
 
(827.6
)
Adjustment to redeemable noncontrolling interest
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(50.7
)
 
78.8

 
—

 
—

 
28.1

Distributions to noncontrolling interest
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(1.0
)
 
(1.0
)
Purchase of noncontrolling interest
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(16.5
)
 
0.5

 
—

 
(4.5
)
 
(20.5
)
Impact of revenue recognition standard adoption
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
38.4

 
—

 
38.4

Common stock distributions declared
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(1,024.5
)
 
—

 
(1,024.5
)
Preferred stock dividends declared
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(18.9
)
 
—

 
(18.9
)
Net income
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
958.8

 
27.0

 
985.8

BALANCE, SEPTEMBER 30, 2018
 
—

 
$
—

 
—

$
—

 
451,030

 
$
4.5

 
(10,255
)
 
$
(1,163.2
)
 
$
10,310.0

 
$
(2,696.3
)
 
$
(1,104.3
)
 
$
578.0

 
$
5,928.7


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
(tabular amounts in millions, unless otherwise noted)



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. The Company refers to this business as its property operations. Additionally, the Company offers tower-related services in the United States, which it refers to as its services operations. These services include site acquisition, zoning and permitting (“AZP”) and structural analysis, which primarily support the Company’s site leasing business, including the addition of new tenants and equipment on its sites.
The Company’s portfolio primarily consists of towers that it owns and towers that it operates pursuant to long-term lease arrangements, as well as distributed antenna system (“DAS”) networks, which provide seamless coverage solutions in certain 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 other telecommunications infrastructure, fiber and property interests that it leases primarily to communications service providers and third-party tower operators.

American Tower Corporation is a holding company that conducts its operations through its directly and indirectly owned subsidiaries and 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.

The Company operates as a real estate investment trust for U.S. federal income tax purposes (“REIT”). Accordingly, the Company generally is not required to pay U.S. federal income taxes on income generated by its REIT operations, including the income derived from leasing space on its towers, as it receives a dividends paid deduction for distributions to stockholders that generally offsets its REIT 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 classification for U.S. tax purposes, continue to be subject to taxation in the 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 September 30, 2018, the Company’s REIT-qualified businesses included its U.S. tower leasing business, its operations in Nigeria, most of its operations in Costa Rica and Mexico, a majority of its operations in Germany and a majority of its indoor DAS networks business and services segment.

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 “SEC”). The financial information included herein is unaudited. However, the Company believes that all adjustments, which are of a normal and recurring nature, 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, 2017 (the “2017 Form 10-K”). The results of operations for the three and nine months ended September 30, 2018 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 upon the Company’s ability to exercise significant influence over operating and financial policies. All intercompany accounts and transactions have been eliminated. As of September 30, 2018, the Company holds (i) a 51% controlling interest, and MTN Group Limited holds a 49% noncontrolling interest, in each of two joint ventures, one in Ghana and

6
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(tabular amounts in millions, unless otherwise noted)


one in Uganda, (ii) a 51% controlling interest, and PGGM holds a 49% noncontrolling interest, in a joint venture that primarily consists of operations in Germany and France, (iii) an approximate 81% controlling interest, and South African investors hold an approximate 19% noncontrolling interest, in a subsidiary of the Company in South Africa and (iv) a 63% controlling interest in ATC Telecom Infrastructure Private Limited (“ATC TIPL”), formerly Viom Networks Limited (“Viom”), in India.

During the nine months ended September 30, 2018, the Company purchased approximately 6% of the interest in a subsidiary of the Company in South Africa from one of its local partners for $20.5 million, which resulted in an increase in the Company’s controlling interest from approximately 75% to approximately 81%. The purchase is reflected in the consolidated statements of equity as a reduction of Additional paid-in capital of $16.5 million, a decrease in Accumulated other comprehensive loss of $0.5 million and a reduction in Noncontrolling interest of $4.5 million.

Significant Accounting Policies—The Company’s significant accounting policies are described in note 1 to the Company’s consolidated financial statements included in the 2017 Form 10-K. There have been no material changes to the Company’s significant accounting policies during the nine months ended September 30, 2018, except the adoption of new revenue recognition guidance, as discussed below.

Adoption of Highly Inflationary Accounting in Argentina—The Argentinean economy was deemed to be highly inflationary as of the second quarter of 2018 and, as a result, the Company adopted highly inflationary accounting as of July 1, 2018 for its subsidiary in Argentina. Under highly inflationary accounting, the functional currency of its subsidiary in Argentina became the U.S. Dollar. All monetary and non-monetary assets and liabilities were remeasured at the U.S. Dollar to Argentinean Peso exchange rate of 1 to 29.4 as of June 30, 2018. These amounts became the new basis for those assets and liabilities as of July 1, 2018. Non-monetary assets and liabilities, as well as the corresponding income statement activities such as depreciation, amortization and equity, will continue to be measured at the historical exchange rate. This change did not have a material impact on the Company’s financial statements as Argentina’s assets and revenue are each less than 1% of consolidated assets and revenue, respectively.

Changes to Prior-Period Amounts—The Company is now disclosing its results in millions rather than thousands and, as a result, certain rounding adjustments have been made to prior-period amounts.

Cash and Cash Equivalents and Restricted Cash—The reconciliation of cash and cash equivalents and restricted cash reported within the applicable balance sheet that sum to the total of the same such amount shown in the statement of cash flows is as follows:
 
Nine Months Ended September 30,
 
2018
 
2017
Cash and cash equivalents
$
1,026.5

 
$
799.5

Restricted cash
266.8

 
155.2

Total cash and cash equivalents and restricted cash
$
1,293.3

 
$
954.7


TV Azteca Note Receivable—In 2000, the Company loaned TV Azteca, S.A. de C.V. (“TV Azteca”), the owner of a major national television network in Mexico, $119.8 million. The loan had an interest rate of 13.11%, payable quarterly, which at the time of issuance was determined to be below market and therefore the Company recorded a corresponding discount. The term of the loan was 70 years, and the Company amortized the discount on the loan to Interest income, TV Azteca, net of interest expense on its consolidated statements of operations using the effective interest method over the term of the loan. As of December 31, 2017, the outstanding balance on the loan was $91.8 million, or $82.9 million, net of discount. On September 25, 2018, TV Azteca paid $59.5 million to extinguish this loan and simultaneously restructured its Economic Rights agreement, which the Company estimates has a fair value of $24.8 million.
In exchange for the issuance of the below market interest rate loan described above and the annual payment of $1.5 million to TV Azteca, which the Company accounted for as a capital lease, the Company had the right to market and lease the unused tower space on the broadcast towers (the “Economic Rights”).


7
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(tabular amounts in millions, unless otherwise noted)


TV Azteca Economic Rights and Commercialization Rights—In conjunction with the note extinguishment described above, the Company restructured the Economic Rights Agreement, as described in note 5 in the 2017 Form 10-K, into a Commercialization Rights agreement. Under this agreement, the Company has the exclusive right to commercialize available space on approximately 190 TV Azteca broadcast towers for the installation, licensing and operation of equipment for wireless telecommunications service, radio and television broadcasting on the towers (the “Commercialization Rights”) until September 2038, during which time the Company is entitled to all revenues derived from the Commercialization Rights. Subsequent to 2038, the Company is required to pay quarterly to TV Azteca a market rate of 25% of the gross revenues associated with the Commercialization Rights, and annually, TV Azteca has the right to repurchase the Commercialization Rights for the then-market price.

As a result of entering into the Commercialization Rights agreement, the obligations under the capital lease were cancelled and the remaining capital lease liability of $14.1 million, the deferred financing costs of $1.5 million, and the net carrying value of the original Economic Rights asset of $3.0 million were written off, which resulted in a gain of $9.7 million which was recorded in Other income (expense).

Revenue—The new revenue recognition accounting standard requires entities to recognize revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. On January 1, 2018, the Company adopted the new revenue recognition standard using the modified retrospective method applied to contracts that were not completed as of January 1, 2018. Results for reporting periods beginning January 1, 2018 are presented under the new standard, while prior-period amounts are not adjusted and continue to be reported in accordance with accounting under the previously applicable guidance.

The Company recorded a net reduction to opening Distributions in excess of earnings in its consolidated balance sheet of $38.4 million as of January 1, 2018 due to the cumulative impact of adopting the new revenue recognition standard. The impact is primarily related to the Company’s site inspection revenue, which is now recognized at the point in time when the inspection service is completed. For the three and nine months ended September 30, 2018, the impact of applying the new standard was a decrease of $0.6 million and an increase of $4.9 million, respectively.

The adoption of the new revenue recognition accounting standard did not have a material impact on the Company’s revenue recognition patterns. Most of the Company’s revenue is derived from leasing arrangements and is accounted for as lease revenue. A small portion of the Company’s revenue is either derived from non-lease performance obligations within the lease arrangements or from other agreements with its tenants. This revenue, designated non-lease revenue, is recognized when control of the promised goods or services is transferred to the tenants in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

Since most of the Company’s contracts are leases, costs to enter into lease arrangements are capitalized under the applicable lease accounting guidance. Costs incurred to obtain non-lease contracts that are capitalized primarily relate to DAS and are not material to the consolidated financial statements. The Company has excluded sales tax, value-added tax and similar taxes from non-lease revenue.
Non-lease revenue is disaggregated by geography in a manner consistent with the Company’s business segments, which are discussed further in note 14 to the consolidated and condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. A summary of non-lease revenue disaggregated by source and geography is as follows:

8
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(tabular amounts in millions, unless otherwise noted)


Three Months Ended September 30, 2018
 
U.S.
 
Asia
 
EMEA
 
Latin
America
 
Total
Power and fuel pass-through revenue
 
$
—

 
$
120.2

 
$
34.3

 
$
3.8

 
$
158.3

Other non-lease revenue
 
66.7

 
1.6

 
0.4

 
23.6

 
92.3

Total non-lease property revenue
 
$
66.7

 
$
121.8

 
$
34.7

 
$
27.4

 
$
250.6

Services revenue
 
33.9

 
—

 
—

 
—

 
33.9

Total non-lease revenue
 
$
100.6

 
$
121.8

 
$
34.7

 
$
27.4

 
$
284.5

Property lease revenue
 
891.0

 
201.3

 
131.9

 
276.8

 
1,501.0

Total revenue
 
$
991.6

 
$
323.1

 
$
166.6

 
$
304.2

 
$
1,785.5


Nine Months Ended September 30, 2018
 
U.S.
 
Asia
 
EMEA
 
Latin
America
 
Total
Power and fuel pass-through revenue
 
$
—

 
$
325.9

 
$
102.1

 
$
12.8

 
$
440.8

Other non-lease revenue
 
203.4

 
5.0

 
1.1

 
71.9

 
281.4

Total non-lease property revenue
 
$
203.4

 
$
330.9


$
103.2

 
$
84.7


$
722.2

Services revenue
 
96.8

 
—

 
—

 
—

 
96.8

Total non-lease revenue
 
$
300.2

 
$
330.9

 
$
103.2

 
$
84.7

 
$
819.0

Property lease revenue
 
2,642.7

 
573.1

 
404.3

 
869.1

 
4,489.2

Total revenue
 
$
2,942.9

 
$
904.0

 
$
507.5

 
$
953.8

 
$
5,308.2


Power and fuel pass-through revenue—Most of the Company’s leasing arrangements outside of the U.S. require that the Company provide power to the communications site through an electrical grid connection, diesel fuel generators or other sources and permit the Company to pass through the costs of, or otherwise charge for, these services. The Company recognizes revenue received in connection with such services as power and fuel pass-through revenue. Many arrangements require that the communications site has power for a specified percentage of time. In most such cases, if delivery of power falls below the specified service level, a corresponding reduction in revenue is recorded. The Company has determined that this performance obligation is satisfied over time for the duration of the arrangement.
Other significant judgments related to this revenue stream are the (i) determination that the Company is a principal in these transactions and revenue is therefore recorded on a gross basis and (ii) service level related adjustments to revenue.
Other non-lease revenue—Other non-lease revenue consists primarily of revenue generated from DAS, fiber and other property related revenue. DAS and fiber arrangements require that the Company provide the tenant the right to use the applicable communications infrastructure. Performance obligations are satisfied over time for the duration of the arrangements. Other property related revenue streams, which include site inspections, are not material on either an individual or consolidated basis.
Services revenue—The Company offers tower-related services in the United States. These services include AZP and structural analysis services. There is a single performance obligation related to AZP, and revenue is recognized over time based on milestones achieved, which are determined based on costs incurred. Structural analysis services may have more than one performance obligation, contingent upon the number of contracted services. Revenue is recognized at the point in time the services are completed.

Some of the Company’s contracts with tenants contain multiple performance obligations. For these arrangements, the Company allocates revenue to each performance obligation based on its relative standalone selling price, which is typically based on the price charged to tenants.

Information about receivables, contract assets and contract liabilities from contracts with tenants is as follows:


9
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(tabular amounts in millions, unless otherwise noted)


 
 
January 1, 2018
 
September 30, 2018
Accounts receivable
 
$
222.2

 
$
269.1

Prepaids and other current assets
 
79.7

 
134.2

Notes receivable and other non-current assets
 
24.2

 
22.0

Unearned revenue
 
26.6

 
36.6

Other non-current liabilities
 
68.5

 
55.7


The Company records unearned revenue when payments are received from tenants in advance of the completion of the Company’s performance obligations. Long-term unearned revenue is included in Other non-current liabilities. The increase in the Unearned revenue for the three and nine months ended September 30, 2018 is due to payments received, offset by $23.6 million and $61.1 million of revenue recognized in the three months and nine months ended September 30, 2018, respectively, that was included in the Unearned revenue balance as of January 1, 2018. There was $0.2 million and $0.4 million of revenue recognized from Other non-current liabilities during the three and nine months ended September 30, 2018, respectively.

The Company records unbilled receivables, which are included in Prepaids and other current assets, when it has completed a performance obligation prior to its ability to bill under the customer arrangement. Other contract assets are included in Notes receivable and other non-current assets. The decrease in unbilled receivables attributable to revenue recognized during the three and nine months ended September 30, 2018 was $0.4 million and $0.8 million, respectively. The change in contract assets attributable to revenue recognized during each of the three and nine months ended September 30, 2018 was less than $0.1 million.

The Company does not disclose the value of unsatisfied performance obligations for agreements (i) with an original expected length of one year or less or (ii) for which it recognizes revenue at the amount to which it has the right to invoice for services performed.

Accounting Standards Updates

Lease Accounting—In February 2016, the Financial Accounting Standards Board (the “FASB”) issued guidance on the accounting for leases. The guidance amends the existing accounting standards for lease accounting, including the requirement that lessees recognize right of use assets and lease liabilities for leases with terms greater than twelve months in the statement of financial position. Under the new guidance, lessor accounting is largely unchanged.

In January 2018, the FASB issued guidance on the treatment of land easements. The guidance provides a practical expedient to not evaluate existing or expired land easements under the new lease accounting standards if those easements were not previously accounted for as leases under the existing lease guidance. The Company does not expect the adoption of this guidance to have a material impact on its financial statements or its adoption of the lease accounting guidance.

In July 2018, the FASB issued additional guidance on the accounting for leases. The guidance provides companies with another transition method by allowing entities to recognize a cumulative-effect adjustment to the opening balance of retained earnings as of the date of adoption. Under this method, previously presented years’ financial positions and results would not be adjusted. The new guidance also provides lessors with a practical expedient, by class of underlying asset, to not separate non-lease components from the associated lease component if the non-lease components would otherwise be accounted for under the new revenue recognition standard and both the timing and pattern of transfer are the same for the non-lease components and associated lease component and, if accounted for separately, the lease component would be classified as an operating lease.

The lease accounting guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018. The Company (i) has established a multidisciplinary team to assess and implement the guidance, (ii) expects the guidance to have a material impact on its consolidated balance sheets due to the recording of right of use assets and lease liabilities for leases in which it is a lessee and which it currently treats as operating leases and (iii) continues to evaluate the impact of the new guidance.

10
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(tabular amounts in millions, unless otherwise noted)



Other Updates

In January 2016, the FASB issued 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 adoption of this guidance did not have a material impact on the Company’s financial statements.

In January 2017, the FASB issued guidance on accounting for goodwill impairments. The guidance eliminates Step 2 from the goodwill impairment test and requires, among other things, recognition of an impairment loss when the carrying value of a reporting unit exceeds its fair value. The loss recognized is limited to the total amount of goodwill allocated to that reporting unit. The guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect the adoption of this guidance to have a material impact on its financial statements.

In August 2017, the FASB issued guidance on hedge and derivative accounting. The guidance simplifies accounting rules around hedge accounting and the disclosures of hedging arrangements. Among other things, the guidance eliminates the need to separately measure and report hedge ineffectiveness and generally requires the entire change in fair value of a hedging instrument to be presented in the same income statement line as the hedged item. The guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The Company does not expect the adoption of this guidance to have a material impact on its financial statements.

In February 2018, the FASB issued guidance on the treatment of tax effects that are presented in other comprehensive income. The guidance allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects as a result of the December 2017 legislation commonly referred to as the Tax Cuts and Jobs Act. The guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The Company does not expect the adoption of this guidance to have a material impact on its financial statements.

In August 2018, the FASB issued guidance on fair value disclosures. The guidance modifies the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. An entity is permitted to early adopt any removed or modified disclosures and delay adoption of the additional disclosures until their effective date. The Company does not expect the adoption of this guidance to have a material impact on its financial statements.

Other Disclosure Requirement Updates

In August 2018, the SEC issued a final rule that amends certain of its disclosure requirements. Among other amendments, the final rule extends to interim periods the annual disclosure requirement of presenting changes in stockholders’ equity and the amount of dividends per share for each class of shares and deletes the provisions of the rules that require the presentation of dividends per share on the face of the income statement for interim periods, moving the required disclosure to the analysis of changes in stockholders’ equity. The final rule will be effective as of November 5, 2018. The Company does not expect these requirements to have a material impact on its financial statements.



11
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(tabular amounts in millions, unless otherwise noted)


2.    PREPAID AND OTHER CURRENT ASSETS
Prepaid and other current assets consisted of the following:
 
As of
 
September 30, 2018
 
December 31, 2017
Unbilled receivables
$
149.8

 
$
107.9

Prepaid operating ground leases
150.9

 
148.6

Prepaid income tax
72.4

 
136.5

Value added tax and other consumption tax receivables
83.2

 
64.2

Prepaid assets
47.9

 
39.6

Other miscellaneous current assets
60.2

 
71.8

Prepaid and other current assets
$
564.4

 
$
568.6


3.    GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in the carrying value of goodwill for each of the Company’s business segments were as follows:
 
 
Property
 
Services
 
Total
 
 
U.S.
 
Asia
 
EMEA
 
Latin America
 
Balance as of January 1, 2018
 
$
3,379.2

 
$
1,095.0

 
$
404.9

 
$
757.3

 
$
2.0

 
$
5,638.4

Additions and adjustments (1)
 
—

 
45.0

 
—

 
(5.8
)
 
—

 
39.2

Effect of foreign currency translation
 
—

 
(133.3
)
 
(19.9
)
 
(61.0
)
 
—

 
(214.2
)
Balance as of September 30, 2018
 
$
3,379.2

 
$
1,006.7

 
$
385.0

 
$
690.5

 
$
2.0

 
$
5,463.4

___________
(1)
Balances have been revised to reflect purchase accounting measurement period adjustments.


The Company’s other intangible assets subject to amortization consisted of the following:
 
 
 
 
As of September 30, 2018
 
As of December 31, 2017
 
Estimated Useful
Lives
 
Gross
Carrying
Value
 
Accumulated
Amortization
 
Net Book
Value
 
Gross
Carrying
Value
 
Accumulated
Amortization
 
Net Book
Value
 
(years)
 
 
Acquired network location intangibles (1)
Up to 20

 
$
4,840.2

 
$
(1,669.2
)
 
$
3,171.0

 
$
4,858.8

 
$
(1,525.3
)
 
$
3,333.5

Acquired tenant-related intangibles
15-20

 
11,337.5

 
(3,092.8
)
 
8,244.7

 
11,150.9

 
(2,754.7
)
 
8,396.2

Acquired licenses and other intangibles
3-20

 
79.8

 
(13.8
)
 
66.0

 
58.8

 
(8.1
)
 
50.7

Economic Rights, TV Azteca (2)
70

 
—

 
—

 
—

 
14.5

 
(11.6
)
 
2.9

Total other intangible assets
 
 
$
16,257.5

 
$
(4,775.8
)
 
$
11,481.7

 
$
16,083.0

 
$
(4,299.7
)
 
$
11,783.3

_______________
(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.
(2)
As discussed in note 1, in conjunction with the extinguishment of a note from TV Azteca, the Company restructured the Economic Rights Agreement and wrote off the corresponding asset. The intangible asset related to the Commercialization Rights agreement with TV Azteca is included in Acquired licenses and other intangibles.

12
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(tabular amounts in millions, unless otherwise noted)


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 tenant-related intangibles typically represent the value to the Company of tenant 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 tenant-related intangibles on a straight-line basis over their estimated useful lives. As of September 30, 2018, the remaining weighted average amortization period of the Company’s intangible assets was 14 years. Amortization of intangible assets for the three and nine months ended September 30, 2018 was $207.4 million and $615.0 million, respectively, and amortization of intangible assets for the three and nine months ended September 30, 2017 was $203.6 million and $579.0 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:
 
 
Remainder of 2018 (1)
$
514.3

2019
773.6

2020
754.4

2021
738.5

2022
734.4

2023
730.3

(1)
Reflects the revised amortization for the Tata Teleservices Limited (“Tata Teleservices”) tenant-related intangible asset as discussed in note 15. Subsequent periods have been adjusted accordingly.
4.    ACCRUED EXPENSES
Accrued expenses consisted of the following:
 
As of
 
September 30, 2018
 
December 31, 2017
Accrued property and real estate taxes
$
166.5

 
$
154.4

Accrued pass-through costs
74.0

 
59.7

Payroll and related withholdings
76.1

 
82.2

Accrued rent
61.6

 
54.0

Amounts payable to tenants
58.8

 
60.8

Accrued construction costs
27.0

 
31.9

Accrued pass-through taxes
5.9

 
25.3

Accrued treasury stock purchases
8.0

 
—

Accrued income tax payable
4.7

 
15.3

Other accrued expenses
380.5

 
370.7

Total accrued expenses
$
863.1

 
$
854.3



13
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(tabular amounts in millions, unless otherwise noted)


5.    LONG-TERM OBLIGATIONS

Outstanding amounts under the Company’s long-term obligations, reflecting discounts, premiums, debt issuance costs and fair value adjustments due to interest rate swaps consisted of the following:
 
As of
 
 
 
September 30, 2018
 
December 31, 2017
 
Maturity Date
2018 Term Loan (1)
$
1,499.6

 
$
—

 
March 29, 2019
2013 Credit Facility (1)
1,855.0

 
2,075.6

 
June 28, 2021
2013 Term Loan (1)
995.3

 
994.5

 
January 31, 2023
2014 Credit Facility (1)
—

 
495.0

 
January 31, 2023
3.40% senior notes
999.9

 
999.8

 
February 15, 2019
2.800% senior notes
747.5

 
746.3

 
June 1, 2020
5.050% senior notes
698.6

 
698.0

 
September 1, 2020
3.300% senior notes
746.9

 
746.0

 
February 15, 2021
3.450% senior notes
646.0

 
645.1

 
September 15, 2021
5.900% senior notes
498.2

 
497.8

 
November 1, 2021
2.250% senior notes
562.2

 
572.4

 
January 15, 2022
4.70% senior notes
697.2

 
696.7

 
March 15, 2022
3.50% senior notes
992.1

 
990.9

 
January 31, 2023
3.000% senior notes
676.1

 
692.5

 
June 15, 2023
5.00% senior notes
1,002.2

 
1,002.4

 
February 15, 2024
1.375% senior notes
570.5

 
589.1

 
April 4, 2025
4.000% senior notes
741.8

 
741.0

 
June 1, 2025
4.400% senior notes
496.0

 
495.6

 
February 15, 2026
1.950% senior notes
572.7

 
—

 
May 22, 2026
3.375% senior notes
986.0

 
984.8

 
October 15, 2026
3.125% senior notes
397.3

 
397.1

 
January 15, 2027
3.55% senior notes
743.3

 
742.8

 
July 15, 2027
3.600% senior notes
691.7

 
691.1

 
January 15, 2028
Total American Tower Corporation debt
17,816.1

 
16,494.5

 
 
 
 
 
 
 
 
Series 2013-1A securities (2)
—

 
499.8

 
N/A
Series 2013-2A securities (3)
1,293.0

 
1,291.8

 
March 15, 2023
Series 2018-1A securities (3)
493.4

 
—

 
March 15, 2028
Series 2015-1 notes (4)
348.6

 
348.0

 
June 15, 2020
Series 2015-2 notes (5)
520.6

 
520.1

 
June 16, 2025
India indebtedness (6)
357.4

 
512.6

 
Various
India preference shares (7)
23.0

 
26.1

 
March 2, 2020
Shareholder loans (8)
59.3

 
100.6

 
Various
Other subsidiary debt (1) (9)
182.5

 
246.1

 
Various
Total American Tower subsidiary debt
3,277.8

 
3,545.1

 
 
Other debt, including capital lease obligations
170.3

 
165.5

 
 
Total
21,264.2

 
20,205.1

 
 
Less current portion of long-term obligations
(2,841.3
)
 
(774.8
)
 
 
Long-term obligations
$
18,422.9

 
$
19,430.3

 
 
_______________
(1)
Accrues interest at a variable rate.
(2)
Repaid in full on the March 2018 payment date.
(3)
Maturity date reflects the anticipated repayment date; final legal maturity is March 15, 2048.
(4)
Maturity date reflects the anticipated repayment date; final legal maturity is June 15, 2045.
(5)
Maturity date reflects the anticipated repayment date; final legal maturity is June 15, 2050.

14
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(tabular amounts in millions, unless otherwise noted)


(6)
Denominated in Indian Rupees (“INR”). Includes India working capital facility, remaining debt assumed by the Company in connection with the Viom Acquisition (as defined in note 9) and debt that has been entered into by ATC TIPL.
(7)
Mandatorily redeemable preference shares (the “Preference Shares”) classified as debt. The Preference Shares have a dividend rate of 10.25% per annum. Denominated in INR.
(8)
At December 31, 2017, 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 was denominated in Ugandan Shillings. On August 30, 2018, the Company repaid the remaining 127.2 billion UGX ($33.8 million) under the Uganda loan, including principal and accrued unpaid interest. As a result, no amounts were outstanding under the Uganda loan as of September 30, 2018.
(9)
Includes the publicly issued simple debentures issued by BR Towers S.A. (the “Brazil Debentures”) and the Brazil credit facility, which are denominated in Brazilian Reais (“BRL”) and have an original amortization through October 15, 2023 and January 15, 2022, respectively, the South African credit facility, which is denominated in South African Rand and amortizes through December 17, 2020 and the Colombian credit facility, which is denominated in Colombian Pesos and amortizes through April 24, 2021. On October 15, 2018, the Brazil Debentures were repaid in full.

Current portion of long-term obligations—The Company’s current portion of long-term obligations primarily includes (i) 14.6 billion INR ($201.0 million) of India indebtedness, (ii) 288.1 million BRL ($72.0 million) of the Brazil Debentures, (iii) $1.5 billion under its unsecured term loan entered into on March 29, 2018 (the “2018 Term Loan”) and (iv) $999.9 million under the 3.40% senior unsecured notes due 2019.

Securitized Debt—Cash flows generated by the sites that secure the securitized debt of the Company are only available for payment of such debt and are not available to pay the Company’s other obligations or the claims of its creditors. However, subject to certain restrictions, the Company holds the right to receive the excess cash flows not needed to pay the securitized debt and other obligations arising out of the securitizations. The securitized debt is the obligation of the issuers thereof or borrowers thereunder, as applicable, and their subsidiaries, and not of the Company or its other subsidiaries.

Senior Notes
1.950% Senior Notes Offering—On May 22, 2018, the Company completed a registered public offering of 500.0 million Euros (“EUR”) ($589.0 million at the date of issuance) aggregate principal amount of 1.950% senior unsecured notes due 2026 (the “1.950% Notes”). The net proceeds from this offering were approximately 493.2 million EUR (approximately $581.0 million at the date of issuance), after deducting commissions and estimated expenses. The Company used the net proceeds to repay existing indebtedness under its multicurrency senior unsecured revolving credit facility entered into in June 2013, as amended (the “2013 Credit Facility”).

The 1.950% Notes will mature on May 22, 2026 and bear interest at a rate of 1.950% per annum. Accrued and unpaid interest on the 1.950% Notes will be payable in EUR in arrears on May 22 of each year, beginning on May 22, 2019. Interest on the 1.950% Notes will be computed on the basis of the actual number of days in the period for which interest is being calculated and the actual number of days from and including the last date on which interest was paid on the 1.950% Notes and commenced accruing on May 22, 2018.

The Company may redeem the 1.950% 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 1.950% Notes on or after February 22, 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 supplemental indenture, it may be required to repurchase all of the 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 indenture contains 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 supplemental indenture.




15
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(tabular amounts in millions, unless otherwise noted)


Securitizations

Secured Tower Revenue Securities, Series 2018-1, Subclass A and Series 2018-1, Subclass R—On March 29, 2018, the Company completed a securitization transaction (the “2018 Securitization”), in which the American Tower Trust I (the “Trust”) issued $500.0 million aggregate principal amount of Secured Tower Revenue Securities, Series 2018-1, Subclass A (the “Series 2018-1A Securities”). To satisfy the applicable risk retention requirements of Regulation RR promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act” and, such requirements, the “Risk Retention Rules”), the Trust issued, and one of the Company’s affiliates purchased, $26.4 million aggregate principal amount of Secured Tower Revenue Securities, Series 2018-1, Subclass R (the “Series 2018-1R Securities” and, together with the Series 2018-1A Securities, the “2018 Securities”) to retain an “eligible horizontal residual interest” (as defined in the Risk Retention Rules) in an amount equal to at least 5% of the fair value of the 2018 Securities.

The assets of the Trust consist of a nonrecourse loan (the “Loan”) made by the Trust to American Tower Asset Sub, LLC and American Tower Asset Sub II, LLC (together, the “AMT Asset Subs”). The AMT Asset Subs are jointly and severally liable under the Loan, which is secured primarily by mortgages on the AMT Asset Subs’ interests in 5,116 broadcast and wireless communications towers and related assets (the “Trust Sites”).
The 2018 Securities correspond to components of the Loan made to the AMT Asset Subs pursuant to the Second Amended and Restated Loan and Security Agreement among the Trust and the AMT Asset Subs, dated as of March 29, 2018 (the “Loan Agreement”) and were issued in two separate subclasses of the same series. The 2018 Securities represent a pass-through interest in the components of the Loan corresponding to the 2018 Securities. The Series 2018-1A Securities have an interest rate of 3.652% and the Series 2018-1R Securities have an interest rate of 4.459%. The 2018 Securities have an expected life of approximately ten years with a final repayment date in March 2048.
The debt service on the Loan will be paid solely from the cash flows generated from the operation of the Trust Sites held by the AMT Asset Subs. The AMT Asset Subs are required to make monthly payments of interest on the Loan. Subject to certain limited exceptions described below, no payments of principal will be required to be made on the components of the Loan corresponding to the 2018 Securities prior to the monthly payment date in March 2028, which is the anticipated repayment date for such components.
The AMT Asset Subs may prepay the Loan at any time provided it is accompanied by applicable prepayment consideration. If the prepayment occurs within thirty-six months of the anticipated repayment date for the 2018 Securities, no prepayment consideration is due. The entire unpaid principal balance of the components of the Loan corresponding to the 2018 Securities will be due in March 2048.
Under the Loan Agreement, the AMT Asset Subs are required to maintain reserve accounts, including for ground rents, real estate and personal property taxes and insurance premiums, and, in certain circumstances, to reserve a portion of advance rents from tenants on the Trust Sites. Based on the terms of the Loan Agreement, all rental cash receipts received each month are reserved for the succeeding month and held in an account controlled by the trustee and then released. The $63.5 million held in the reserve accounts as of September 30, 2018 is classified as restricted cash on the Company’s accompanying consolidated balance sheet.
The Secured Tower Revenue Securities, Series 2013-2A (the “Series 2013-2A Securities”) issued in a securitization transaction in March 2013 (the “2013 Securitization” and, together with the 2018 Securitization, the “Trust Securitizations”) remain outstanding and are subject to the terms of the Second Amended and Restated Trust and Servicing Agreement entered into in connection with the 2018 Securitization. The component of the Loan corresponding to the Series 2013-2A Securities also remains outstanding and is subject to the terms of the Loan Agreement. The Loan Agreement includes terms and conditions, including with respect to secured assets, substantially consistent with the First Amended and Restated Loan and Security Agreement dated as of March 15, 2013, and as further described in note 8 to the Company’s consolidated financial statements included in the 2017 Form 10-K.

Bank Facilities

2013 Credit Facility—During the nine months ended September 30, 2018, the Company borrowed an aggregate of $1.8 billion and repaid an aggregate of $2.0 billion of revolving indebtedness under the 2013 Credit Facility. The Company used the borrowings to fund acquisitions, repay existing indebtedness and for general corporate purposes.


16
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(tabular amounts in millions, unless otherwise noted)


2014 Credit Facility—During the nine months ended September 30, 2018, the Company borrowed an aggregate of $1.1 billion and repaid an aggregate of $1.5 billion 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”). The Company used the borrowings to repay existing indebtedness, including the Secured Tower Revenue Securities, Series 2013-1A, and for general corporate purposes.

2018 Term Loan—During the nine months ended September 30, 2018, the Company entered into the 2018 Term Loan, the net proceeds of which were used to repay $1.1 billion of outstanding indebtedness under the 2013 Credit Facility and $445.0 million of outstanding indebtedness under the 2014 Credit Facility.
The 2018 Term Loan matures on March 29, 2019. Any outstanding principal and accrued but unpaid interest will be due and payable in full at maturity. The 2018 Term Loan may be paid prior to maturity in whole or in part at the Company’s option without penalty or premium.
The loan agreement for the 2018 Term Loan contains certain reporting, information, financial and operating covenants and other restrictions (including limitations on additional debt, guaranties, sales of assets and liens) with which the Company must comply. Any failure to comply with the financial and operating covenants of the loan agreement may constitute a default, which could result in, among other things, the amounts outstanding, including all accrued interest and unpaid fees, becoming immediately due and payable.

As of September 30, 2018, the key terms under the 2013 Credit Facility, the 2014 Credit Facility, the Company’s unsecured term loan entered into in October 2013, as amended (the “2013 Term Loan”) and the 2018 Term Loan were as follows:
 
Outstanding Principal Balance
 
Undrawn letters of credit
 
Maturity Date
 
Current margin over LIBOR (1)
 
Current commitment fee (2)
2013 Credit Facility
$
1,855.0

 
$
3.5

 
June 28, 2021
(3)
1.125
%
 
0.125
%
2014 Credit Facility
$
—

 
$
6.2

 
January 31, 2023
(3)
1.250
%
 
0.150
%
2013 Term Loan
$
1,000.0

 
N/A

 
January 31, 2023
 
1.250
%
 
N/A

2018 Term Loan
$
1,500.0

 
N/A

 
March 29, 2019
 
0.875
%
 
N/A

_______________
(1)    LIBOR means the London Interbank Offered Rate.
(2)    Fee on undrawn portion of the applicable 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.


17
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(tabular amounts in millions, unless otherwise noted)


Items Measured at Fair Value on a Recurring Basis—The fair values of the Company’s financial assets and liabilities that are required to be measured on a recurring basis at fair value were as follows:
 
 
 
September 30, 2018
 
December 31, 2017
 
 
Fair Value Measurements Using
 
Fair Value Measurements Using
 
 
Level 1
 
Level 2
 
Level 3
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
Short-term investments (1)
 
$
—

 
$
68.2

 
—

 
$
1.0

 
—

 
—

Embedded derivative in lease agreement
 
—

 
—

 
$
11.7

 
—

 
—

 
$
12.4

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swap agreements
 
—

 
$
55.1

 
—

 
—

 
$
29.0

 
—

Acquisition-related contingent consideration
 
—

 
—

 
$
0.9

 
—

 
—

 
$
10.1

Fair value of debt related to interest rate swap agreements (2)
 
$
(52.6
)
 
—

 
—

 
$
(24.5
)
 
—

 
—

_______________
(1)
Consists of mutual funds with a portfolio duration of approximately 90 days and highly liquid investments with original maturities in excess of three months.
(2)
Included in the carrying values of the corresponding debt obligations.

As of September 30, 2018, the Company had marketable securities with a cost basis of $67.7 million and recognized unrealized gains of $0.5 million on these securities. During the nine months ended September 30, 2018, the Company made no changes to the methods described in note 11 to its consolidated financial statements included in the 2017 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 nine months ended September 30, 2018 and 2017 were not material to the consolidated financial statements. As of September 30, 2018, the Company estimated the value of all potential acquisition-related contingent consideration payments to be between zero and $0.9 million.
 
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. There were no other items measured at fair value on a nonrecurring basis during the nine months ended September 30, 2018 or 2017.

On February 28, 2018, one of the Company’s tenants in Asia, Aircel Ltd. (“Aircel”), filed for bankruptcy protection with the National Company Law Tribunal of India. The bankruptcy process is ongoing and the ultimate outcome has yet to be determined. The Company performed an impairment test based on current expectations of the impact of the bankruptcy on projected cash flows for assets related to Aircel. These assets consisted primarily of towers, which typically are assessed on an individual basis, network location intangibles, which relate directly to towers, and tenant-related intangibles. As a result, an impairment of $40.1 million was taken on the tower and network intangible assets. The Company also fully impaired the tenant-related intangible asset for Aircel, which resulted in an impairment of $107.3 million during the nine months ended September 30, 2018.

The Company recorded an additional $29.5 million of impairments on tower and network intangible assets related to other carrier consolidation-driven churn in India during the nine months ended September 30, 2018. All such impairments were recorded in Other operating expenses in the consolidated statements of operations.

In October 2017, one of the Company’s tenants in Asia, Tata Teleservices, informed the Department of Telecommunications in India of its intent to exit the wireless telecommunications business and announced plans to transfer its business to another telecommunications provider. The Company considered the developments regarding these events, including ongoing negotiations with Tata Teleservices, when updating its impairment test for the Tata Teleservices tenant relationship, and concluded that there was no impairment because the estimated probability-weighted undiscounted cash flows were in excess of the carrying value of this asset, which was $355.7 million as of September 30, 2018. Developments subsequent to September 30, 2018 are discussed in note 15.

18
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(tabular amounts in millions, unless otherwise noted)


 
Fair Value of Financial Instruments—The Company’s