Edgar Filing: AMERICAN TOWER CORP /MA/

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

FORM 10-Q

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, 2013.

¨	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):

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 18, 2013, there were 394,639,947 shares of common stock outstanding.

AMERICAN TOWER CORPORATION

INDEX

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2013


		Page No.
PART I. FINANCIAL INFORMATION
Item 1.	Unaudited Condensed Consolidated Financial Statements		1
	Condensed Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012		1
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2013 and 2012		2
	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2013 and 2012		3
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012		4
	Condensed Consolidated Statements of Equity for the nine months ended September 30, 2013 and 2012		5
	Notes to Condensed Consolidated Financial Statements		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		38
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		71
Item 4.	Controls and Procedures		73
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		74
Item 1A.	Risk Factors		74
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		85
Item 6.	Exhibits		85
Signatures			86
Exhibit Index			Ex-1

PART I.

FINANCIAL INFORMATION

ITEM 1.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AMERICAN TOWER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS—Unaudited

(in thousands, except share data)


	September 30, 2013			December 31, 2012
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	4,040,353		$	368,618
Restricted cash		132,019			69,316
Short-term investments		27,381			6,018
Accounts receivable, net		152,560			143,772
Prepaid and other current assets		365,792			222,999
Deferred income taxes		23,931			25,754

Total current assets		4,742,036			836,477

PROPERTY AND EQUIPMENT, net		5,878,826			5,766,150
GOODWILL		2,815,271			2,842,717
OTHER INTANGIBLE ASSETS, net		3,195,106			3,205,496
DEFERRED INCOME TAXES		219,373			209,589
DEFERRED RENT ASSET		878,124			776,201
NOTES RECEIVABLE AND OTHER NON-CURRENT ASSETS		452,584			452,788

TOTAL	$	18,181,320		$	14,089,418

LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable	$	90,845		$	89,578
Accrued expenses		331,311			286,962
Distributions payable		110,937			189
Accrued interest		84,528			71,271
Current portion of long-term obligations		67,276			60,031
Unearned revenue		138,422			124,147

Total current liabilities		823,319			632,178

LONG-TERM OBLIGATIONS		12,578,532			8,693,345
ASSET RETIREMENT OBLIGATIONS		461,586			435,613
OTHER NON-CURRENT LIABILITIES		705,966			644,101

Total liabilities		14,569,403			10,405,237

COMMITMENTS AND CONTINGENCIES
EQUITY:
Preferred stock: $.01 par value; 20,000,000 shares authorized; no shares issued or outstanding
Common stock: $.01 par value; 1,000,000,000 shares authorized; 397,345,022 and 395,963,218 shares issued; and 394,534,996 and 395,091,213 shares outstanding, respectively		3,973			3,959
Additional paid-in capital		5,097,325			5,012,124
Distributions in excess of earnings		(1,066,580	)		(1,196,907	)
Accumulated other comprehensive loss		(298,015	)		(183,347	)
Treasury stock (2,810,026 and 872,005 shares at cost, respectively)		(207,740	)		(62,728	)

Total American Tower Corporation equity		3,528,963			3,573,101
Noncontrolling interest		82,954			111,080

Total equity		3,611,917			3,684,181

TOTAL	$	18,181,320		$	14,089,418

See accompanying notes to unaudited condensed consolidated financial statements.

AMERICAN TOWER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS—Unaudited

(in thousands, except per share data)


	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
REVENUES:
Rental and management	$	796,575		$	697,554		$	2,363,207		$	2,063,806
Network development services		11,305			15,781			56,231			43,780

Total operating revenues		807,880			713,335			2,419,438			2,107,586

OPERATING EXPENSES:
Costs of operations (exclusive of items shown separately below):
Rental and management (including stock-based compensation expense of $248, $195, $751 and $594, respectively)		195,953			177,336			585,465			506,120
Network development services (including stock-based compensation expense of $99, $245, $440 and $749, respectively)		4,876			7,568			22,839			22,153
Depreciation, amortization and accretion		184,922			144,061			555,334			465,788
Selling, general, administrative and development expense (including stock-based compensation expense of $14,711, $12,618, $51,964 and $38,311, respectively)		97,781			81,459			298,737			237,891
Other operating expenses		15,469			7,359			35,686			35,150

Total operating expenses		499,001			417,783			1,498,061			1,267,102

OPERATING INCOME		308,879			295,552			921,377			840,484

OTHER INCOME (EXPENSE):
Interest income, TV Azteca, net of interest expense of $371, $372, $1,113 and $1,114, respectively		3,544			3,586			10,673			10,715
Interest income		2,342			1,717			5,468			6,253
Interest expense		(106,335	)		(102,272	)		(318,916	)		(297,622	)
Loss on retirement of long-term obligations		—			—			(37,967	)		(398	)
Other (expense) income (including unrealized foreign currency (losses) gains of $(30,907), $46,191, $(151,673), and $(12,847), respectively)		(29,622	)		46,294			(148,991	)		(19,468	)

Total other expense		(130,071	)		(50,675	)		(489,733	)		(300,520	)

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND INCOME ON EQUITY METHOD INVESTMENTS		178,808			244,877			431,644			539,964
Income tax provision		(15,586	)		(13,054	)		(23,361	)		(64,117	)
Income on equity method investments		—			2			—			25

NET INCOME		163,222			231,825			408,283			475,872
Net loss attributable to noncontrolling interest		16,901			264			43,068			25,732

NET INCOME ATTRIBUTABLE TO AMERICAN TOWER CORPORATION	$	180,123		$	232,089		$	451,351		$	501,604

NET INCOME PER COMMON SHARE AMOUNTS:
Basic net income attributable to American Tower Corporation	$	0.46		$	0.59		$	1.14		$	1.27

Diluted net income attributable to American Tower Corporation	$	0.45		$	0.58		$	1.13		$	1.26

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		394,759			395,244			395,138			394,626

Diluted		398,348			399,487			399,275			399,084

DISTRIBUTIONS DECLARED PER SHARE	$	0.28		$	0.23		$	0.81		$	0.66

See accompanying notes to unaudited condensed consolidated financial statements.

AMERICAN TOWER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME—Unaudited

(in thousands)


	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
Net income	$	163,222		$	231,825		$	408,283		$	475,872
Other comprehensive (loss) income:
Changes in fair value of cash flow hedges, net of taxes of $(70), $0, $386 and $0, respectively		(1,334	)		(955	)		1,415			(2,483	)
Reclassification of unrealized losses on cash flow hedges to net income, net of taxes of $58, $0, $176 and $0, respectively		683			199			1,877			397
Reclassification of unrealized losses on available-for-sale securities to net income		—			—			—			495
Foreign currency translation adjustments, net of taxes of $(2,329), $1,667, $4,254 and $7,764, respectively		(24,660	)		38,782			(120,602	)		(36,357	)

Other comprehensive (loss) income		(25,311	)		38,026			(117,310	)		(37,948	)

Comprehensive income		137,911			269,851			290,973			437,924

Comprehensive loss attributable to noncontrolling interest		18,453			1,460			45,710			42,216

Comprehensive income attributable to American Tower Corporation	$	156,364		$	271,311		$	336,683		$	480,140

See accompanying notes to unaudited condensed consolidated financial statements.

AMERICAN TOWER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS—Unaudited

(in thousands)


	Nine months ended September 30,
	2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	408,283		$	475,872
Adjustments to reconcile net income to cash provided by operating activities:
Stock-based compensation expense		53,155			39,654
Depreciation, amortization and accretion		555,334			465,788
Loss on early retirement of securitized debt		35,288			—
Other non-cash items reflected in statements of operations		164,406			79,655
Increase in net deferred rent asset		(83,694	)		(92,296	)
Increase in restricted cash		(62,703	)		(693	)
Increase in assets		(59,267	)		(36,137	)
Increase in liabilities		133,641			184,704

Cash provided by operating activities		1,144,443			1,116,547

CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for purchase of property and equipment and construction activities		(448,249	)		(377,026	)
Payments for acquisitions, net of cash acquired		(365,658	)		(822,714	)
Proceeds from sale of short-term investments and other non-current assets		27,889			358,707
Payments for short-term investments		(50,224	)		(330,341	)
Deposits, restricted cash, investments and other		(122,396	)		(2,892	)

Cash used for investing activities		(958,638	)		(1,174,266	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings, net		7,544			20,099
Borrowings under credit facilities		3,507,000			1,325,000
Proceeds from issuance of senior notes, net		2,221,792			698,670
Proceeds from issuance of Securities in securitization transaction, net		1,778,496			—
Proceeds from term loan credit facility		—			750,000
Proceeds from other long-term borrowings		27,971			99,132
Repayments of notes payable, credit facilities and capital leases		(3,705,454	)		(2,655,367	)
Contributions from noncontrolling interest holders, net		17,584			48,500
Purchases of common stock		(145,012	)		(16,733	)
Proceeds from stock options		32,973			42,825
Distributions		(209,711	)		(169,816	)
Payment for early retirement of securitized debt		(29,234	)		—
Deferred financing costs and other financing activities		(9,190	)		(30,215	)

Cash provided by financing activities		3,494,759			112,095

Net effect of changes in foreign currency exchange rates on cash and cash equivalents		(8,829	)		(2,255	)

NET INCREASE IN CASH AND CASH EQUIVALENTS		3,671,735			52,121
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		368,618			330,191

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	4,040,353		$	382,312

CASH PAID FOR INCOME TAXES (NET OF REFUNDS OF $17,336 AND $20,453, RESPECTIVELY)	$	23,172		$	28,465

CASH PAID FOR INTEREST	$	283,145		$	265,443

NON-CASH INVESTING AND FINANCING ACTIVITIES:
INCREASE (DECREASE) IN ACCOUNTS PAYABLE AND ACCRUED EXPENSES FOR PURCHASES OF PROPERTY AND EQUIPMENT AND CONSTRUCTION ACTIVITIES	$	17,208		$	(1,228	)

PURCHASES OF PROPERTY AND EQUIPMENT UNDER CAPITAL LEASES	$	16,199		$	12,219

See accompanying notes to unaudited condensed consolidated financial statements.

AMERICAN TOWER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY—Unaudited

(in thousands, except share data)


	Common Stock				Treasury Stock						Additional Paid-in Capital		Other Comprehensive Loss			Distributions in Excess of Earnings			Non-controlling Interest			Total Equity
	Issued Shares		Amount		Shares			Amount			Additional Paid-in Capital		Other Comprehensive Loss			Distributions in Excess of Earnings			Non-controlling Interest			Total Equity
BALANCE, JANUARY 1, 2012		393,642,079	$	3,936		—		$	—		$	4,903,800	$	(142,617	)	$	(1,477,899	)	$	122,922		$	3,410,142

Stock-based compensation related activity		1,917,576		19		—			—			65,017		—			—			—			65,036
Issuance of common stock-Stock Purchase Plan		47,464		1		—			—			2,364		—			—			—			2,365
Treasury stock activity		—		—		(252,691	)		(16,733	)				—			—			—			(16,733	)
Changes in fair value of cash flow hedges, net of tax		—		—		—			—			—		(1,862	)		—			(621	)		(2,483	)
Reclassification of unrealized losses on cash flow hedges to net income, net of tax		—		—		—			—			—		397			—			—			397
Reclassification of unrealized losses on available-for-sale securities to net income		—		—		—			—			—		495			—			—			495
Foreign currency translation adjustment, net of tax		—		—		—			—			—		(20,494	)		—			(15,863	)		(36,357	)
Contributions from noncontrolling interest		—		—		—			—			—		—			—			48,963			48,963
Distributions to noncontrolling interest		—		—		—			—			—		—			—			(441	)		(441	)
Dividends/distributions declared		—		—		—			—			—		—			(261,274	)		—			(261,274	)
Net income (loss)		—		—		—			—			—		—			501,604			(25,732	)		475,872

BALANCE, SEPTEMBER 30, 2012		395,607,119	$	3,956		(252,691	)	$	(16,733	)	$	4,971,181	$	(164,081	)	$	(1,237,569	)	$	129,228		$	3,685,982

BALANCE, JANUARY 1, 2013		395,963,218	$	3,959		(872,005	)	$	(62,728	)	$	5,012,124	$	(183,347	)	$	(1,196,907	)	$	111,080		$	3,684,181

Stock-based compensation related activity		1,343,555		14		—			—			82,874		—			—			—			82,888
Issuance of common stock- Stock Purchase Plan		38,249		—		—			—			2,327		—			—			—			2,327
Treasury stock activity		—		—		(1,938,021	)		(145,012	)				—			—			—			(145,012	)
Changes in fair value of cash flow hedges, net of tax		—		—		—			—			—		1,167			—			248			1,415
Reclassification of unrealized losses on cash flow hedges to net income, net of tax		—		—		—			—			—		1,764			—			113			1,877
Foreign currency translation adjustment, net of tax		—		—		—			—			—		(117,599	)		—			(3,003	)		(120,602	)
Contributions from noncontrolling interest		—		—		—			—			—		—			—			18,020			18,020
Distributions to noncontrolling interest		—		—		—			—			—		—			—			(436	)		(436	)
Dividends/distributions declared		—		—		—			—			—		—			(321,024	)		—			(321,024	)
Net income (loss)		—		—		—			—			—		—			451,351			(43,068	)		408,283

BALANCE, SEPTEMBER 30, 2013		397,345,022	$	3,973		(2,810,026	)	$	(207,740	)	$	5,097,325	$	(298,015	)	$	(1,066,580	)	$	82,954		$	3,611,917

See accompanying notes to unaudited condensed consolidated financial statements.

AMERICAN TOWER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—Unaudited

1. Description of Business, Basis of Presentation and Accounting Policies

American Tower Corporation is, through its various subsidiaries (collectively, “ATC” or the “Company”), an independent owner, operator and developer of wireless and broadcast communications real estate in the United States, Brazil, Chile, Colombia, Germany, Ghana, India, Mexico, Peru, South Africa and Uganda. In connection with its acquisition of MIP Tower Holdings LLC (“MIPT”) on October 1, 2013, the Company expanded its operations into two new markets, Costa Rica and Panama. The Company’s primary business is the leasing of antenna space on multi-tenant communications sites to wireless service providers, radio and television broadcast companies, wireless data and data providers, government agencies and municipalities and tenants in a number of other industries. The Company also manages rooftop and tower sites for property owners, operates in-building and outdoor distributed antenna system (“DAS”) networks, holds property interests under third-party communications sites and provides network development services that primarily support its rental and management operations and the addition of new tenants and equipment on its sites. Effective January 1, 2012, the Company reorganized to qualify as a real estate investment trust for federal income tax purposes (“REIT”).

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 through its subsidiary, American Tower International, Inc., which in turn conducts operations through its various international operating subsidiaries and joint ventures.

The accompanying condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The financial information included herein is unaudited; however, the Company believes that all adjustments (consisting primarily of normal recurring adjustments) considered necessary for a fair presentation of the Company’s financial position and results of operations for such periods have been included. These 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, 2012.

The Company believes that since January 1, 2012, it has been organized and has operated in a manner that enables it to qualify, and intends to continue to operate in a manner that will allow it to continue to qualify, as a REIT for federal income tax purposes. The Company filed an election to be taxed as a REIT effective as of January 1, 2012 on its U.S. federal income tax return for the 2012 taxable year.

The Company holds and operates certain of its assets through one or more taxable REIT subsidiaries (“TRSs”). A TRS is a subsidiary of a REIT that is subject to applicable corporate income tax. The Company’s use of TRSs enables it to continue to engage in certain businesses while complying with REIT qualification requirements and also allows the Company to retain income generated by these businesses for reinvestment without the requirement of distributing those earnings. The non-REIT qualified businesses that the Company holds through TRSs include its network development services segment. In addition, the Company has included most of its international operations and DAS networks business within its TRSs. The Company changed the election for substantially all of its Mexican operations, all of which was previously designated as a TRS, to be treated as a qualified REIT subsidiary as of March 1, 2013. Although the election did not have a material effect on the Company’s deferred tax position, the Company recognized a one-time dividend from its Mexican operations, the income from which the Company may either offset with its net operating losses or distribute to its stockholders as part of its regular distributions. For all periods subsequent to March 1, 2013, the Company will be required to include the income from its Mexican operations as part of its REIT taxable income for the purpose of computing the Company’s REIT distribution requirements.

AMERICAN TOWER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—Unaudited

The Company may, from time to time, change the election of other previously designated TRSs that hold certain of its other international operations to be treated as qualified REIT subsidiaries or other disregarded entities (collectively, “QRSs”), and may reorganize and transfer certain assets or operations from its TRSs to other subsidiaries, including QRSs.

As a REIT, the Company generally is not subject to federal income taxes on its income and gains that the Company distributes to its stockholders, including the income derived from leasing towers. However, even as a REIT, the Company remains obligated to pay income taxes on earnings from its TRS assets. In addition, the Company’s international assets and operations continue to be subject to taxation in the foreign jurisdictions where those assets are held or those operations are conducted.

Principles of Consolidation and Basis of Presentation—The accompanying 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.

Significant Accounting Policies and Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results may differ from those estimates, and such differences could be material to the accompanying condensed consolidated financial statements. The significant estimates in the accompanying condensed consolidated financial statements include impairment of long-lived assets (including goodwill), asset retirement obligations, revenue recognition, rent expense, stock-based compensation, income taxes and accounting for business combinations. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued as additional evidence for certain estimates or to identify matters that require additional disclosure.

Changes in Presentation—Changes have been made to the presentation of the Company’s condensed consolidated statements of cash flows for the nine months ended September 30, 2012 to be consistent with the current year presentation. Specifically, amounts surrendered for the satisfaction of employee tax obligations in connection with the vesting of restricted stock units of $16.7 million that were previously included in Purchases of common stock are now included in Deferred financing costs and other financing activities in the Company’s condensed consolidated statements of cash flows.

Recently Adopted Accounting Standards—In February 2013, the Financial Accounting Standards Board (“FASB”) issued additional guidance on comprehensive income which adds new disclosure requirements for items reclassified out of accumulated other comprehensive income (“AOCI”) by component. This guidance enhances the transparency of changes in other comprehensive income (“OCI”) and items transferred out of AOCI in the financial statements and it does not amend any existing requirements for reporting net income or OCI in the financial statements. Since the guidance relates only to presentation and disclosure of information, the adoption did not have a material effect on the Company’s condensed consolidated financial condition or results of operations.

In February 2013, the FASB issued guidance that clarifies the scope of transactions subject to disclosures about offsetting assets and liabilities. The guidance requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. This guidance is effective for annual and interim reporting periods beginning on or after January 1, 2013 on a retrospective basis. Since the guidance relates only to presentation and disclosure of information, the adoption did not have a material effect on the Company’s condensed consolidated financial condition or results of operations.

AMERICAN TOWER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—Unaudited

In July 2013, the FASB issued guidance that permits the Fed Funds Effective Swap Rate (Overnight Index Swap Rate) to be used as a U.S. benchmark interest rate for hedge accounting purposes, in addition to U.S. Treasury rates and the London Interbank Offered Rate (“LIBOR”). The guidance also removed the restriction on using different benchmark rates for similar hedges. These amendments are effective prospectively for qualifying new or re-designated hedging relationships entered into on or after July 17, 2013. The adoption of this guidance did not have a material effect on the Company’s financial statements.

In July 2013, the FASB issued guidance that requires an unrecognized tax benefit, or a portion of an unrecognized tax benefit, to be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, with certain exceptions. The amendment is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013, with early adoption permitted. The adoption of this guidance did not have a material effect on the Company’s financial statements.

2. Prepaid and Other Current Assets

Prepaid and other current assets consist of the following as of (in thousands):


	September 30, 2013		December 31, 2012 (1)
Acquisition deposit in escrow	$	120,000	$	—
Prepaid income tax		65,903		57,665
Prepaid operating ground leases		61,393		56,916
Unbilled receivables		27,922		32,588
Prepaid assets		34,260		19,037
Value added tax and other consumption tax receivables		16,771		22,443
Other miscellaneous current assets		39,543		34,350

Balance	$	365,792	$	222,999

(1)	December 31, 2012 balances have been revised to reflect purchase accounting measurement period adjustments.

3. Accrued Expenses

Accrued expenses consist of the following as of (in thousands):


	September 30, 2013		December 31, 2012
Accrued property and real estate taxes	$	46,972	$	36,814
Payroll and related withholdings		38,359		37,586
Accrued construction costs		38,201		20,711
Accrued rent		23,485		24,394
Other accrued expenses		184,294		167,457

Balance	$	331,311	$	286,962

AMERICAN TOWER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—Unaudited

4. Goodwill and Other Intangible Assets

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


	Rental and Management					Network Development Services
	Domestic		International			Network Development Services		Total
Balance as of January 1, 2013 (1)	$	2,320,645	$	520,072		$	2,000	$	2,842,717
Additions		4,698		14,933			—		19,631
Effect of foreign currency translation		—		(47,077	)		—		(47,077	)

Balance as of September 30, 2013	$	2,325,343	$	487,928		$	2,000	$	2,815,271

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

The Company’s other intangible assets subject to amortization consist of the following as of (in thousands):


		September 30, 2013							December 31, 2012 (1)
	Estimated Useful Lives	Gross Carrying Value		Accumulated Amortization			Net Book Value		Gross Carrying Value		Accumulated Amortization			Net Book Value
	(years)
Acquired network location (2)	Up to 20	$	1,731,664	$	(767,973	)	$	963,691	$	1,702,895	$	(721,135	)	$	981,760
Acquired customer-related intangibles	15-20		3,228,515		(1,093,481	)		2,135,034		3,133,166		(979,264	)		2,153,902
Acquired licenses and other intangibles	3-20		6,524		(2,087	)		4,437		26,079		(20,835	)		5,244
Economic Rights, TV Azteca	70		28,609		(14,037	)		14,572		28,954		(13,902	)		15,052

Total			4,995,312		(1,877,578	)		3,117,734		4,891,094		(1,735,136	)		3,155,958
Deferred financing costs, net (3)	N/A							77,372							49,538

Other intangible assets, net							$	3,195,106						$	3,205,496

(1)	December 31, 2012 balances have been revised to reflect purchase accounting measurement period adjustments.

(2)	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.

(3)	Deferred financing costs are amortized over the term of the respective debt instruments to which they relate using the effective interest method. This amortization is included in interest expense rather than in amortization expense.

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 customer-related intangibles typically represent the value to the Company of customer contracts and relationships in place at the time of an acquisition, including assumptions regarding estimated renewals. During the nine months ended September 30, 2013, the Company retired $19.6 million of intangible assets related to non-competition agreements that had expired and were fully amortized.

The Company amortizes these intangibles on a straight-line basis over their estimated useful lives. As of September 30, 2013, the remaining weighted average amortization period of the Company’s intangible assets, excluding deferred financing costs and the TV Azteca Economic Rights detailed in note 5 to the Company’s consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, was approximately 13 years. Amortization of intangible assets for the three and nine months ended September 30, 2013 was approximately $57.7 million and $177.9 million (excluding amortization of

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—Unaudited

deferred financing costs, which is included in interest expense), respectively. Amortization of intangible assets for the three and nine months ended September 30, 2012 was approximately $46.9 million and $154.3 million (excluding amortization of deferred financing costs, which is included in interest expense), respectively. The Company expects to record amortization expense (excluding amortization of deferred financing costs) as follows over the next five years (in millions):


Fiscal Year
2013 (remaining year)	$	61.5
2014		232.9
2015		214.5
2016		202.2
2017		195.7
2018		189.3

5. Financing Transactions

Commercial Mortgage Pass-Through Certificates, Series 2007-1—During the year ended December 31, 2007, the Company completed a securitization transaction involving assets related to 5,295 broadcast and wireless communications towers owned by two special purpose subsidiaries of the Company through a private offering of $1.75 billion of Commercial Mortgage Pass-Through Certificates, Series 2007-1 (the “Certificates”). On March 15, 2013, the Company repaid all indebtedness outstanding under the Certificates ($1.75 billion in principal amount), plus prepayment consideration and accrued interest thereon and other costs and expenses related thereto, with proceeds from the offering of $1.8 billion of Secured Tower Revenue Securities, Series 2013-1A and Series 2013-2A, as described in more detail below (collectively, the “Securities”). The Company recorded a loss on retirement of long-term obligations in the accompanying condensed consolidated statements of operations of $35.3 million, consisting of prepayment consideration of $29.2 million and the expense of deferred financing costs of $6.1 million.

Secured Tower Revenue Securities, Series 2013-1A and Series 2013-2A—On March 15, 2013, the Company completed a securitization transaction (the “Securitization”) involving assets related to 5,195 wireless and broadcast communications towers (the “Secured Towers”) owned by two special purpose subsidiaries of the Company, through a private offering of $1.8 billion of the Securities. The net proceeds of the transaction were $1.78 billion. The Securities were issued by American Tower Trust I (the “Trust”), a trust established by American Tower Depositor Sub, LLC (the “Depositor”), an indirect wholly owned special purpose subsidiary of the Company. The assets of the Trust consist of a nonrecourse loan (the “Loan”) to American Tower Asset Sub, LLC and American Tower Asset Sub II, LLC (the “Borrowers”), pursuant to a First Amended and Restated Loan and Security Agreement dated as of March 15, 2013 (the “Loan Agreement”). The Borrowers are special purpose entities formed solely for the purpose of holding the Secured Towers subject to a securitization.

The Securities were issued in two separate series of the same class pursuant to a First Amended and Restated Trust and Servicing Agreement (the “Trust Agreement”), with terms identical to the Loan. The Series 2013-1A Securities have an expected life of five years with a final repayment date in March 2043 and an interest rate of 1.551%. The Series 2013-2A Securities have an expected life of ten years with a final repayment date in March 2048 and an interest rate of 3.070%. The effective weighted average life and interest rate of the Securities is 8.6 years and 2.648%, respectively.

Amounts due under the Loan will be paid by the Borrowers solely from the cash flows generated by the Secured Towers. These funds in turn will be used by or on behalf of the Trust to service the payment of interest on the Securities and for any other payments required by the Loan Agreement or Trust Agreement. The

AMERICAN TOWER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—Unaudited

Borrowers 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 prior to March 15, 2018, which is the anticipated repayment date for the component of the Loan associated with the Series 2013-1A Securities. On a monthly basis, after payment of all required amounts under the Loan Agreement and Trust Agreement, the excess cash flows generated from the operation of the Secured Towers are released to the Borrowers, and can then be distributed to, and used by, the Company. However, if the debt service coverage ratio (the “DSCR”), generally defined as the net cash flow divided by the amount of interest, servicing fees and trustee fees that the Borrowers will be required to pay over the succeeding 12 months on the principal amount of the Loan, as of the last day of any calendar quarter prior to the applicable anticipated repayment date, is 1.30x or less (the “Cash Trap DSCR”) for such quarter, and the DSCR continues to be equal to or below the Cash Trap DSCR for two consecutive calendar quarters, then all cash flow in excess of amounts required to make debt service payments, to fund required reserves, to pay management fees and budgeted operating expenses and to make other payments required under the loan documents, referred to as excess cash flow, will be deposited into a reserve account instead of being released to the Borrowers. The funds in the reserve account will not be released to the Borrowers unless the DSCR exceeds the Cash Trap DSCR for two consecutive calendar quarters. An “amortization period” commences if (i) as of the end of any calendar quarter the DSCR equals or falls below 1.15x (the “Minimum DSCR”) for such calendar quarter and such amortization period will continue to exist until the DSCR exceeds the Minimum DSCR for two consecutive calendar quarters or (ii) on the anticipated repayment date the component of the Loan corresponding to the applicable subclass of the Securities has not been repaid in full, provided that such amortization period shall apply with respect to such component that has not been repaid in full. During an amortization period all excess cash is applied to payment of the principal on the Loan.

The Borrowers may prepay the Loan in whole or in part at any time provided it is accompanied by applicable prepayment consideration. If the prepayment occurs within 12 months of the anticipated repayment date for the Series 2013-1A Securities or 18 months of the anticipated repayment date for the 2013-2A Securities, no prepayment consideration is due. The entire unpaid principal balance of the component of the Loan related to the Series 2013-1A Securities will be due in March 2043. The entire unpaid principal balance of the component of the Loan related to the Series 2013-2A Securities will be due in March 2048. The Loan may be defeased in whole at any time prior to the anticipated repayment date for any component of the Loan then outstanding.

The Loan is secured by (1) mortgages, deeds of trust and deeds to secure debt on substantially all of the Secured Towers, (2) a pledge of the Borrowers’ operating cash flows from the Secured Towers, (3) a security interest in substantially all of the Borrowers’ personal property and fixtures and (4) the Borrowers’ rights under the tenant leases and the Management Agreement entered into in connection with the Securitization. American Tower Holding Sub, LLC, whose only material assets are its equity interests in each of the Borrowers, and American Tower Guarantor Sub, LLC, whose only material asset is its equity interest in American Tower Holding Sub, LLC, each have guaranteed repayment of the Loan and pledged their equity interests in their respective subsidiary or subsidiaries as security for such payment obligations. American Tower Guarantor Sub, LLC, American Tower Holding Sub, LLC, the Depositor and the Borrowers each were formed as special purpose entities solely for purposes of entering a securitization transaction, and the assets and credit of these entities are not available to satisfy the debts and other obligations of the Company or any other person, except as set forth in the Loan Agreement.

The Loan Agreement includes operating covenants and other restrictions customary for loans subject to rated securitizations. Among other things, the Borrowers are prohibited from incurring other indebtedness for borrowed money or further encumbering their assets subject to customary carveouts for ordinary course trade payables and permitted encumbrances (as defined in the Loan Agreement). The organizational documents of the Borrowers contain provisions consistent with rating agency securitization criteria for special purpose entities, including the requirement that the Borrowers maintain at least two independent directors. The Loan Agreement

AMERICAN TOWER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—Unaudited

also contains certain covenants that require the Borrowers to provide the trustee with regular financial reports and operating budgets, promptly notify the trustee of events of default and material breaches under the Loan Agreement and other agreements related to the Secured Towers, and allow the trustee reasonable access to the Secured Towers, including the right to conduct site investigations.

A failure to comply with the covenants in the Loan Agreement could prevent the Borrowers from taking certain actions with respect to the Secured Towers, and could prevent the Borrowers from distributing any excess cash from the operation of the Secured Towers to the Company. If the Borrowers were to default on the Loan, Midland Loan Services, a Division of PNC Bank, National Association, in its capacity as servicer on behalf of the trustee, could seek to foreclose upon or otherwise convert the ownership of the Secured Towers, in which case the Company could lose the Secured Towers and the revenue associated with the Secured Towers.

Under the Loan Agreement, the Borrowers are required to maintain reserve accounts, including for ground rents, real estate and personal property taxes and insurance premiums, and to reserve a portion of advance rents from tenants on the Secured Towers. Based on the terms of the Loan Agreement, all rental cash receipts received for each month are reserved for the succeeding month and held in an account controlled by the trustee and then released. The $120.9 million held in the reserve accounts as of September 30, 2013 is classified as Restricted cash on the Company’s accompanying condensed consolidated balance sheet.

3.50% Senior Notes Offering—On January 8, 2013, the Company completed a registered public offering of $1.0 billion aggregate principal amount of 3.50% senior unsecured notes due 2023 (the “3.50% Notes”), which were issued at a price equal to 99.185% of their face value. The net proceeds to the Company from the offering were approximately $983.4 million, after deducting commissions and expenses. The Company used $265.0 million of the net proceeds to repay the outstanding indebtedness under its $1.0 billion senior unsecured revolving credit facility entered into in April 2011 (the “2011 Credit Facility”) and $718.4 million to repay a portion of the outstanding indebtedness incurred under its $1.0 billion senior unsecured revolving credit facility entered into in January 2012 (the “2012 Credit Facility”).

The 3.50% Notes mature on January 31, 2023, and interest is payable semi-annually in arrears on January 31 and July 31 of each year, commencing on July 31, 2013. The Company may redeem the 3.50% Notes at any time at a redemption price equal to 100% of the principal amount, plus a make-whole premium, together with accrued interest to the redemption date. Interest on the notes began to accrue on January 8, 2013 and is computed on the basis of a 360-day year comprised of 12 30-day months.

If the Company undergoes a change of control and ratings decline, each as defined in the supplemental indenture, the Company will be required to offer to repurchase all of the 3.50% Notes at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest (including additional interest, if any) up to but not including the repurchase date. The 3.50% 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.

3.40% Senior Notes and 5.00% Senior Notes Offering—On August 19, 2013, the Company completed a registered public offering of $750 million aggregate principal amount of 3.40% senior unsecured notes due 2019 (the “3.40% Notes”) and $500 million aggregate principal amount of 5.00% senior unsecured notes due 2024 (the “5.00% Notes”). The net proceeds to the Company from the offering were approximately $1,238.7 million, after

AMERICAN TOWER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—Unaudited

deducting commissions and estimated expenses. The Company used a portion of the proceeds to repay outstanding indebtedness under its $2.0 billion senior unsecured revolving credit facility (the “2013 Credit Facility”).

The 3.40% Notes will mature on February 15, 2019 and bear interest at a rate of 3.40% per annum. The 5.00% Notes will mature on February 15, 2024 and bear interest at a rate of 5.00% per annum. Accrued and unpaid interest on the 3.40% Notes and the 5.00% Notes will be payable in U.S. Dollars semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2014. Interest on the 3.40% Notes and the 5.00% Notes will accrue from August 19, 2013 and will be computed on the basis of a 360-day year comprised of 12 30-day months.

The Company may redeem the 3.40% Notes or the 5.00% Notes at any time at a redemption price equal to 100% of the principal amount, plus a make-whole premium, together with accrued interest to the redemption date. If the Company undergoes a change of control and ratings decline, each as defined in the supplemental indenture, the Company may be required to repurchase all of the 3.40% Notes and the 5.00% Notes at a purchase price equal to 101% of the principal amount of the 3.40% Notes and the 5.00% Notes, plus accrued and unpaid interest (including additional interest, if any), up to but not including the repurchase date. The 3.40% Notes and the 5.00% 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.

2011 Credit Facility—On June 28, 2013, the Company terminated the 2011 Credit Facility upon entering into the 2013 Credit Facility. During the nine months ended September 30, 2013, the Company recorded a loss on retirement of long-term obligations in the accompanying condensed consolidated statements of operations of $2.7 million, related to the acceleration of the remaining deferred financing costs associated with the 2011 Credit Facility.

The 2011 Credit Facility had a term of five years and a maturity date of April 8, 2016. The 2011 Credit Facility was terminated prior to maturity at the Company’s option without penalty or premium. The 2011 Credit Facility was undrawn at the time of termination.

2012 Credit Facility—As of September 30, 2013, the Company had $963.0 million outstanding under the 2012 Credit Facility, which was used to fund its acquisition of MIPT on October 1, 2013 (see note 14). The Company also had approximately $7.8 million of undrawn letters of credit. On October 29, 2013, the Company repaid $800 million under the 2012 Credit Facility with net proceeds from the $1.5 billion unsecured term loan entered into on October 29, 2013 (the “2013 Term Loan”) (see note 16) and cash on hand.

The Company continues to maintain the ability to draw down and repay amounts under the 2012 Credit Facility in the ordinary course.

The 2012 Credit Facility has a term of five years and matures on January 31, 2017. The 2012 Credit Facility does not require amortization of principal and may be paid prior to maturity in whole or in part at the Company’s option without penalty or premium. The current margin over LIBOR that the Company incurs on borrowings is 1.625%, which results in an interest rate of 1.81% as of September 30, 2013. The current commitment fee on the undrawn portion of the 2012 Credit Facility is 0.225%.

AMERICAN TOWER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—Unaudited

On September 20, 2013, the Company entered into an amendment agreement with respect to the 2012 Credit Facility, which (i) amended the definition of “Total Debt” to be net of unrestricted domestic cash and cash equivalents and (ii) increased the permitted ratio of Total Debt to Adjusted EBITDA (as defined therein) from 6.00 to 1.00 to 6.50 to 1.00 from September 30, 2013 to September 30, 2014.

2013 Credit Facility—On June 28, 2013, the Company entered into the 2013 Credit Facility, which allowed the Company to borrow up to $1.5 billion, and includes a $1.0 billion sublimit for multicurrency borrowings, a $200.0 million sublimit for letters of credit, a $50.0 million sublimit for swingline loans and an expansion option allowing the Company to request additional commitments of up to $500.0 million, which the Company exercised on September 20, 2013. As a result, the Company may borrow up to $2.0 billion under the 2013 Credit Facility.

The 2013 Credit Facility has a term of five years, matures on June 28, 2018 and includes two one-year renewal periods at the Company’s option. Any outstanding principal and accrued but unpaid interest will be due and payable in full at maturity. The 2013 Credit Facility does not require amortization of principal and may be paid prior to maturity in whole or in part at the Company’s option without penalty or premium.

The Company has the option of choosing either a defined base rate or LIBOR as the applicable base rate for borrowings under the 2013 Credit Facility. The interest rate ranges between 1.125% to 2.000% above LIBOR for LIBOR-based borrowings, or between 0.125% to 1.000% above the defined base rate for base rate borrowings, in each case based upon the Company’s debt ratings. A quarterly commitment fee on the undrawn portion of the 2013 Credit Facility is required, ranging from 0.125% to 0.400% per annum, based upon the Company’s debt ratings. The current margin over LIBOR that the Company incurs on borrowings is 1.250%, which results in an interest rate of 1.43% as of September 30, 2013. The current commitment fee on the undrawn portion of the new credit facility is 0.150%.

The loan agreement 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 would not only prevent the Company from being able to borrow additional funds, but would 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.

On September 20, 2013, the Company entered into an amendment agreement with respect to the 2013 Credit Facility, which (i) amended the definition of “Total Debt” to be net of unrestricted domestic cash and cash equivalents, (ii) increased the permitted ratio of Total Debt to Adjusted EBITDA (as defined therein) from 6.00 to 1.00 to 6.50 to 1.00 from September 30, 2013 to September 30, 2014 and (iii) added an additional expansion feature permitting the Company to request an increase of the commitments under the 2013 Credit Facility from time to time up to an aggregate additional $750.0 million, including in the form of a term loan, from any of the lenders or other eligible lenders that elect to make such increases available, upon the satisfaction of certain conditions.

As of September 30, 2013, the Company had $1,853.0 million outstanding under the 2013 Credit Facility, which was used to fund its acquisition of MIPT on October 1, 2013 (see note 14). The Company also had approximately $2.3 million of undrawn letters of credit. The Company continues to maintain the ability to draw down and repay amounts under the 2013 Credit Facility in the ordinary course.

2012 Term Loan—On June 29, 2012, the Company entered into a $750.0 million unsecured term loan (“2012 Term Loan”). The 2012 Term Loan has a term of five years and matures on June 29, 2017. The interest

AMERICAN TOWER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—Unaudited

rate under the 2012 Term Loan is LIBOR plus 1.750%, or 1.93% as of September 30, 2013. On October 29, 2013, the Company repaid the 2012 Term Loan with net proceeds from the 2013 Term Loan (see note 16).

On September 20, 2013, the Company entered into an amendment agreement with respect to the 2012 Term Loan, which (i) amended the definition of “Total Debt” to be net of unrestricted domestic cash and cash equivalents and (ii) increased the permitted ratio of Total Debt to Adjusted EBITDA (as defined therein) from 6.00 to 1.00 to 6.50 to 1.00 from September 30, 2013 to September 30, 2014.

Short-Term Credit Facility—On September 20, 2013, the Company entered into a $1.0 billion senior unsecured revolving credit facility (the “Short-Term Credit Facility”).

The Short-Term Credit Facility does not require amortization of payments and may be repaid prior to maturity in whole or in part at the Company’s option without penalty or premium. The unutilized portion of the commitments under the Short-Term Credit Facility may be irrevocably reduced or terminated by the Company in whole or in part without penalty. The Short-Term Credit Facility matures on September 19, 2014.

Amounts borrowed under the Short-Term Credit Facility will bear interest, at the Company’s option, at a margin above LIBOR or the defined base rate. For LIBOR based borrowings, interest rates will range from 1.125% to 2.000% above LIBOR. For base rate borrowings, interest rates will range from 0.125% to 1.000% above the defined base rate. In each case, the applicable margin is based upon the Company’s debt ratings. In addition, the loan agreement provides for a quarterly commitment fee on the undrawn portion of the Short-Term Credit Facility ranging from 0.125% to 0.400% per annum, based upon the Company’s debt ratings. The current margin over LIBOR that the Company would incur (should it choose LIBOR) on borrowings is 1.250% and the current commitment fee on the undrawn portion is 0.150%.

The loan agreement contains certain reporting, information, financial and operating covenants and other restrictions (including with respect to its real estate investment trust status, indebtedness, guaranties, mergers and asset sales, liens, dividends, corporate existence and financial reporting obligations) with which the Company must comply. Any failure to comply with the financial and operating covenants would not only prevent the Company from being able to borrow additional funds, but would 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, 2013, the Company had no amounts outstanding under the Short-Term Credit Facility. The Company maintains the ability to draw down and repay amounts under the Short-Term Credit Facility in the ordinary course.

Colombian Bridge Loans—In connection with the acquisition of communications sites from Colombia Movil S.A. E.S.P. (“Colombia Movil”) pursuant to an agreement dated July 17, 2011, one of the Company’s Colombian subsidiaries entered into five Colombian Peso (“COP”) denominated bridge loans for an aggregate principal amount outstanding of 94.0 billion COP (approximately $49.1 million) and an interest rate of 7.99%. On August 6, 2013, one of the Company’s Colombian subsidiaries entered into an additional 14.0 billion COP bridge loan (approximately $7.3 million) with an interest rate of 7.95%. As of September 30, 2013, the aggregate principal amount outstanding under the bridge loans was 108.0 billion COP (approximately $56.4 million) which mature on December 22, 2013.

Indian Working Capital Facility—On April 29, 2013, one of the Company’s Indian subsidiaries (“ATC India”) entered into a working capital facility agreement (the “Indian Working Capital Facility”), which allows ATC India to borrow an amount not to exceed the Indian Rupee equivalent of $10.0 million. Any advances made

AMERICAN TOWER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—Unaudited

pursuant to the Indian Working Capital Facility will be payable on the earlier of demand or six months following the borrowing date and the interest rate will be determined at the time of advance by the bank. As of September 30, 2013, ATC India had not drawn on the facility.

South African Facility—The Company’s South African Facility was executed in November 2011 and generally matures on March 31, 2020. Principal and interest are payable quarterly in arrears with principal due in accordance with the repayment schedule. On September 30, 2013, the Company’s ability to draw on the South African Facility expired. During the nine months ended September 30, 2013, the Company borrowed an additional 116.3 million South African Rand (“ZAR”) (approximately $11.6 million) to increase total borrowings under the South African Facility to 950.6 million ZAR (approximately $94.8 million) as of September 30, 2013.

6. Derivative Financial Instruments

The Company is exposed to certain risks related to its ongoing business operations. The primary risk managed through the use of derivative instruments is interest rate risk. From time to time, the Company enters into interest rate protection agreements to manage exposure to variability in cash flows relating to forecasted interest payments. Under these agreements, the Company is exposed to credit risk to the extent that a counterparty fails to meet the terms of a contract. The Company’s credit risk exposure is limited to the current value of the contract at the time the counterparty fails to perform.

If a derivative is designated as a cash flow hedge, the effective portions of changes in the fair value of the derivative are recorded in accumulated other comprehensive income (loss) and are recognized in the results of operations when the hedged item affects earnings. Ineffective portions of changes in the fair value of cash flow hedges are recognized immediately in the results of operations. For derivative instruments not designated as hedging instruments, changes in fair value are recognized in the results of operations in the period in which the change occurs.

The Company, through certain of its foreign subsidiaries, has entered into interest rate swap agreements to manage its exposure to variability in interest rates on debt in South Africa and Colombia. As of December 31, 2012, the Company had nine interest rate swap agreements outstanding in South Africa and one interest rate swap agreement outstanding in Colombia. During the three months ended September 30, 2013, the Company entered into three additional interest rate swaps agreements in South Africa with an aggregate notional value of 24.6 million ZAR (approximately $2.5 million). As a result, as of September 30, 2013, the Company had 12 interest rate swap agreements outstanding in South Africa with an aggregate notional value of 442.7 million ZAR (approximately $44.1 million), which notional value is reduced in accordance with the repayment schedule under the South African Facility, and one interest rate swap agreement outstanding in Colombia with a notional value of 101.3 billion COP (approximately $52.9 million).

The Company’s South African interest rate swap agreements accrue interest based on Johannesburg Interbank Agreed Rate (“JIBAR”), have been designated as cash flow hedges, have fixed interest rates ranging from 6.09% to 7.83% and expire on March 31, 2020. The Company’s Colombian interest rate swap agreement accrues interest based on the Inter-bank Rate (“IBR”), has been designated as a cash flow hedge, has a fixed interest rate of 5.78% and expires on November 30, 2020.

AMERICAN TOWER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—Unaudited

As of September 30, 2013 and December 31, 2012, the notional amount and fair value of the Company’s interest rate swap agreements (expressed in their respective currency units), which are recorded in Other non-current liabilities, are as follows (in thousands):


	September 30, 2013 (1)		December 31, 2012 (2)
ZAR
Notional		442,655		423,634
Carrying Amount/Fair Value		909		20,441
COP
Notional		101,250,000		101,250,000
Carrying Amount/Fair Value		2,869,430		5,356,377

(1)	The interest rate swap agreements are denominated in ZAR and COP and have an aggregate notional amount and fair value of $97.0 million and $1.6 million, respectively, as of September 30, 2013.

(2)	The interest rate swap agreements are denominated in ZAR and COP and have an aggregate notional amount and fair value of $107.3 million and $5.4 million, respectively, as of December 31, 2012.

During the three months ended September 30, 2013 and 2012, the interest rate swap agreements held by the Company had the following impact on OCI included in the condensed consolidated balance sheets and in the condensed consolidated statements of operations (in thousands):

Three Months Ended September 30, 2013

Amount of Gain/(Loss)

Recognized in OCI on

Derivatives (Effective

Portion)

Location of Gain/(Loss)
Reclassified from
Accumulated OCI into
Income (Effective Portion)

Amount of Gain/(Loss)
Reclassified from
Accumulated OCI into
Income (Effective Portion)

Location of Gain/(Loss)
Recognized in Income on
Derivative (Ineffective
Portion and Amount
Excluded from
Effectiveness Testing)

Gain/(Loss) Recognized in
Income on Derivative
(Ineffective Portion and
Amount Excluded from
Effectiveness Testing)

$(1,404)

Interest expense

(741

)

N/A

Three Months Ended September 30, 2012

Amount of Gain/(Loss)

Recognized in OCI on

Derivatives (Effective

Portion)

Location of Gain/(Loss)
Reclassified from
Accumulated OCI into
Income (Effective Portion)

Amount of Gain/(Loss)
Reclassified from
Accumulated OCI into
Income (Effective Portion)

Location of Gain/(Loss)
Recognized in Income on
Derivative (Ineffective
Portion and Amount
Excluded from
Effectiveness Testing)

Gain/(Loss) Recognized in
Income on Derivative
(Ineffective Portion and
Amount Excluded from
Effectiveness Testing)

$(1,135)

Interest expense

(181

)

N/A

During the nine months ended September 30, 2013 and 2012, the interest rate swap agreements held by the Company had the following impact on OCI included in the condensed consolidated balance sheets and in the condensed consolidated statements of operations (in thousands):

Nine Months Ended September 30, 2013

Amount of Gain/(Loss)

Recognized in OCI on

Derivatives (Effective

Portion)

Location of Gain/(Loss)
Reclassified from
Accumulated OCI into
Income (Effective Portion)

Amount of Gain/(Loss)
Reclassified from
Accumulated OCI into
Income (Effective Portion)

Location of Gain/(Loss)
Recognized in Income on
Derivative (Ineffective
Portion and Amount
Excluded from
Effectiveness Testing)

Gain/(Loss) Recognized in
Income on Derivative
(Ineffective Portion and
Amount Excluded from
Effectiveness Testing)

$1,801

Interest expense

$(2,053)

N/A

Nine Months Ended September 30, 2012

Amount of Gain/(Loss)

Recognized in OCI on

Derivatives (Effective

Portion)

Location of Gain/(Loss)
Reclassified from
Accumulated OCI into
Income (Effective Portion)

Amount of Gain/(Loss)
Reclassified from
Accumulated OCI into
Income (Effective Portion)

Location of Gain/(Loss)
Recognized in Income on
Derivative (Ineffective
Portion and Amount
Excluded from
Effectiveness Testing)

Gain/(Loss) Recognized in
Income on Derivative
(Ineffective Portion and
Amount Excluded from
Effectiveness Testing)

$(2,985)

Interest expense

(502

)

N/A

AMERICAN TOWER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—Unaudited

As of September 30, 2013, approximately $1.4 million related to derivatives designated as cash flow hedges is expected to be reclassified from Accumulated other comprehensive loss into earnings in the next twelve months.

7. 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 is as follows (in thousands):


	September 30, 2013
	Fair Value Measurements Using					Assets/Liabilities at Fair Value
	Level 1	Level 2		Level 3		Assets/Liabilities at Fair Value
Assets:
Short-term investments (1)		$	27,381			$	27,381
Liabilities:
Acquisition-related contingent consideration				$	22,409	$	22,409
Interest rate swap agreements (2)		$	1,589			$	1,589


	December 31, 2012
	Fair Value Measurements Using						Assets/Liabilities at Fair Value
	Level 1		Level 2		Level 3		Assets/Liabilities at Fair Value
Assets:
Short-term investments (1)	$	6,018					$	6,018
Liabilities:
Acquisition-related contingent consideration					$	23,711	$	23,711
Interest rate swap agreements (2)			$	5,442			$	5,442

(1)	Consists of highly liquid investments with original maturities in excess of three months.

(2)	Consists of interest rate swap agreements based on JIBAR and IBR whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from, or corroborated by, observable market data.

Cash and cash equivalents include short-term investments, including money market funds, with original maturities of three months or less whose fair value approximated cost at September 30, 2013 and December 31, 2012.

The fair value of the Company’s interest rate swap agreements recorded as net liabilities is included in Other non-current liabilities in the accompanying condensed consolidated balance sheets. Fair valuations of the

AMERICAN TOWER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—Unaudited

Company’s interest rate swap agreements reflect the value of the instrument including the values associated with counterparty risk and the Company’s own credit standing. The Company includes in the valuation of the derivative instrument the value of the net credit differential between the counterparties to the derivative contract.

The Company may be required to pay additional consideration under certain agreements for the acquisition of communications sites in Colombia and Ghana if certain barter agreements with other wireless carriers are converted to cash-paying master lease agreements (see note 14).

Acquisition-related contingent consideration is initially measured and recorded at fair value as an element of consideration paid in connection with an acquisition with subsequent adjustments recognized in Other operating expenses in the condensed consolidated statements of operations. The Company determines the fair value of acquisition-related contingent consideration, and any subsequent changes in fair value using a discounted probability-weighted approach. This approach takes into consideration Level 3 unobservable inputs including probability assessments of expected future cash flows over the period in which the obligation is expected to be settled and applies a discount factor that captures the uncertainties associated with the obligation. Changes in these unobservable inputs could significantly impact the fair value of the liabilities recorded in the accompanying condensed consolidated balance sheets and operating expenses in the condensed consolidated statements of operations.

As of September 30, 2013, the Company estimates that the value of all potential acquisition-related contingent consideration required payments to be between zero and $37.8 million. During the three months ended September 30, 2013 and 2012, the fair value of the contingent consideration changed as follows (in thousands):


	2013			2012
Balance as of July 1	$	21,218		$	29,897
Additions		3,599			1,180
Payments		(3,729	)		(3,951	)
Change in fair value		1,303			325
Foreign currency translation adjustment		18			(242	)

Balance as of September 30	$	22,409		$	27,209

During the nine months ended September 30, 2013 and 2012, the fair value of the contingent consideration changed as follows (in thousands):


	2013			2012
Balance as of January 1	$	23,711		$	25,617
Additions		4,087			1,533
Payments		(7,952	)		(4,397	)
Change in fair value		4,610			3,791
Foreign currency translation adjustment		(2,047	)		665

Balance as of September 30	$	22,409		$	27,209

Items Measured at Fair Value on a Nonrecurring Basis—During the nine months ended September 30, 2013, certain long-lived assets held and used were written down to their net realizable value of $4.0 billion, resulting in an asset impairment charge of $2.0 million, which was recorded in Other operating expenses in the accompanying condensed consolidated statements of operations. During the nine months ended September 30, 2012, certain long-lived assets held and used with a carrying value of $299.9 million were written down to their

AMERICAN TOWER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—Unaudited

net realizable value of $289.2 million, resulting in an asset impairment charge of $10.7 million, which was recorded in Other operating expenses in the accompanying condensed consolidated statements of operations. These adjustments were determined by comparing the estimated proceeds from sale of assets or the projected future discounted cash flows to be provided from the long-lived assets (calculated using Level 3 inputs) to the asset’s carrying value when indications of impairment exist. There were no other items measured at fair value on a nonrecurring basis during the nine months ended September 30, 2013.

Fair Value of Financial Instruments—The carrying value of the Company’s financial instruments, with the exception of long-term obligations, including the current portion, reasonably approximate the related fair value as of September 30, 2013 and December 31, 2012. 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 was estimated using a discounted cash flow analysis using rates for debt with similar terms and maturities. As of September 30, 2013, the carrying value and fair value of long-term obligations, including the current portion, were $12.6 billion and $12.7 billion, respectively, of which $8.4 billion was measured using Level 1 inputs and $4.3 billion was measured using Level 2 inputs. As of December 31, 2012, the carrying value and fair value of long-term obligations, including the current portion, were $8.8 billion and $9.4 billion, respectively, of which $4.9 billion was measured using Level 1 inputs and $4.5 billion was measured using Level 2 inputs.

8. Accumulated Other Comprehensive Loss

The changes in Accumulated other comprehensive loss for the three months ended September 30, 2013 are as follows (in thousands):


	Unrealized Losses on Cash Flow Hedges (1)			Deferred Loss on the Settlement of the Treasury Rate Lock			Foreign Currency Items			Total
Balance as of July 1, 2013	$	(1,182	)	$	(3,427	)	$	(269,647	)	$	(274,256	)
Other comprehensive loss before reclassifications, net of tax		(1,289	)		—			(23,114	)		(24,403	)
Amounts reclassified from accumulated other comprehensive loss, net of tax		445			199			—			644

Net current-period other comprehensive income (loss)		(844	)		199			(23,114	)		(23,759	)

Balance as of September 30, 2013	$	(2,026	)	$	(3,228	)	$	(292,761	)	$	(298,015	)

(1)	Losses on cash flow hedges have been reclassified into interest expense in the accompanying condensed consolidated statements of operations. The tax effect of less than $0.1 million is included in income tax expense for the three months ended September 30, 2013.

AMERICAN TOWER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—Unaudited

The changes in Accumulated other comprehensive loss for the nine months ended September 30, 2013 are as follows (in thousands):


	Unrealized Losses on Cash Flow Hedges (1)			Deferred Loss on the Settlement of the Treasury Rate Lock			Foreign Currency Items			Total
Balance as of January 1, 2013	$	(4,358	)	$	(3,827	)	$	(175,162	)	$	(183,347	)
Other comprehensive loss before reclassifications, net of tax		1,167			—			(117,599	)		(116,432	)
Amounts reclassified from accumulated other comprehensive loss, net of tax		1,165			599			—			1,764

Net current-period other comprehensive income (loss)		2,332			599			(117,599	)		(114,668	)

Balance as of September 30, 2013	$	(2,026	)	$	(3,228	)	$	(292,761	)	$	(298,015	)

(1)	Losses on cash flow hedges have been reclassified into interest expense in the accompanying condensed consolidated statements of operations. The tax effect of $0.1 million is included in income tax expense for the nine months ended September 30, 2013.

9. Income Taxes

The Company provides for income taxes at the end of each interim period based on the estimated effective tax rate for the full fiscal year. Cumulative adjustments to the Company’s estimate are recorded in the interim period in which a change in the estimated annual effective tax rate is determined. As described in note 1, the Company reorganized to qualify as a REIT for the taxable year commencing January 1, 2012. As a REIT, the Company will continue to be subject to income taxes on the income of its TRSs, and taxation in foreign jurisdictions where it conducts international operations. Under the provisions of the Internal Revenue Code of 1986, as amended, (the “Code”) the Company may deduct amounts distributed to stockholders against the income generated in its QRSs. Additionally, the Company is able to offset income in both its TRSs and QRSs by utilizing their respective net operating losses.

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 of September 30, 2013 and December 31, 2012, the total amount of unrecognized tax benefits that would impact the effective tax rate, if recognized, was approximately $31.2 million and $30.6 million, respectively. The increase in the amount of unrecognized tax benefits during the three and nine months ended September 30, 2013 is primarily attributable to the additions to the Company’s existing tax positions partially offset by fluctuations in foreign currency exchange rates and the closure of certain tax years. 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 timeframe, as described in note 13 to the Company’s consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2012. The impact of the amount of such changes to previously recorded uncertain tax positions could range from zero to $1.3 million.

The Company recorded penalties and income tax-related interest expense during the three and nine months ended September 30, 2013 of $0.9 million and $3.5 million, respectively, and during the three and nine months ended September 30, 2012 of $1.3 million and $3.9 million, respectively. In addition, due to the expiration of the

AMERICAN TOWER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—Unaudited

statute of limitations in certain jurisdictions, the Company reduced its liability for penalties and income tax-related interest expense related to uncertain tax positions during the three and nine months ended September 30, 2013 by $0.8 million and $1.4 million, respectively. As of September 30, 2013 and December 31, 2012, the total amount of accrued penalties and income tax-related interest included in Other non-current liabilities in the condensed consolidated balance sheets was $29.8 million and $28.7 million, respectively.

In September 2013, the Internal Revenue Service released final Tangible Property Regulations (the “Final Regulations”). The Final Regulations provide guidance on applying Section 263(a) of the Code to amounts paid to acquire, produce or improve tangible property, as well as rules for materials and supplies (Code Section 162). These regulations contain certain changes from the temporary and proposed tangible property regulations that were issued on December 27, 2011. The Final Regulations are generally effective for taxable years beginning on or after January 1, 2014. In addition, taxpayers are permitted to early adopt the Final Regulations for taxable years beginning on or after January 1, 2012. The Company does not expect the Final Regulations to have a material effect on its results of operations. The Company is currently evaluating the impact on its financial condition.

10. Stock-Based Compensation

The Company recognized stock-based compensation expense during the three and nine months ended September 30, 2013 of $15.1 million and $53.2 million, respectively, and stock-based compensation expense during the three and nine months ended September 30, 2012 of $13.1 million and $39.7 million, respectively. Stock-based compensation expense for the nine months ended September 30, 2013 included $1.1 million related to the modification of the vesting and exercise terms for certain employees’ equity awards. The Company capitalized $0.4 million and $1.2 million of stock-based compensation expense as property and equipment during the three and nine months ended September 30, 2013, respectively, and capitalized $0.5 million and $1.6 million of stock-based compensation expense as property and equipment during the three and nine months ended September 30, 2012, respectively.

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 (“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 over various periods, generally four years, and stock options generally expire ten years from the date of grant. As of September 30, 2013, the Company had the ability to grant stock-based awards with respect to an aggregate of 16.6 million shares of common stock under the 2007 Plan.

Effective January 1, 2013, the Company’s Compensation Committee adopted a death, disability and retirement benefits program in connection with equity awards that provides for accelerated vesting and extended exercise periods of stock options and restricted stock units granted on or after January 1, 2013 upon an employee’s death or permanent disability, or upon an employee’s qualified retirement, provided certain eligibility criteria are met. Accordingly, for grants made after January 1, 2013, the Company recognizes compensation expense for all stock-based compensation over the shorter of (i) the four-year vesting period or (ii) the period from the date of grant to the date the employee becomes eligible for such retirement benefits, which may occur upon grant. Due to the accelerated recognition of stock-based compensation expense related to awards granted to retirement eligible employees, the Company recognized an additional $7.5 million of stock-based compensation expense during the nine months ended September 30, 2013.

AMERICAN TOWER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—Unaudited

Stock Options—The Company’s option activity for the nine months ended September 30, 2013 is as follows:


	Number of Options
Outstanding as of January 1, 2013		5,829,945
Granted		1,420,206
Exercised		(799,233	)
Forfeited		(53,245	)
Expired		—

Outstanding as of September 30, 2013		6,397,673

The Company estimates the fair value of each option grant on the date of grant using the Black-Scholes pricing model. The following assumptions were used to determine the grant date fair value for options granted during the nine months ended September 30, 2013:


Range of risk-free interest rate		0.75% - 1.03%
Weighted average risk-free interest rate		0.90%
Expected life of option grants		4.4 years
Range of expected volatility of underlying stock price		26.60% - 36.09%
Weighted average expected volatility of underlying stock price		33.56%
Expected annual dividend yield		1.50%

The weighted average grant date fair value per share during the nine months ended September 30, 2013 was $19.15. As of September 30, 2013, total unrecognized compensation expense related to unvested stock options was $39.3 million and is expected to be recognized over a weighted average period of approximately two years.

Restricted Stock Units—The Company’s restricted stock unit activity during the nine months ended September 30, 2013 is as follows:


	Number of Units
Outstanding as of January 1, 2013		1,968,553
Granted		803,561
Vested		(806,868	)
Forfeited		(106,658	)

Outstanding as of September 30, 2013		1,858,588

As of September 30, 2013, total unrecognized compensation expense related to unvested restricted stock units granted under the 2007 Plan was $86.7 million and is expected to be recognized over a weighted average period of approximately two years. Distributions accrue with each unvested restricted stock unit award granted subsequent to January 1, 2012, which are payable upon vesting.

Employee Stock Purchase Plan—The Company maintains an employee stock purchase plan (the “ESPP”) for all eligible employees as described in note 14 to the Company’s consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2012. Under the ESPP, shares of the Company’s common stock may be purchased on the last day of each bi-annual offering period at 85% of the lower of the fair market value on the first or the last day of such offering period. The offering periods run from

AMERICAN TOWER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—Unaudited

June 1 through November 30 and from December 1 through May 31 of each year. During the nine months ended September 30, 2013, employee contributions were accumulated to purchase an estimated 57,000 shares under the ESPP.

Key assumptions used to apply the Black-Scholes pricing model for shares purchased through the ESPP during the nine months ended September 30, 2013, which resulted in a fair value per share of $13.41, are as follows:


Approximate risk-free interest rate		0.07% - 0.13%
Expected life of shares		6 months
Expected volatility of underlying stock price over the option period		12.21% - 13.57%
Expected annual dividend yield		1.50%

11. Equity

Stock Repurchase Program—In March 2011, the Board of Directors approved a stock repurchase program, pursuant to which the Company is authorized to purchase up to $1.5 billion of its common stock (“2011 Buyback”).

During the nine months ended September 30, 2013, the Company repurchased 1,938,021 shares of its common stock for an aggregate of $145.0 million, including commissions and fees, pursuant to the 2011 Buyback. On September 6, 2013, the Company temporarily suspended repurchases following the signing of its agreement to acquire MIPT.

As of September 30, 2013, the Company had repurchased a total of approximately 6.3 million shares of its common stock under the 2011 Buyback for an aggregate of $389.0 million, including commissions and fees.

Under the 2011 Buyback, the Company is authorized to purchase shares from time to time through open market purchases or privately negotiated transactions at prevailing prices in accordance with securities laws and other legal requirements, and subject to market conditions and other factors. To facilitate repurchases, the Company makes purchases pursuant to trading plans under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, which allows the Company to repurchase shares during periods when it otherwise might be prevented from doing so under insider trading laws or because of self-imposed trading blackout periods.

The Company continues to manage the pacing of the remaining $1.1 billion under the 2011 Buyback in response to general market conditions and other relevant factors. The Company expects to fund any further repurchases of its common stock through a combination of cash on hand, cash generated by operations and borrowings under its credit facilities. Purchases under the 2011 Buyback are subject to the Company having available cash to fund repurchases.

Distributions—During the nine months ended September 30, 2013, the Company declared the following regular cash distributions to its stockholders:


Declaration Date	Payment Date	Record Date	Distribution per share	Aggregate Payment Amount (in millions)
March 12, 2013	April 25, 2013	April 10, 2013	$0.26	$102.8
May 22, 2013	July 16, 2013	June 17, 2013	$0.27	$106.7
September 12, 2013	October 7, 2013	September 23, 2013	$0.28	$110.5

AMERICAN TOWER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—Unaudited

The Company accrues distributions on unvested restricted stock unit awards granted subsequent to January 1, 2012, which are payable upon vesting. As of September 30, 2013, the Company had accrued $1.6 million of distributions payable related to unvested restricted stock units. During the nine months ended September 30, 2013, the Company paid $0.2 million of distributions payable upon the vesting of restricted stock units.

To maintain its REIT status, the Company expects to continue paying regular distributions, the amount, timing and frequency of which will be determined and be subject to adjustment by the Company’s Board of Directors.

12. Earnings Per Common Share

Basic income from continuing operations per common share represents income from continuing operations attributable to American Tower Corporation divided by the weighted average number of common shares outstanding during the period. Diluted income from continuing operations per common share represents income from continuing operations attributable to American Tower Corporation divided by the weighted average number of common shares outstanding during the period and any dilutive common share equivalents, including unvested restricted stock and shares issuable upon exercise of stock options as determined under the treasury stock method. Dilutive common share equivalents also include the dilutive impact of the Verizon transaction (see note 13).

The following table sets forth basic and diluted income from continuing operations per common share computational data for the three and nine months ended September 30, 2013 and 2012 (in thousands, except per share data):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Income from continuing operations attributable to American Tower Corporation	$	180,123	$	232,089	$	451,351	$	501,604

Basic weighted average common shares outstanding		394,759		395,244		395,138		394,626
Dilutive securities		3,589		4,243		4,137		4,458

Diluted weighted average common shares outstanding		398,348		399,487		399,275		399,084

Basic income from continuing operations attributable to American Tower Corporation per common share	$	0.46	$	0.59	$	1.14	$	1.27

Diluted income from continuing operations attributable to American Tower Corporation per common share	$	0.45	$	0.58	$	1.13	$	1.26

For the three and nine months ended September 30, 2013, the diluted weighted average number of common shares outstanding excluded shares issuable upon exercise of the Company’s stock options and stock-based awards of 2.5 million and 1.1 million, respectively, as the effect would be anti-dilutive. For the three and nine months ended September 30, 2012, the diluted weighted average number of common shares outstanding excluded shares issuable upon exercise of the Company’s stock options and stock-based awards of 1.2 million and 1.0 million, respectively, as the effect would be anti-dilutive.

AMERICAN TOWER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—Unaudited

13. 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, other than the legal proceedings discussed below, 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.

TriStar Litigation—The Company is involved in several lawsuits against TriStar Investors LLP and its affiliates (“TriStar”) in various states regarding single tower sites where TriStar has taken land interests under the Company’s owned or managed sites and the Company believes TriStar has induced the landowner to breach obligations to the Company. In addition, on February 16, 2012, TriStar brought a federal action against the Company in the United States District Court for the Northern District of Texas, in which TriStar principally alleges that the Company made misrepresentations to landowners when competing with TriStar for land under the Company’s owned or managed sites. On January 22, 2013, the Company filed an amended answer and counterclaim against TriStar and certain of its employees, denying Tristar’s claims and asserting that TriStar has engaged in a pattern of unlawful activity, including: (i) entering into agreements not to compete for land under certain towers; and (ii) making widespread misrepresentations to landowners regarding both TriStar and the Company. TriStar and the Company are seeking injunctive relief that would prohibit the other party from making certain statements when interacting with landowners, as well as damages.

Commitments

AT&T Transaction—The Company has an agreement with SBC Communications Inc., a predecessor entity to AT&T Inc. (“AT&T”), for the lease or sublease of approximately 2,450 towers from AT&T commencing between December 2000 and August 2004. Substantially all of the towers are part of the Securitization. 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 sublease for that site plus the fair market value of certain alterations made to the related tower by AT&T. The aggregate purchase option price for the towers leased and subleased was approximately $585.3 million as of September 30, 2013, and will accrete at a rate of 10% per year to 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 Consumer Price Index.

Verizon Transaction—In December 2000, the Company entered into an agreement with ALLTEL, a predecessor entity to Verizon Wireless (“Verizon”), to acquire towers through a 15-year sublease agreement. Pursuant to the agreement, as amended, with Verizon, the Company acquired rights to a total of 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, which will occur in tranches between April 2016 and March 2017 based on the original closing date for such tranche of towers. The purchase price per tower as of the original closing date was $27,500 and will accrete at a rate of 3% per annum through the expiration of the applicable sublease. The aggregate purchase option price for the subleased towers was approximately $70.7 million as of September 30, 2013. At Verizon’s option, at the expiration of the sublease, the purchase price would be payable in cash or with 769 shares of the Company’s common stock per tower, which at September 30, 2013 would be valued at approximately $101.2 million.

AMERICAN TOWER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—Unaudited

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. During the nine months ended September 30, 2013, the Company received notices from the Indian tax authorities of their intent to challenge the transfer pricing related to taxes arising out of transactions of Essar Telecom Infrastructure Private Limited (“ETIPL”) in 2008, prior to the Company’s acquisition of ETIPL in August 2010. Pursuant to the Company’s definitive acquisition agreement, the seller is obligated to indemnify and defend the Company with respect to any tax-related liability that may arise from activities prior to March 31, 2010. Since no formal assessment has been issued and the Company believes ETIPL’s tax position will be sustained, the Company has not accounted for any potential impact of this notification.

14. Acquisitions

All of the acquisitions described below are being accounted for as business combinations and are consistent with the Company’s strategy to expand in selected geographic areas.

The estimates of the fair value of the assets acquired and liabilities assumed at the date of the applicable acquisition are subject to adjustment during the measurement period (up to one year from the particular acquisition date). The primary areas of the preliminary purchase price allocations that are not yet finalized relate to the fair value of certain tangible and intangible assets acquired and liabilities assumed, including contingent consideration, and residual goodwill and any related tax impact. The fair values of these net assets acquired are based on management’s estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. During the measurement period, the Company will adjust assets and/or liabilities if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the revised estimated values of those assets and/or liabilities as of that date. The effect of measurement period adjustments to the estimated fair values is reflected as if the adjustments had been completed on the acquisition date. The impact of all changes that do not qualify as measurement period adjustments are included in current period earnings. If the actual results differ from the estimates and judgments used in these fair values, the amounts recorded in the condensed consolidated financial statements could be subject to a possible impairment of the intangible assets and/or goodwill, or require acceleration of the amortization expense of intangible assets in subsequent periods. During the nine months ended September 30, 2013, the Company made certain purchase accounting measurement period adjustments related to several acquisitions and therefore retrospectively adjusted the fair value of the assets acquired and liabilities assumed in the condensed consolidated balance sheet as of December 31, 2012.

Impact of current year acquisitions—The Company typically acquires communications sites from wireless carriers or other tower operators and subsequently integrates those sites into its existing portfolio of communications sites. The financial results of the Company’s acquisitions have been included in the Company’s condensed consolidated statements of operations for the nine months ended September 30, 2013 from the date of respective acquisition. The date of acquisition, and by extension the point at which the Company begins to recognize the results of an acquisition may be dependent upon, among other things, the receipt of contractual consents, the commencement and extent of leasing arrangements and the timing of the transfer of title or rights to the assets, which may be accomplished in phases. For sites acquired from communication service providers, these sites may never have been operated as a business and were utilized solely by the seller as a component of their network infrastructure. An acquisition, depending on its size and nature, may or may not involve the transfer of business operations or employees.

AMERICAN TOWER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—Unaudited

The Company expenses acquisition and merger related costs in the period in which they are incurred and services are received. Acquisition and merger related costs may include finder’s fees, advisory, legal, accounting, valuation and other professional or consulting fees and general administrative costs, and are included in Other operating expenses. During the three and nine months ended September 30, 2013, the Company recognized acquisition and merger related expenses of $8.9 million and $25.8 million, respectively. During the three and nine months ended September 30, 2012, the Company recognized acquisition and merger related expenses of $5.2 million and $14.8 million, respectively.

2013 Acquisitions

Mexico Axtel Acquisition—On January 23, 2013, the Company entered into a definitive agreement to purchase communications sites from Axtel, S.A.B. de C.V. (“Axtel”). Pursuant to the definitive agreement, on January 31, 2013, the Company acquired 883 communications sites from Axtel for an aggregate purchase price of $248.5 million, subject to post-closing adjustments and value added tax.

Other International Acquisitions—During the nine months ended September 30, 2013, the Company acquired a total of 644 additional communications sites and equipment in the Company’s international markets, including Brazil, Colombia, Ghana, Mexico, and South Africa, for an aggregate purchase price of $80.5 million (including contingent consideration of $4.1 million and value added tax of $3.7 million), subject to post-closing adjustments.

Other U.S. Acquisitions—During the nine months ended September 30, 2013, the Company acquired a total of 41 additional communications sites and equipment, as well as 19 property interests, in the United States for an aggregate purchase price of $52.7 million, including cash paid of approximately $52.3 million and net liabilities assumed of approximately $0.4 million, subject to post-closing adjustments.

The following table summarizes the preliminary allocation of the aggregate purchase price paid and the amounts of assets acquired and liabilities assumed for the fiscal year 2013 acquisitions based upon their estimated fair value at the date of acquisition (in thousands). Balances are reflected in the accompanying condensed consolidated balance sheets as of September 30, 2013.


	Mexico Axtel			Other International			Other U.S.
Current assets	$	—		$	3,688		$	1,433
Non-current assets		4,032			1,835			44
Property and equipment		86,100			39,693			17,493
Intangible assets (1):
Customer-related intangible assets		115,700			18,401			24,296
Network location intangible assets		41,700			19,984			5,605
Current liabilities		—			—			(440	)
Other non-current liabilities		(9,377	)		(7,653	)		(786	)

Fair value of net assets acquired	$	238,155		$	75,948		$	47,645

Goodwill (2)		10,368			4,565			4,698

(1)	Customer-related intangible assets and network location intangible assets are amortized on a straight-line basis over periods of up to 20 years.

(2)	Goodwill was allocated to the Company’s domestic and international rental and management segments, as applicable, and the Company expects goodwill recorded will be deductible for tax purposes, except for South Africa where goodwill is expected to be partially deductible.

AMERICAN TOWER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—Unaudited

2012 Acquisitions

Brazil-Vivo Acquisition—On March 30, 2012, the Company entered into a definitive agreement to purchase up to 1,500 communications sites from Vivo S.A. (“Vivo”). Pursuant to the agreement, on March 30, 2012, the Company purchased 800 communications sites for an aggregate purchase price of $151.7 million. On June 30, 2012, the Company purchased the remaining 700 communications sites for an aggregate purchase price of $126.3 million, subject to post-closing adjustments. In addition, the Company and Vivo amended the asset purchase agreement to allow for the acquisition of up to an additional 300 communications sites by the Company, subject to regulatory approval. On August 31, 2012, the Company purchased an additional 192 communications sites from Vivo for an aggregate purchase price of $32.7 million, subject to post-closing adjustments.

Diamond Acquisition (United States)—On December 28, 2012, the Company acquired Diamond Communications Trust and its subsidiary New Towers LLC, which held a portfolio of 316 communications sites and 24 property interests under third-party communications sites, for an aggregate purchase price of $322.5 million, including cash paid of $320.1 million and net liabilities assumed of $2.4 million.

Germany Acquisition—On November 14, 2012, the Company entered into a definitive agreement to purchase communications sites from E-Plus Mobilfunk GmbH & Co. KG (“E-Plus”). On December 4, 2012, the Company completed the purchase of 2,031 communications sites from E-Plus, for an aggregate purchase price of $525.7 million.

Skyway Acquisition (United States)—On December 20, 2012, the Company acquired an entity holding a portfolio of 318 communications sites from Skyway Towers Holdings, LLC (“Skyway”) for an aggregate purchase price of $169.6 million, including cash paid of approximately $169.5 million and net liabilities assumed of approximately $0.1 million. The aggregate purchase price was subsequently decreased to $166.3 million, including cash paid of approximately $166.2 million and net liabilities assumed of approximately $0.1 million, primarily due to the return of 11 communications sites to Skyway pursuant to the terms of the purchase agreement.

Uganda Acquisition—On December 8, 2011, the Company entered into a definitive agreement with MTN Group Limited (“MTN Group”) to establish a joint venture in Uganda. The joint venture is 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. The joint venture owns a tower operations company in Uganda and is managed and controlled by the Company.

Pursuant to the agreement, the joint venture agreed to purchase a total of up to 1,000 existing communications sites from MTN Group’s operating subsidiary in Uganda, subject to customary closing conditions. On June 29, 2012, the joint venture acquired 962 communications sites for an aggregate purchase price of $171.5 million, subject to post-closing adjustments. As a result of post-closing adjustments, the aggregate purchase price was adjusted from $171.5 million to $173.2 million during the year ended December 31, 2012, and further adjusted to $169.2 million during the nine months ended September 30, 2013.

On August 15, 2013, the Company returned seven communications sites to MTN Group pursuant to the terms of the agreement.

Other International Acquisitions—During the year ended December 31, 2012, the Company acquired a total of 705 additional communications sites and equipment in the Company’s international markets, including Mexico and South Africa, for an aggregate purchase price of $162.7 million (including value added tax of $21.9 million), subject to post-closing adjustments.

AMERICAN TOWER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—Unaudited

Other United States Acquisitions—During the year ended December 31, 2012, the Company acquired a total of 128 additional communications sites and equipment in the United States for an aggregate purchase price of $146.2 million, subject to post-closing adjustments. The purchase price was subsequently reduced to $146.1 million during nine months ended September 30, 2013.

The following table summarizes the updated allocation of the aggregate purchase price paid and the amounts of assets acquired and liabilities assumed based upon their estimated fair value at the date of acquisition (in thousands). Balances are reflected in the accompanying condensed consolidated balance sheets as of September 30, 2013.


	Brazil Vivo (1)			Diamond (U.S.)			Germany			Skyway (U.S.)			Uganda (1)			Other International			Other U.S.
Current assets	$	—		$	842		$	14,043		$	740		$	—		$	21,911		$	—
Non-current assets		22,418			—			—			—			2,258			2,309			153
Property and equipment		138,959			72,447			203,494			58,913			102,366			66,073			61,091
Intangible assets (2):
Customer-related intangible assets		83,012			184,200			288,330			64,400			30,500			52,911			61,266
Network location intangible assets		40,983			32,000			21,997			20,500			26,000			15,935			16,133
Current liabilities		—			(3,216	)		(2,988	)		(454	)		—			—			—
Other non-current liabilities		(18,195	)		(3,423	)		(23,243	)		(3,222	)		(7,528	)		(6,294	)		(1,310	)

Fair value of net assets acquired	$	267,177		$	282,850		$	501,633		$	140,877		$	153,596		$	152,845		$	137,333

Goodwill (3)		43,518			37,276			24,020			25,308			15,644			9,844			8,724

(1)	The allocation of the purchase price was finalized during the nine months ended September 30, 2013.

(2)	Customer-related intangible assets and network location intangible assets are amortized on a straight-line basis over periods of up to 20 years.

(3)

Goodwill was allocated to the Company’s domestic and international rental and management segments, as applicable, and the Company expects goodwill recorded will be deductible for tax purposes, except for Uganda where goodwill is not expected to be deductible and South Africa where goodwill is expected to be partially deductible.

AMERICAN TOWER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—Unaudited

The following table summarizes the preliminary allocation of the aggregate purchase price paid and the amounts of assets acquired and liabilities assumed based upon their estimated fair value at the date of acquisition (in thousands). Balances are reflected in the consolidated balance sheets in the Annual Report on Form 10-K for the year ended December 31, 2012.


	Brazil Vivo			Diamond (U.S.)			Germany			Skyway (U.S.)			Uganda			Other International			Other U.S.
Current assets	$	—		$	842		$	14,483		$	740		$	—		$	21,911		$	—
Non-current assets		24,460			—			—			—			2,258			4,196			153
Property and equipment		138,959			69,045			233,073			60,671			102,366			61,080			61,995
Intangible assets (1):
Customer-related intangible assets		80,010			171,300			218,146			63,000			36,500			49,227			61,966
Network location intangible assets		37,980			28,400			20,819			20,700			27,000			16,442			16,233
Current liabilities		—			(3,216	)		(2,990	)		(454	)		—			—			—
Other non-current liabilities		(18,195	)		(3,423	)		(23,243	)		(3,333	)		(7,528	)		(5,893	)		(1,310	)

Fair value of net assets acquired	$	263,214		$	262,948		$	460,288		$	141,324		$	160,596		$	146,963		$	139,037

Goodwill (2)		47,481			57,178			65,365			28,224			12,564			15,726			7,124

(1)	Customer-related intangible assets and network location intangible assets are amortized on a straight-line basis over periods of up to 20 years.

(2)

Contingent Consideration

The Company may be required to pay additional consideration under certain agreements related to acquisitions in Colombia and Ghana if certain barter agreements with other wireless carriers are converted to cash-paying master lease agreements.

Colombia—Under the terms of the agreement with Colombia Movil, the Company is required to make additional payments upon the conversion of certain barter agreements with other wireless carriers to cash paying lease agreements. Based on current estimates, the Company expected the value of potential contingent consideration payments required to be made under the amended agreement to be between zero and $36.9 million and estimated it to be $21.5 million using a probability weighted average of the expected outcomes at September 30, 2013. During the three and nine months ended September 30, 2013, the Company recorded additional contingent consideration of $3.6 million and $4.1 million, respectively, related to acquisitions during the period. In addition, during the three and nine months ended September 30, 2013, the Company recorded an increase in fair value of $0.5 million and $1.5 million, respectively, in Other operating expenses in the accompanying condensed consolidated statements of operations.

South Africa—Under the terms of the agreement with Cell C (Pty) Limited (“Cell C”) dated November 4, 2010, pursuant to which the Company agreed to purchase up to 1,400 existing communications sites and additional communications sites in South Africa, the Company was required to make periodic payments for each collocation of a specific wireless carrier installed on the acquired communications sites occurring within a four-year period after the initial closing date. During the three months ended September 30, 2013, the Company

AMERICAN TOWER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—Unaudited

amended its agreement with Cell C whereby the Company made a one-time payment of $2.5 million, which satisfied its remaining contingent consideration obligations. During the three months ended September 30, 2013, no further adjustments to the fair value of the contingent consideration were required. During the nine months ended September 30, 2013, the Company recorded a net increase in fair value of $3.4 million in Other operating expenses in the accompanying condensed consolidated statements of operations.

Other—Certain agreements in Brazil, Ghana and the United States include provisions that provide for contingent consideration.

During the three and nine months ended September 30, 2013, the Company recorded an increase in fair value of $0.8 million and a net decrease in fair value of $0.3 million, respectively, related to the contingent consideration liability for the acquisitions of communications sites in Brazil, Ghana and the United States. The change in fair value was recorded in Other operating expenses in the accompanying condensed consolidated statements of operations.

During the three months ended September 30, 2013, the Company paid an additional $1.0 million and satisfied the remaining obligation associated with the acquisition in Brazil. In addition, during the nine months ended September 30, 2013, the Company reduced the obligation associated with the acquisition in the United States to zero. The Company recorded an increase in the fair value of the contingent consideration liability as a result of the conversion of certain barter agreements in Ghana to cash-paying master lease agreements. Based on current estimates, the Company expects the value of potential contingent consideration payments required to be made under the agreement to be between zero and $0.9 million and estimated it to be $0.9 million using a probability weighted average of the expected outcomes at September 30, 2013.

For more information regarding contingent consideration, see note 7 to the accompanying condensed consolidated financial statements.

Other Signed Acquisitions

NII Holdings Acquisition—On August 8, 2013, the Company entered into an agreement with NII Holdings, Inc. to acquire up to 2,790 communications sites in Brazil and 1,666 communications sites in Mexico in two separate transactions, for approximately 945 million Brazilian Reais (“BRL”) (approximately $423.8 million) and 5,025 million Mexican Pesos (approximately $382.3 million), respectively. The Company paid $120.0 million into escrow for this transaction which is reflected in Prepaid and other current assets in the condensed consolidated balance sheets as of September 30, 2013.

Brazil-Z Sites Acquisition—On September 26, 2013, the Company entered into an agreement with Z-Sites Locação de Imóveis Ltda. to acquire up to 236 communications sites in Brazil for an aggregate purchase price of up to approximately 283 million BRL (approximately $127.1 million).

Subsequently Closed Acquisition

MIPT Acquisition—On October 1, 2013, the Company, through its wholly-owned subsidiary American Tower Investments LLC, acquired 100% of the outstanding common membership interests of MIPT, a private REIT, which is the parent company of Global Tower Partners, and related companies, for a total purchase price of approximately $4.8 billion, subject to customary post-closing purchase price adjustments.

The purchase price was satisfied with approximately $3.3 billion in cash, including an aggregate of approximately $2.8 billion from borrowings under the 2012 Credit Facility and the 2013 Credit Facility, and the assumption of approximately $1.5 billion of MIPT’s existing indebtedness. MIPT’s existing indebtedness

AMERICAN TOWER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—Unaudited

included $1.49 billion of securitized indebtedness under eleven separate classes of Secured Tower Revenue Notes and $32.6 million of secured debt in Costa Rica.

The following table reflects the preliminary allocation of the aggregate purchase price paid and the amounts of assets acquired and liabilities assumed for MIPT based upon the estimated fair value at the date of acquisition. The primary areas of the preliminary purchase price allocations that are not yet finalized relate to the fair value of property and equipment, intangible assets and goodwill. The valuations consist of a discounted cash flow analysis or other appropriate valuation techniques to determine the fair value of the assets acquired and liabilities assumed.


	MIPT
Current assets	$	104,044
Non-current assets		627
Property, equipment and easements		1,290,143
Intangible assets (1):
Customer-related intangible assets		2,536,700
Network location intangible assets		338,600
Current liabilities		(88,497	)
Long-term obligations (2)		(1,573,366	)
Other non-current liabilities		(49,158	)

Fair value of net assets acquired	$	2,559,093

Goodwill (3)		756,833

(1)	Customer-related intangible assets and network location intangible assets are amortized on a straight-line basis over periods of up to 20 years.

(2)	Long-term obligations included $1.5 billion of MIPT’s existing indebtedness and a fair value adjustment of $53.0 million.

(3)

Goodwill will be allocated to the Company’s domestic and international rental and management segments, as applicable. The Company expects goodwill recorded to its domestic rental and management segment will be deductible for tax purposes and goodwill recorded to its international segment will not be deductible for tax purposes.

MIPT Acquisition—Pro Forma Consolidated Results

The following pro forma information presents the financial results as if the acquisition of MIPT had occurred on January 1, 2012. The pro forma results do not include any anticipated cost synergies, costs or other effects of the planned integration of MIPT. Accordingly, such pro forma amounts are not necessarily indicative of the results that actually would have occurred had the acquisition been completed on the dates indicated, nor are they indicative of the future operating results of the combined company.


	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012
Operating revenues	$	888,432	$	788,623	$	2,659,294	$	2,326,753
Net income attributable to American Tower Corporation	$	142,357	$	195,647	$	343,992	$	392,156
Net income per common share amounts:
Basic net income attributable to American Tower Corporation	$	0.36	$	0.50	$	0.87	$	0.99
Diluted net income attributable to American Tower Corporation	$	0.36	$	0.49	$	0.86	$	0.98

AMERICAN TOWER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—Unaudited

15. Business Segments

The Company operates in three business segments: domestic rental and management, international rental and management and network development services. The Company’s primary business is leasing antenna space on multi-tenant communications sites to wireless service providers, radio and television broadcast companies, wireless data and data providers, government agencies and municipalities and tenants in a number of other industries. This business is referred to as the Company’s rental and management operations and is comprised of domestic and international segments, which consist of the following as of September 30, 2013:

•

Domestic: rental and management operations in the United States; and

•

International: rental and management operations in Brazil, Chile, Colombia, Germany, Ghana, India, Mexico, Peru, South Africa and Uganda.

The Company has applied the aggregation criteria to operations within the international rental and management operating segments on a basis consistent with management’s review of information and performance evaluation.

The Company’s network development services segment offers tower-related services in the United States, including site acquisition, zoning and permitting services and structural analysis services, which primarily support its site leasing business and the addition of new tenants and equipment on its sites. The network development services segment is a strategic business unit that offers different services from the rental and management operating segments and requires different resources, skill sets and marketing strategies.

The accounting policies applied in compiling segment information below are similar to those described in note 1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012. Among other factors, in evaluating financial performance in each business segment, management uses segment gross margin and segment operating profit. The Company defines segment gross margin as segment revenue less segment operating expenses excluding stock-based compensation expense recorded in costs of operations; depreciation, amortization and accretion; selling, general, administrative and development expense; and other operating expenses. The Company defines segment operating profit as segment gross margin less selling, general, administrative and development expense attributable to the segment, excluding stock-based compensation expense and corporate expenses. For reporting purposes, the international rental and management segment gross margin and segment operating profit also include Interest income, TV Azteca, net. These measures of segment gross margin and segment operating profit are also before Interest income, Interest expense, Loss on retirement of long-term obligations, Other income (expense), Net income (loss) attributable to noncontrolling interest, Income (loss) on equity method investments and Income tax provision (benefit). The categories of expenses indicated above, such as depreciation, have been excluded from segment operating performance as they are not considered in the review of information or the evaluation of results by management. There are no significant revenues resulting from transactions between the Company’s operating segments. All intercompany transactions are eliminated to reconcile segment results and assets to the condensed consolidated statements of operations and condensed consolidated balance sheets.

Summarized financial information concerning the Company’s reportable segments for the three and nine months ended September 30, 2013 and 2012 is shown in the following tables. The “Other” column represents amounts excluded from specific segments, such as business development operations, stock-based compensation expense and corporate expenses included in selling, general, administrative and development expense; other operating expense; interest income; interest expense; loss on retirement of long-term obligations; and other income (expense), as well as reconciles segment operating profit to income from continuing operations before income taxes and income on equity method investments, as these amounts are not utilized in assessing each segment’s performance.

AMERICAN TOWER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—Unaudited


	Rental and Management				Total Rental and Management		Network Development Services		Other		Total
Three months ended September 30, 2013	Domestic		International		Total Rental and Management		Network Development Services		Other		Total
	(in thousands)
Segment revenues	$	529,941	$	266,634	$	796,575	$	11,305			$	807,880
Segment operating expenses (1)		95,232		100,473		195,705		4,777				200,482
Interest income, TV Azteca, net		—		3,544		3,544		—				3,544

Segment gross margin		434,709		169,705		604,414		6,528				610,942

Segment selling, general, administrative and development expense (1)		24,523		31,728		56,251		1,880				58,131

Segment operating profit	$	410,186	$	137,977	$	548,163	$	4,648			$	552,811

Stock-based compensation expense									$	15,058		15,058
Other selling, general, administrative and development expense										24,939		24,939
Depreciation, amortization and accretion										184,922		184,922
Other expense (principally interest expense and other (expense) income)										149,084		149,084

Income from continuing operations before income taxes and income on equity method investments											$	178,808

Total assets	$	12,037,318	$	5,427,416	$	17,464,734	$	49,973	$	666,613	$	18,181,320

(1)	Segment operating expenses and segment selling, general, administrative and development expenses exclude stock-based compensation expense of $0.3 million and $14.7 million, respectively.


	Rental and Management				Total Rental and Management		Network Development Services		Other		Total
Three months ended September 30, 2012	Domestic		International		Total Rental and Management		Network Development Services		Other		Total
	(in thousands)
Segment revenues	$	480,351	$	217,203	$	697,554	$	15,781			$	713,335
Segment operating expenses (1)		92,072		85,069		177,141		7,323				184,464
Interest income, TV Azteca, net		—		3,586		3,586		—				3,586

Segment gross margin		388,279		135,720		523,999		8,458				532,457

Segment selling, general, administrative and development expense (1)		20,141		25,057		45,198		2,127				47,325

Segment operating profit	$	368,138	$	110,663	$	478,801	$	6,331			$	485,132

Stock-based compensation expense									$	13,058		13,058
Other selling, general, administrative and development expense										21,516		21,516
Depreciation, amortization and accretion										144,061		144,061
Other expense (principally interest expense and other (expense) income)										61,620		61,620

Income from continuing operations before income taxes and income on equity method investments											$	244,877

(1)	Segment operating expenses and segment selling, general, administrative and development expenses exclude stock-based compensation expense of $0.4 million and $12.6 million, respectively.

AMERICAN TOWER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—Unaudited


	Rental and Management				Total Rental and Management		Network Development Services		Other		Total
Nine months ended September 30, 2013	Domestic		International		Total Rental and Management		Network Development Services		Other		Total
	(in thousands)
Segment revenues	$	1,566,660	$	796,547	$	2,363,207	$	56,231			$	2,419,438
Segment operating expenses (1)		282,273		302,441		584,714		22,399				607,113
Interest income, TV Azteca, net		—		10,673		10,673		—				10,673

Segment gross margin		1,284,387		504,779		1,789,166		33,832				1,822,998

Segment selling, general, administrative and development expense (1)		71,664		93,753		165,417		7,105				172,522

Segment operating profit	$	1,212,723	$	411,026	$	1,623,749	$	26,727			$	1,650,476

Stock-based compensation expense									$	53,155		53,155
Other selling, general, administrative and development expense										74,251		74,251
Depreciation, amortization and accretion										555,334		555,334
Other expense (principally interest expense and other (expense) income)										536,092		536,092

Income from continuing operations before income taxes and income on equity method investments											$	431,644

(1)	Segment operating expenses and segment selling, general, administrative and development expenses exclude stock-based compensation expense of $1.2 million and $52.0 million, respectively.


	Rental and Management				Total Rental and Management		Network Development Services		Other		Total
Nine months ended September 30, 2012	Domestic		International		Total Rental and Management		Network Development Services		Other		Total
	(in thousands)
Segment revenues	$	1,440,824	$	622,982	$	2,063,806	$	43,780			$	2,107,586
Segment operating expenses (1)		273,188		232,338		505,526		21,404				526,930
Interest income, TV Azteca, net		—		10,715		10,715		—				10,715

Segment gross margin		1,167,636		401,359		1,568,995		22,376				1,591,371

Segment selling, general, administrative and development expense (1)		60,638		68,433		129,071		4,410				133,481

Segment operating profit	$	1,106,998	$	332,926	$	1,439,924	$	17,966			$	1,457,890

Stock-based compensation expense									$	39,654		39,654
Other selling, general, administrative and development expense										66,099		66,099
Depreciation, amortization and accretion										465,788		465,788
Other expense (principally interest expense and other (expense) income)										346,385		346,385

Income from continuing operations before income taxes and income on equity method investments											$	539,964

(1)	Segment operating expenses and segment selling, general, administrative and development expenses exclude stock-based compensation expense of $1.3 million and $38.3 million, respectively.

AMERICAN TOWER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—Unaudited

16. Subsequent Events

2013 Term Loan—On October 29, 2013, the Company entered into the 2013 Term Loan of $1.5 billion. The Company used the net proceeds from the 2013 Term Loan and cash on hand to repay the 2012 Term Loan and $800 million of outstanding indebtedness under the 2012 Credit Facility.

The 2013 Term Loan matures on January 3, 2019. Any outstanding principal and accrued but unpaid interest will be due and payable in full at maturity. The 2013 Term Loan may be paid prior to maturity in whole or in part at our option without penalty or premium.

The Company has the option of choosing either a defined base rate or LIBOR as the applicable base rate. The interest rate ranges between 1.125% to 2.250% above LIBOR for LIBOR based borrowings or between 0.125% to 1.250% above the defined base rate for base rate borrowings, in each case based upon our debt ratings. The current margin over LIBOR that the Company would incur (should it choose LIBOR) on borrowings is 1.25%.

The loan agreement 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 would 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.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q contains forward-looking statements relating to our goals, beliefs, plans or current expectations and other statements that are not of historical facts. For example, when we use words such as “project,” “believe,” “anticipate,” “expect,” “forecast,” “estimate,” “intend,” “should,” “would,” “could,” “may” or other words that convey uncertainty of future events or outcomes, we are making forward-looking statements. Certain important factors may cause actual results to differ materially from those indicated by our forward-looking statements, including those set forth under the caption “Risk Factors” in Part II, Item 1A. of this Quarterly Report on Form 10-Q. Forward-looking statements represent management’s current expectations and are inherently uncertain. We do not undertake any obligation to update forward-looking statements made by us.

The discussion and analysis of our financial condition and results of operations that follow are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities at the date of our financial statements. Actual results may differ significantly from these estimates under different assumptions or conditions. This discussion should be read in conjunction with our condensed consolidated financial statements herein and the accompanying notes thereto, information set forth under the caption “Critical Accounting Policies and Estimates” of our Annual Report on Form 10-K for the year ended December 31, 2012, and in particular, the information set forth therein under Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our results of operations do not reflect the impact of our acquisition of MIP Tower Holdings LLC (“MIPT”), which closed on October 1, 2013. For more information regarding our acquisition of MIPT, see note 14 to our condensed consolidated financial statements included herein.

Overview

We are a leading independent owner, operator and developer of wireless and broadcast communications real estate. Our primary business is leasing antenna space on multi-tenant communications sites to wireless service providers, radio and television broadcast companies, wireless data and data providers, government agencies and municipalities and tenants in a number of other industries. We refer to this business as our rental and management operations, which accounted for approximately 98% of our total revenues for the nine months ended September 30, 2013. We also offer tower-related services domestically, including site acquisition, zoning and permitting services and structural analysis services, which primarily support our site leasing business and the addition of new tenants and equipment on our sites. Effective January 1, 2012, we reorganized to qualify as a real estate investment trust for federal income tax purposes (“REIT” and the reorganization, the “REIT Conversion”).

Our communications real estate portfolio of 57,389 sites, as of September 30, 2013, includes wireless and broadcast communications towers and distributed antenna system (“DAS”) networks, which provide seamless coverage solutions in certain in-building and outdoor wireless environments. Our portfolio primarily consists of towers that we own and towers that we operate pursuant to long-term lease arrangements, including, as of September 30, 2013, 22,754 towers domestically and 34,314 towers internationally. Our portfolio also includes 321 DAS networks. In addition to the communications sites in our portfolio, we manage rooftop and tower sites for property owners under various contractual arrangements. We also hold property interests that we lease to communications service providers and third-party tower operators.

The following table details the number of communications sites we own or operate as of September 30, 2013:


Country	Number of Owned Sites		Number of Operated Sites (1)
United States		16,615		6,414
International:
Brazil		4,369		155
Chile		1,153		—
Colombia		2,723		706
Germany		2,031		—
Ghana		1,959		—
India		10,965		—
Mexico		6,625		199
Peru		499		—
South Africa		1,828		—
Uganda		1,148		—

(1)	All of the communications sites we operate are held pursuant to long-term capital leases, including those subject to purchase options.

In addition, on October 1, 2013, through our acquisition of MIPT, we acquired over 5,000 communications sites in the United States, approximately 500 communications sites in Costa Rica and approximately 50 communications sites in Panama.

Our continuing operations are reported in three segments, domestic rental and management, international rental and management and network development services. Among other factors, management uses segment gross margin and segment operating profit in its assessment of operating performance in each business segment. We define segment gross margin as segment revenue less segment operating expenses, excluding stock-based compensation expense recorded in costs of operations; depreciation, amortization and accretion; selling, general, administrative and development expense; and other operating expense. We define segment operating profit as segment gross margin less selling, general, administrative and development expense attributable to the segment, excluding stock-based compensation expense and corporate expenses. Segment gross margin and segment operating profit for the international rental and management segment also include interest income, TV Azteca, net (see note 15 to our condensed consolidated financial statements included herein). These measures of segment gross margin and segment operating profit are also before interest income, interest expense, loss on retirement of long-term obligations, other income (expense), net income (loss) attributable to noncontrolling interest, income (loss) on equity method investments and income taxes.

In the section that follows, we provide information regarding management’s expectations of long-term drivers of demand for our communications sites, as well as our current results of operations, financial position and sources and uses of liquidity. In addition, we highlight key trends, which management believes provide valuable insight into our operating and financial resource allocation decisions.

Revenue Growth. Due to our diversified communications site portfolio, our tenant lease rates vary considerably depending upon numerous factors, including but not limited to, tower location, amount and type of tenant equipment on the tower, ground space required by the tenant and remaining tower capacity. We measure the remaining tower capacity by assessing several factors, including tower height, tower type, environmental conditions, existing equipment on the tower and zoning and permitting regulations in effect in the jurisdiction where the tower is located. In many instances, tower capacity can be increased through tower augmentation.

The primary sources of revenue growth for our domestic and international rental and management segments are:

•

Recurring revenues from tenant leases generated from sites which existed in our portfolio as of the beginning of the prior year period (“legacy sites”);

•

Contractual rent escalations on existing tenant leases, net of cancellations;

•

New revenue generated from leasing additional space on our legacy sites; and

•

New revenue generated from sites acquired or constructed since the beginning of the prior year period (“new sites”).

For instance, we expect the new communications sites we acquired from MIPT on October 1, 2013 to generate predictable revenue growth in future periods. For the nine months ended September 30, 2013, total revenues for MIPT were $239.9 million. For more information regarding our acquisition of MIPT, see note 14 to our condensed consolidated financial statements included herein.

The majority of our tenant leases with wireless carriers are typically for an initial non-cancellable term of five to ten years, with multiple five-year renewal terms thereafter. Accordingly, nearly all of the revenue generated by our rental and management operations during the nine months ended September 30, 2013 is recurring revenue that we should continue to receive in future periods. Based upon foreign currency exchange rates and the tenant leases in place as of September 30, 2013, we expect to generate approximately $21 billion of non-cancellable tenant lease revenue over future periods, absent the impact of straight-line lease accounting. In addition, most of our tenant leases have provisions that periodically increase the rent due under the lease, typically annually based on a fixed percentage (on average approximately 3.5% in the U.S.), inflation or inflation with a fixed minimum or maximum escalation for the year. Revenue lost from either cancellations of leases at the end of their terms or rent negotiations historically have not had a material adverse effect on the revenues generated by our rental and management operations. During the nine months ended September 30, 2013, loss of revenue from tenant lease cancellations or renegotiations represented approximately 1.5% of the total revenue of our rental and management segments.

Demand Drivers. We continue to believe that our site leasing revenue is likely to increase due to the growing use of wireless communications and data services and our ability to meet that demand by adding new tenants and new equipment for existing tenants on our legacy sites, which increases the utilization and profitability of our sites. In addition, we believe the majority of our site leasing activity will continue to come from wireless service providers. Our legacy site portfolio and our established tenant base provide us with new business opportunities, which have historically resulted in consistent and predictable organic revenue growth as wireless carriers seek to increase the coverage and capacity of their networks as well as roll out next generation wireless technologies. In addition, we intend to continue to supplement the organic growth on our legacy sites by selectively developing or acquiring new sites in our existing and new markets where we can achieve our risk adjusted return on investment criteria.

According to industry data, we believe the following key trends will provide opportunities for organic growth in our domestic rental and management segment:

•

The deployment of advanced wireless technology across existing wireless networks will provide our tenants the ability to deliver higher speed data services and enable fixed broadband substitution. As a result, our tenants continue to deploy additional equipment across their existing networks.

•

Wireless service providers compete based on the overall capacity and coverage of their existing wireless networks. To maintain or improve their network performance as overall network usage increases, our tenants continue to deploy additional equipment across their existing sites and also add new cell sites.

•

Wireless service providers are investing in reinforcing their networks through incremental backhaul and the utilization of on-site generators, which results in additional space and/or equipment leased at the tower site.

•

Wireless service providers continue to acquire additional spectrum, and as a result, are expected to add additional equipment to their network as they seek to optimize their network configuration.

According to industry data, we believe the following key trends will provide opportunities for organic growth in our international rental and management segment:

•

In India, nationwide voice networks continue to be deployed as wireless service providers are beginning their initial investments in wireless data networks.

•

In Ghana and Uganda, wireless service providers continue to build their voice and data networks to satisfy increasing demand for wireless service.

•

In South Africa, carriers are beginning to deploy wireless data networks utilizing spectrum acquired through recent auctions.

•

In Mexico and Brazil, nationwide voice networks have been deployed and certain incumbent wireless service providers continue to invest in their wireless data networks. Recent spectrum auctions in both markets have enabled other incumbent wireless service providers and new market entrants to begin initial investments in wireless data networks.

•

In Costa Rica, nationwide voice networks are currently being deployed by three carriers, after the dissolution of a government monopoly of the wireless industry in 2011. After the initial network build-outs are complete, additional carrier network investments are expected to support more advanced wireless services.

•

In markets such as Chile, Colombia and Peru, recent or anticipated spectrum auctions are expected to drive investment in nationwide voice and wireless data networks.

•

In Panama, nationwide networks have been deployed and the major carriers in the market are currently focused on augmenting their networks to support wireless data applications.

•

In Germany, our most mature international wireless market, demand is currently being driven by a government-mandated rural LTE network build-out, as well as other tenant initiatives to deploy next generation wireless services.

Direct Operating Expenses. Direct operating expenses incurred by our domestic and international rental and management segments include direct site level expenses and consist primarily of ground rent, property taxes, repairs and maintenance, security and power and fuel costs, some of which may be passed through to our tenants. These segment direct operating expenses exclude all segment and corporate selling, general, administrative and development expenses, which are aggregated into one line item entitled selling, general, administrative and development expense in our condensed consolidated statements of operations. In general, our domestic and international rental and management segments selling, general, administrative and development expenses do not significantly increase as a result of adding incremental tenants to our legacy sites and typically increase only modestly year-over-year. As a result, leasing additional space to new tenants on our legacy sites provides significant incremental cash flow. We may incur additional segment selling, general, administrative and development expenses as we increase our presence in geographic areas where we have recently launched operations or are focused on expanding our portfolio. Our profit margin growth is therefore positively impacted by the addition of new tenants to our legacy sites and can be temporarily diluted by our development activities.

As we continue to focus on growing our rental and management operations, we anticipate that our network development services revenue will continue to represent a small percentage of our total revenues. Through our network development services segment, we offer tower-related services, including site acquisition, zoning and permitting services and structural analysis services, which primarily support our site leasing business and the addition of new tenants and equipment on our sites.

REIT Conversion. Effective January 1, 2012, we reorganized to qualify as a REIT. The REIT tax rules require that we derive most of our income, other than income generated by a taxable REIT subsidiary (“TRS”), from investments in real estate, which for us primarily consists of income from the leasing of our communications sites. Under the Internal Revenue Code of 1986, as amended (the “Code”), maintaining REIT status generally requires that no more than 25% of the value of the REIT’s assets be represented by securities of one or more TRSs and other non-qualifying assets.

A REIT must annually distribute to its stockholders an amount equal to at least 90% of its REIT taxable income (determined before the deduction for distributed earnings and excluding any net capital gain). During the nine months ended September 30, 2013, we declared an aggregate of approximately $320.0 million in regular cash distributions to our stockholders. The amount, timing and frequency of future distributions will be at the sole discretion of our Board of Directors and will be declared based upon various factors, a number of which may be beyond our control, including our financial condition and operating cash flows, the amount required to maintain REIT status and reduce any income and excise taxes that we otherwise would be required to pay, limitations on distributions in our existing and future debt instruments, our ability to utilize net operating losses (“NOLs”) to offset, in whole or in part, our distribution requirements, limitations on our ability to fund distributions using cash generated through our TRSs and other factors that our Board of Directors may deem relevant.

For more information on the requirements to qualify as a REIT, see Item 1 of our Annual Report on Form 10-K for the year ended December 31, 2012 under the caption “Business—Overview,” and Item 1A of this Quarterly Report under the caption “Risk Factors.”

Non-GAAP Financial Measures

Included in our analysis of our results of operations are discussions regarding earnings before interest, taxes, depreciation, amortization and accretion, as adjusted (“Adjusted EBITDA”), Funds From Operations, as defined by the National Association of Real Estate Investment Trusts (“NAREIT FFO”) and Adjusted Funds From Operations (“AFFO”).

We define Adjusted EBITDA as Net income before income (loss) on discontinued operations, net; Income (loss) from equity method investments; Income tax provision (benefit); Other income (expense); Loss on retirement of long-term obligations; Interest expense; Interest income; Other operating income (expense); Depreciation, amortization and accretion; and stock-based compensation expense.

NAREIT FFO is defined as net income before gains or losses from the sale or disposal of real estate, real estate related impairment charges and real estate related depreciation, amortization and accretion, and including adjustments for (i) unconsolidated affiliates and (ii) noncontrolling interest.

We define AFFO as NAREIT FFO before (i) straight-line revenue and expense; (ii) stock-based compensation expense; (iii) the non-cash portion of our tax provision; (iv) non-real estate related depreciation, amortization and accretion; (v) amortization of deferred financing costs, capitalized interest, debt discounts and premiums and long-term deferred interest charges; (vi) other income (expense); (vii) loss on retirement of long-term obligations; (viii) other operating income (expense); and adjustments for (ix) unconsolidated affiliates and (x) noncontrolling interest, less cash payments related to capital improvements and cash payments related to corporate capital expenditures.

Adjusted EBITDA, NAREIT FFO and AFFO are not intended to replace net income or any other performance measures determined in accordance with GAAP. Neither NAREIT FFO nor AFFO represent cash flows from operating activities in accordance with GAAP and therefore these measures should not be considered indicative of cash flows from operating activities as a measure of liquidity or of funds available to fund our cash needs, including our ability to make cash distributions. Rather, Adjusted EBITDA, NAREIT FFO and AFFO are presented as we believe each is a useful indicator of our current operating performance. We believe that these metrics are useful to an investor in evaluating our operating performance because (1) each is a key measure used by our management team for purposes of decision making and for evaluating the performance of our operating segments; (2) Adjusted EBITDA is a component of the calculation used by our lenders to determine compliance with certain debt covenants; (3) Adjusted EBITDA is widely used in the tower industry to measure operating performance as depreciation, amortization and accretion may vary significantly among companies depending upon accounting methods and useful lives, particularly where acquisitions and non-operating factors are involved; (4) each provides investors with a meaningful measure for evaluating our period to period operating performance by eliminating items which are not operational in nature; and (5) each provides investors with a measure for comparing our results of operations to those of different companies.

Our measurement of Adjusted EBITDA, NAREIT FFO and AFFO may not be comparable to similarly titled measures used by other companies. Reconciliations of Adjusted EBITDA, NAREIT FFO and AFFO to net income, the most directly comparable GAAP measure, have been included below.

Results of Operations

Three Months Ended September 30, 2013 and 2012 (in thousands, except percentages)

Revenue


	Three Months Ended September 30,				Amount of Increase (Decrease)			Percent Increase (Decrease)
	2013		2012		Amount of Increase (Decrease)			Percent Increase (Decrease)
Rental and management
Domestic	$	529,941	$	480,351	$	49,590			10	%
International		266,634		217,203		49,431			23

Total rental and management		796,575		697,554		99,021			14
Network development services		11,305		15,781		(4,476	)		(28	)

Total revenues	$	807,880	$	713,335	$	94,545			13	%

Total revenues for the three months ended September 30, 2013 increased 13% to $807.9 million. The increase was primarily attributable to an increase in both of our rental and management segments, including organic revenue growth attributable to our legacy sites, and revenue growth attributable to the approximately 7,850 new sites that we have constructed or acquired since July 1, 2012.

Domestic rental and management segment revenue for the three months ended September 30, 2013 increased 10% to $529.9 million, which was comprised of:

•

Revenue growth from legacy sites of approximately 8%, which includes approximately 6% due to incremental revenue primarily generated from new tenant leases and amendments to existing tenant leases on our legacy sites and approximately 2% attributable to contractual rent escalations, net of tenant lease cancellations;

•

Revenue growth from new sites of approximately 3%, resulting from the construction or acquisition of approximately 1,050 new sites, as well as land interests under third-party sites since July 1, 2012; and

•

A decrease of approximately 1% from the impact of straight-line lease accounting.

International rental and management segment revenue for the three months ended September 30, 2013 increased 23% to $266.6 million, which was comprised of:

•

Revenue growth from new sites of approximately 17%, resulting from the construction or acquisition of approximately 6,800 new sites since July 1, 2012;

•

Revenue growth from legacy sites of approximately 14%, which includes approximately 12% due to incremental revenue primarily generated from new tenant leases and amendments to existing tenant leases on our legacy sites and approximately 2% attributable to contractual rent escalations, net of tenant lease cancellations;

•

An increase of less than 1% from the impact of straight-line lease accounting; and

•

A decrease of approximately 9% attributable to the negative impact from foreign currency translation, which includes, among others, the negative impact of approximately 3% related to fluctuations in Brazilian Real (“BRL”), approximately 2% related to fluctuations in South African Rand (“ZAR”) and approximately 2% related to fluctuations in Indian Rupee (“INR”).

Network development services segment revenue for the three months ended September 30, 2013 decreased 28% to $11.3 million. During the prior period, our network development services segment revenue was

positively impacted by the additional site acquisition, zoning and permitting services and structural engineering services associated with certain tenants’ next generation technology network upgrade projects.

Gross Margin


	Three Months Ended September 30,				Amount of Increase (Decrease)			Percent Increase (Decrease)
	2013		2012		Amount of Increase (Decrease)			Percent Increase (Decrease)
Rental and management
Domestic	$	434,709	$	388,279	$	46,430			12	%
International		169,705		135,720		33,985			25

Total rental and management		604,414		523,999		80,415			15
Network development services		6,528		8,458		(1,930	)		(23	)%

Domestic rental and management segment gross margin for the three months ended September 30, 2013 increased 12% to $434.7 million, which was comprised of:

•

Gross margin growth from legacy sites of approximately 10%, primarily associated with the increase in revenue, as described above; and

•

Gross margin growth from new sites of approximately 2%, resulting from the construction or acquisition of approximately 1,050 new sites, as well as land interests under third-party sites since July 1, 2012.

International rental and management segment gross margin for the three months ended September 30, 2013 increased 25% to $169.7 million, which was comprised of:

•

Gross margin growth from new sites of approximately 19%, resulting from the construction or acquisition of approximately 6,800 new sites since July 1, 2012;

•

Gross margin growth from legacy sites of approximately 14%, primarily associated with the increase in revenue, as described above; and

•

A decrease of approximately 8% attributable to the negative impact from foreign currency translation, which includes, among others, the negative impact of approximately 3% related to fluctuations in BRL, approximately 2% related to fluctuations in ZAR and approximately 2% related to fluctuations in INR.

Network development services segment gross margin for the three months ended September 30, 2013 decreased 23% to $6.5 million, primarily attributable to the decrease in network development services revenue as described above.

Selling, General, Administrative and Development Expense


	Three Months Ended September 30,				Amount of Increase (Decrease)			Percent Increase (Decrease)
	2013		2012		Amount of Increase (Decrease)			Percent Increase (Decrease)
Rental and management
Domestic	$	24,523	$	20,141	$	4,382			22	%
International		31,728		25,057		6,671			27

Total rental and management		56,251		45,198		11,053			24
Network development services		1,880		2,127		(247	)		(12	)
Other		39,650		34,134		5,516			16

Total selling, general, administrative and development expense	$	97,781	$	81,459	$	16,322			20	%

Total selling, general, administrative and development expense (“SG&A”) for the three months ended September 30, 2013 increased 20% to $97.8 million. The increase was primarily attributable to an increase in our international rental and management segment and other SG&A.

Domestic rental and management segment SG&A for the three months ended September 30, 2013 increased 22% to $24.5 million. The increase was primarily driven by increasing personnel costs and professional fees to support our business.

International rental and management segment SG&A for the three months ended September 30, 2013 increased 27% to $31.7 million. The increase was primarily due to our continued expansion in foreign markets, including operations in Germany.

Network development services segment SG&A for the three months ended September 30, 2013 decreased 12% to $1.9 million. During the three months ended September 30, 2012, we incurred higher personnel related costs related to the additional site acquisition, zoning, permitting and structural engineering services associated with certain tenants’ next generation technology network upgrade projects.

Other SG&A for the three months ended September 30, 2013 increased 16% to $39.7 million. The increase was primarily due to a $2.1 million increase in SG&A related stock-based compensation expense and a $3.7 million increase in corporate expenses associated with supporting a growing global business, and legal expenses.

Operating Profit


	Three Months Ended September 30,				Amount of Increase (Decrease)			Percent Increase (Decrease)
	2013		2012		Amount of Increase (Decrease)			Percent Increase (Decrease)
Rental and management
Domestic	$	410,186	$	368,138	$	42,048			11	%
International		137,977		110,663		27,314			25

Total rental and management		548,163		478,801		69,362			14
Network development services		4,648		6,331		(1,683	)		(27	)%

Domestic rental and management segment operating profit for the three months ended September 30, 2013 increased 11% to $410.2 million. The growth was primarily attributable to the increase in our domestic rental and management segment gross margin (12%), as described above, and was partially offset by an increase in our domestic rental and management segment SG&A (22%), as described above.

International rental and management segment operating profit for the three months ended September 30, 2013 increased 25% to $138.0 million. The growth was primarily attributable to the increase in our international rental and management segment gross margin (25%), as described above, and was partially offset by an increase in our international rental and management segment SG&A (27%), as described above.

Network development services segment operating profit for the three months ended September 30, 2013 decreased 27% to $4.6 million. The decrease was primarily attributable to the decrease in network development services segment gross margin (23%), as described above, and was partially offset by a decrease in our network development services segment SG&A (12%), as described above.

Depreciation, Amortization and Accretion


	Three Months Ended September 30,				Amount of Increase (Decrease)		Percent Increase (Decrease)
	2013		2012		Amount of Increase (Decrease)		Percent Increase (Decrease)
Depreciation, amortization and accretion	$	184,922	$	144,061	$	40,861		28	%

Depreciation, amortization and accretion for the three months ended September 30, 2013 increased 28% to $184.9 million. The increase was primarily attributable to the depreciation, amortization and accretion associated with the acquisition or construction of approximately 7,850 sites since July 1, 2012, which resulted in an increase in property and equipment and intangible assets subject to amortization.

Other Operating Expenses


	Three Months Ended September 30,				Amount of Increase (Decrease)		Percent Increase (Decrease)
	2013		2012		Amount of Increase (Decrease)		Percent Increase (Decrease)
Other operating expenses	$	15,469	$	7,359	$	8,110		110	%

Other operating expenses for the three months ended September 30, 2013 increased 110% to $15.5 million. The increase was primarily attributable to an increase of $4.3 million in losses from the sale or disposal of assets and impairment charges and an increase of $3.7 million in acquisition related costs.

Interest Expense


	Three Months Ended September 30,				Amount of Increase (Decrease)		Percent Increase (Decrease)
	2013		2012		Amount of Increase (Decrease)		Percent Increase (Decrease)
Interest expense	$	106,335		102,272	$	4,063		4	%

Interest expense for the three months ended September 30, 2013 increased 4% to $106.3 million. The increase was primarily attributable to an increase in our average debt outstanding of approximately $2.0 billion, which includes the impact of our senior notes offering completed in August 2013. This increase was partially offset by a decrease in our annualized weighted average cost of borrowing from 5.35% to 4.55%. The weighted average interest rate was 3.78% at September 30, 2013.

Other Expense (Income)


	Three Months Ended September 30,					Amount of Increase (Decrease)		Percent Increase (Decrease)
	2013		2012			Amount of Increase (Decrease)		Percent Increase (Decrease)
Other expense (income)	$	29,622	$	(46,294	)	$	75,916		164	%

During the three months ended September 30, 2013, other expense increased 164% to $29.6 million. During the three months ended September 30, 2013 and 2012, we recorded unrealized foreign currency losses of $30.9 million and unrealized foreign currency gains of $46.2 million, respectively, resulting primarily from fluctuations in the foreign currency exchange rates associated with our intercompany notes and similar unaffiliated balances denominated in a currency other than the subsidiaries’ functional currencies.

Income Tax Provision


	Three Months Ended September 30,						Amount of Increase (Decrease)		Percent Increase (Decrease)
	2013			2012			Amount of Increase (Decrease)		Percent Increase (Decrease)
Income tax provision	$	15,586			13,054		$	2,532		19	%
Effective tax rate		8.7	%		5.3	%

The income tax provision for the three months ended September 30, 2013 and 2012 was $15.6 million and $13.1 million, respectively. The effective tax rate (“ETR”) for the three months ended September 30, 2013 increased to 8.7% from 5.3%. The lower ETR during the three months ended September 30, 2012 was primarily a result of recording certain favorable adjustments during the three months ended September 30, 2012.

The ETR on income from continuing operations for the three months ended September 30, 2013 and 2012 differs from the federal statutory rate primarily due to our qualification for taxation as a REIT effective as of January 1, 2012 and adjustments for foreign items.

Net Income/Adjusted EBITDA


	Three Months Ended September 30,						Amount of Increase (Decrease)			Percent Increase (Decrease)
	2013			2012			Amount of Increase (Decrease)			Percent Increase (Decrease)
Net income	$	163,222		$	231,825		$	(68,603	)		(30	)%
Income from equity method investments		—			(2	)		(2	)		(100	)
Income tax provision		15,586			13,054			2,532			19
Other expense (income)		29,622			(46,294	)		75,916			164
Interest expense		106,335			102,272			4,063			4
Interest income		(2,342	)		(1,717	)		625			36
Other operating expenses		15,469			7,359			8,110			110
Depreciation, amortization and accretion		184,922			144,061			40,861			28
Stock-based compensation expense		15,058			13,058			2,000			15

Adjusted EBITDA	$	527,872		$	463,616		$	64,256			14	%

Net income for the three months ended September 30, 2013 decreased 30% to $163.2 million. The decrease was primarily attributable to an increase in depreciation, amortization and accretion expense and other expenses, which were primarily due to unrealized foreign currency losses. The decrease was partially offset by the increase in our rental and management segments’ operating profit, as described above.

Adjusted EBITDA for the three months ended September 30, 2013 increased 14% to $527.9 million. Adjusted EBITDA growth was primarily attributable to the increase in our rental and management segments’ gross margin, and was partially offset by an increase in SG&A.

Net Income/NAREIT FFO/AFFO


	Three Months Ended September 30,						Amount of Increase (Decrease)			Percent Increase (Decrease)
	2013			2012			Amount of Increase (Decrease)			Percent Increase (Decrease)
Net income	$	163,222		$	231,825		$	(68,603	)		(30	)%
Real estate related depreciation, amortization and accretion		160,976			122,944			38,032			31
Losses from sale or disposal of real estate and real estate related impairment charges		6,160			1,901			4,259			224
Adjustments for unconsolidated affiliates and noncontrolling interest		10,516			(6,338	)		16,854			266

NAREIT FFO	$	340,874		$	350,332		$	(9,458	)		(3	)%
Straight-line revenue		(37,286	)		(40,986	)		(3,700	)		(9	)
Straight-line expense		6,293			8,118			(1,825	)		(22	)
Stock-based compensation expense		15,058			13,058			2,000			15
Non-cash portion of tax provision (benefit)		9,567			(2,635	)		12,202			463
Non-real estate related depreciation, amortization and accretion		23,946			21,117			2,829			13
Amortization of deferred financing costs, capitalized interest, debt discounts and premiums and long-term deferred interest charges		7,127			2,254			4,873			216
Other expense (income) (1)		29,622			(46,294	)		75,916			164
Other operating expenses (2)		9,309			5,458			3,851			71
Capital improvement capital expenditures		(18,724	)		(16,189	)		2,535			16
Corporate capital expenditures		(7,930	)		(5,268	)		2,662			51
Adjustments for unconsolidated affiliates and noncontrolling interest		(10,516	)		6,338			16,854			266

AFFO	$	367,340		$	295,303		$	72,037			24	%

(1)	Primarily includes unrealized loss on foreign currency exchange rate fluctuations.

(2)	Primarily includes transaction related costs.

NAREIT FFO for the three months ended September 30, 2013 was $340.9 million as compared to NAREIT FFO of $350.3 million for the three months ended September 30, 2012. AFFO for the three months ended September 30, 2013 increased 24% to $367.3 million as compared to $295.3 million for the three months ended September 30, 2012. AFFO growth was primarily attributable to the increase in our operating profit, partially offset by an increase in cash paid for capital improvement and corporate capital expenditures.

Results of Operations

Nine Months Ended September 30, 2013 and 2012 (in thousands, except percentages)

Revenue


	Nine Months Ended September 30,				Amount of Increase (Decrease)		Percent Increase (Decrease)
	2013		2012		Amount of Increase (Decrease)		Percent Increase (Decrease)
Rental and management
Domestic	$	1,566,660	$	1,440,824	$	125,836		9	%
International		796,547		622,982		173,565		28

Total rental and management		2,363,207		2,063,806		299,401		15
Network development services		56,231		43,780		12,451		28