Annual Reports

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  • 10-K (Mar 14, 2008)

 
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American Tower 10-K 2010
Form 10-K
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-K

 

 

(Mark One):

x Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the fiscal year ended December 31, 2009

 

¨ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the transition period from              to             

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)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each Class

 

Name of exchange on which registered

Class A Common Stock, $0.01 par value   New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

 

 

Indicate by check mark if the registrant is a well known seasoned issuer, as defined in Rule 405 of the Securities Act:    Yes  x    No  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act:    Yes  ¨    No  x

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form 10-K or any amendment to this Form 10-K.    x

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 definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):

 

Large accelerated filer  x   Accelerated filer  ¨   Non-accelerated filer  ¨   Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act):    Yes  ¨    No  x

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant as of June 30, 2009 was approximately $12.4 billion, based on the closing price of the registrant’s Class A Common Stock as reported on the New York Stock Exchange as of the last business day of the registrant’s most recently completed second quarter.

As of February 12, 2010, there were 402,669,455 shares of Class A Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement (the “Definitive Proxy Statement”) to be filed with the Securities and Exchange Commission relative to the Company’s 2010 Annual Meeting of Stockholders are incorporated by reference into Part III of this Report.

 

 

 


Table of Contents

AMERICAN TOWER CORPORATION

TABLE OF CONTENTS

FORM 10-K ANNUAL REPORT

FISCAL YEAR ENDED DECEMBER 31, 2009

 

          Page

Special Note Regarding Forward-Looking Statements

   ii

PART I

     

ITEM 1.

  

Business

   1
  

Overview

   1
  

Strategy

   2
  

The Company

   3
  

Products and Services

   4
  

Recent Developments

   6
  

Regulatory Matters

   7
  

Competition and Customer Demand

   9
  

Employees

   9
  

Available Information

   10

ITEM 1A.

  

Risk Factors

   10

ITEM 1B.

  

Unresolved Staff Comments

   19

ITEM 2.

  

Properties

   19

ITEM 3.

  

Legal Proceedings

   20

ITEM 4.

  

[RESERVED]

   21

PART II

     

ITEM 5.

  

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

   22
  

Dividends

   22
  

Performance Graph

   23
  

Recent Sales of Unregistered Securities

   23
  

Issuer Purchases of Equity Securities

   24

ITEM 6.

  

Selected Financial Data

   25

ITEM 7.

  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

   27
  

Executive Overview

   27
  

Results of Operations: Years Ended December 31, 2009 and 2008

   29
  

Results of Operations: Years Ended December 31, 2008 and 2007

   33
  

Liquidity and Capital Resources

   36
  

Critical Accounting Policies and Estimates

   45
  

Recently Adopted Accounting Standards

   48
  

Accounting Standards Updates

   49

ITEM 7A.

  

Quantitative and Qualitative Disclosures About Market Risk

   51

ITEM 8.

  

Financial Statements and Supplementary Data

   52

ITEM 9.

  

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

   53

 

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Table of Contents

AMERICAN TOWER CORPORATION

TABLE OF CONTENTS—(Continued)

FORM 10-K ANNUAL REPORT

FISCAL YEAR ENDED DECEMBER 31, 2009

 

          Page

ITEM 9A.

  

Controls and Procedures

   53
  

Disclosure Controls and Procedures

   53
  

Management’s Annual Report on Internal Control over Financial Reporting

   53
  

Report of Independent Registered Public Accounting Firm

   54
  

Changes in Internal Control over Financial Reporting

   55

PART III

     

ITEM 10.

  

Directors, Executive Officers and Corporate Governance

   56

ITEM 11.

  

Executive Compensation

   58

ITEM 12.

  

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

   58

ITEM 13.

  

Certain Relationships and Related Transactions, and Director Independence

   58

ITEM 14.

  

Principal Accounting Fees and Services

   58

PART IV

     

ITEM 15.

  

Exhibits, Financial Statement Schedules

   58

Signatures

   59

Index to Consolidated Financial Statements

   F-1

Index to Exhibits

   EX-1

 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report contains statements about future events and expectations, or forward-looking statements, all of which are inherently uncertain. We have based those forward-looking statements on our current expectations and projections about future results. When we use words such as “anticipates,” “intends,” “plans,” “believes,” “estimates,” “expects,” or similar expressions, we do so to identify forward-looking statements. Examples of forward-looking statements include statements we make regarding future prospects of growth in the communications site leasing industry, the level of future expenditures by companies in this industry and other trends in this industry, the effects of consolidation among companies in our industry and among our customers, our ability to maintain or increase our market share, our future operating results, our future purchases under our stock repurchase program, our future capital expenditure levels, our future financing transactions and our plans to fund our future liquidity needs. These statements are based on our management’s beliefs and assumptions, which in turn are based on currently available information. These assumptions could prove inaccurate. These forward-looking statements may be found under the captions “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as in this Annual Report generally.

You should keep in mind that any forward-looking statement we make in this Annual Report or elsewhere speaks only as of the date on which we make it. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. In any event, these and other important factors, including those set forth in Item 1A of this Annual Report under the caption “Risk Factors,” may cause actual results to differ materially from those indicated by our forward-looking statements. We have no duty to, and do not intend to, update or revise the forward-looking statements we make in this Annual Report, except as may be required by law. In light of these risks and uncertainties, you should keep in mind that the future events or circumstances described in any forward-looking statement we make in this Annual Report or elsewhere might not occur.

 

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PART I

 

ITEM 1. BUSINESS

Overview

We are a leading wireless and broadcast communications infrastructure company that develops, owns, and operates communications sites, including wireless communications towers, broadcast communications towers and distributed antenna system (“DAS”) networks. Our portfolio of wireless and broadcast towers consists of towers that we own and towers that we operate pursuant to long-term lease arrangements, including, as of December 31, 2009, approximately 20,000 towers in the United States and approximately 7,000 towers in Mexico, Brazil and India. Our portfolio also includes approximately 200 in-building DAS networks that we operate in malls, casinos and other in-building applications in the United States and Mexico and one outdoor DAS network in development in the United States. In addition to the communications sites in our portfolio, we manage rooftop and tower sites for property owners in the United States, Mexico and Brazil.

Our primary business is leasing antenna space on multi-tenant communications sites to wireless service providers and radio and television broadcast companies. This segment of our business, which we refer to as our rental and management segment, accounted for approximately 97%, 97% and 98% of our total revenues for the years ended December 31, 2009, 2008 and 2007, respectively. Through our network development services segment, we also offer tower-related services in the United States, including site acquisition, zoning and permitting services and structural analysis services, which directly support our site leasing business and the addition of new tenants and equipment on our sites.

We have historically focused on our rental and management segment due to its high operating leverage and low cash flow volatility when compared to our network development services segment. Our rental and management segment has generated consistent incremental growth in revenue and cash flows due to the following characteristics:

 

   

Long-term tenant leases with contractual escalations. In general, a lease with a wireless carrier has an initial term of five to ten years with multiple five-year renewal terms thereafter, and lease payments that typically increase 3% to 5% per year.

 

   

High lease renewal rates. Wireless carriers tend to renew leases because suitable alternative sites may not exist or be available and repositioning a site in a carrier’s network may be expensive and may adversely affect the quality of the carrier’s network.

 

   

High operating leverage. Incremental operating costs associated with adding wireless tenants to a communications site are minimal. Therefore, as additional tenants are added to a site, the substantial majority of incremental revenue flows through to operating profit.

 

   

Low maintenance capital expenditures. On average, we require low amounts of annual capital expenditures to maintain our communications sites.

Additionally, our communications site portfolio provides us with growth potential because we have the ability to add new tenants, and new equipment for existing tenants, on our sites. In the United States, our largest geographic area, our nationwide network of communications sites enables us to address the needs of national, regional, local and emerging wireless service providers. Our diverse site portfolio and our established customer base provide us with a diverse source of new business opportunities, which has historically resulted in consistent and predictable revenue growth. Our operations in the United States accounted for approximately 85%, 86% and 87% of our total revenues for the years ended December 31, 2009, 2008 and 2007, respectively.

Our international site leasing business, which is comprised of communications sites in Mexico, Brazil and India, provides a source of diversification and growth for our rental and management segment. Our international site leasing business accounted for approximately 15%, 14% and 13% of our total revenues for the years ended December 31, 2009, 2008 and 2007, respectively. In developing our international site portfolio, we have focused on building and acquiring communications sites in high demand areas to meet the needs of our customers.

 

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Strategy

Our strategy is to capitalize on the growth in the use of wireless communications services and the expanding infrastructure required to deploy current and future generations of wireless communications technologies. We believe that, based on current trends, wireless service providers in each of our existing geographic areas will continue to invest in their networks to meet demand from their new and existing subscribers. Wireless communications services have experienced significant growth in our domestic and international businesses:

Wireless Service Growth

 

Country

   Subscribers
as of June 30, 2009
(in millions)
   Year-over-year growth
(% increase from prior year
period)
    Penetration rate
(%)
 

United States

   276.6    5   89

Mexico

   77.8    10   72

Brazil

   159.6    20   83

India

   427.3    52   40

According to industry data, in the United States, total voice minutes of use increased to over 1.1 trillion for the six months ended June 30, 2009, representing a year-over-year increase from the prior year period of approximately 3%. Further, as of June 30, 2009, revenue attributable to data services increased from the prior year period to over 27% as a percent of total service revenues for the nationwide wireless service providers. To meet the needs of growing voice and data service usage, cell sites in the industry (i.e., the number of antenna arrays and related equipment in commercial operation, not the number of towers on which that equipment is located) increased to approximately 245,900 as of June 30, 2009, representing a year-over-year increase from the prior year period of 12%.

We believe the growth in the number of wireless service subscribers, the minutes of use per subscriber and the further adoption of wireless data applications by subscribers will require wireless carriers to add new cell sites and new equipment to existing cell sites to maintain the performance of their networks in the areas they currently cover and to extend service to areas where coverage does not yet exist. As wireless carriers continue to add subscribers and seek to limit churn, we anticipate they will focus on network quality as a competitive necessity and will continue to invest in equipment upgrades that increase the capacity and overall quality of their networks.

In addition, we believe that as the usage of wireless data applications, such as email, internet access and video, continues to grow on a widespread basis, wireless carriers may be compelled to further increase the cell density of their existing networks, deploy new technology and equipment, and expand their network coverage. To meet this demand, we believe wireless carriers will continue to outsource their communications site infrastructure needs as a means to accelerate access to their markets and more efficiently use their capital, rather than construct and operate their own communications sites and maintain their own communications site service and development capabilities.

We believe that our existing portfolio of communications sites, our tower-related services and our management team position us to benefit from these trends and to play an increasing role in addressing the needs of wireless service providers and broadcasters. The key elements of our strategy include:

 

   

Maximize Use of Existing Site Capacity. We believe that our highest returns will be achieved by leasing additional space on our existing communications sites. We anticipate that our revenues and operating profit from our rental and management segment will continue to grow because many of our communications sites are attractively located for wireless service providers and have capacity available for additional antenna space that we can offer to customers at low incremental costs to us. Because the costs of operating a site are largely fixed, increasing utilization significantly improves operating margins. We will continue to target our sales and marketing activities to increase utilization, and return on investment, of our existing communications sites.

 

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Grow Our Operations Using Selective Criteria for Acquisitions and New Site Development. Given the relatively fixed cost structure of our site leasing business, we believe that adding new communications sites to our portfolio in existing markets will allow us to grow revenues with only modest increases in administrative and operating expenses. Therefore, we seek to acquire and construct towers and install DAS networks in our existing markets when we are able to meet our return on investment criteria. We evaluate expansion opportunities into new markets on a similar basis. We consider geographic expansion into countries that have a relatively stable political and macroeconomic environment, a growing, competitive wireless communications industry, and multiple wireless carriers that are likely to outsource their communications site infrastructure needs to us.

 

   

Continue Our Focus on Customer Service and Processes. Because speed to market and reliable network performance are critical components to the success of wireless service providers, our ability to assist customers in meeting their goals contributes to our success. We intend to continue to focus on customer service, for example, by reducing cycle times for key functions, such as lease processing and tower structural analysis. In addition, we seek to develop complementary product lines, such as generators, that expand the shared infrastructure available at our communications sites. We are also continuing our efforts to improve customer access to information regarding our communications sites to allow faster and easier site selection and qualification by our customers. We believe that by increasing the speed with which we provide our customers with accurate and complete information about our sites, we will be able to increase our competitiveness and revenue generation.

 

   

Build On Our Customer Relationships. Our understanding of the network needs of our customers and our ability to convey effectively how we can satisfy those needs are key to our efforts to add new antenna leases, cross-sell our services and identify desirable new projects, including site development. We are building on our relationships with our major wireless carrier customers to gain more familiarity with their evolving network plans so we can identify opportunities where our portfolio of sites and experienced personnel can be used to satisfy their needs. We are also working with smaller and emerging wireless carriers and network operators as they define their coverage and network needs and expand into new markets. In addition, we are also seeking opportunities to build relationships with new market participants who have obtained or may obtain spectrum licenses, including those who participated in recent governmental auctions of wireless spectrum. We believe we are well positioned to be a preferred partner to our customers because of the size, scope and location of our portfolio of communications sites and our proven operating experience.

The Company

American Tower Corporation was created as a subsidiary of American Radio Systems Corporation in 1995 to own, manage, develop and lease communications and broadcast tower sites, and was spun off into a free-standing public company in 1998. Since inception, we have grown our communications site portfolio through acquisitions, long-term lease arrangements, development and construction, and through mergers with and acquisitions of other tower operators, increasing the size of our portfolio to over 27,200 communications sites.

American Tower Corporation is a holding company, and we conduct our operations through our directly and indirectly owned subsidiaries. Our principal United States operating subsidiaries are American Towers, Inc. (“ATI”) and SpectraSite Communications, LLC (“SpectraSite”). We conduct our international operations through our subsidiary, American Tower International, Inc., which in turn conducts operations through its various international operating subsidiaries. Our international operations consist of our operations in Mexico, Brazil and India.

We operate in two business segments: rental and management and network development services. For more information about our business segments, as well as financial information about the geographic areas in which we operate, see Item 7 of this Annual Report under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and note 18 to our consolidated financial statements included in this Annual Report.

 

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Products and Services

Rental and Management Segment

Our primary business is our communications site leasing business, which we conduct through our rental and management segment. This segment accounted for approximately 97%, 97% and 98% of our total revenues for the years ended December 31, 2009, 2008 and 2007, respectively. Our rental and management segment is comprised of our domestic and international site leasing business, including the operation of wireless communications towers, broadcast communications towers and DAS networks, as well as rooftop management.

Wireless Communications Towers. We are a leading independent owner and operator of wireless communications towers in the United States, Mexico and Brazil, based on number of towers and revenue. We also own and operate communications towers in India, where we commenced operations in the second half of 2007. In addition to owning wireless communications towers, we also manage wireless communications sites for property owners in the United States, Mexico and Brazil. Approximately 94%, 92% and 91% of our rental and management segment revenue was attributable to our wireless towers for the years ended December 31, 2009, 2008 and 2007, respectively. As of December 31, 2009, our wireless tower portfolio included the following:

 

Country

   Number of
Owned Towers
(approx)
  

Coverage Area

United States

   19,800    Coverage spans 49 states and the District of Columbia; over 90% of the network provides coverage in the top 100 markets or core areas such as high traffic interstate corridors.

Mexico

   2,600    Coverage primarily concentrated in highly populated areas, including Mexico City, Monterrey and Guadalajara.

Brazil

   1,600    Coverage primarily concentrated in major metropolitan areas throughout Brazil.

India

   2,600    Coverage primarily concentrated in northern, eastern and southern India.

We lease space on our wireless communications towers to customers in a diverse range of wireless industries, including personal communications services, cellular, enhanced specialized mobile radio, WiMAX, paging and fixed microwave. Our three largest wireless customers by revenue in each country are as follows:

 

   

United States: AT&T Mobility, Sprint Nextel and Verizon Wireless;

 

   

Mexico: Grupo Iusacell, Nextel International and Telefonica (Movistar);

 

   

Brazil: Nextel International, America Movil (Claro) and Vivo;

 

   

India: Vodafone, Idea and Aircel.

For the year ended December 31, 2009, we had three customers that each accounted for 10% or more of our total revenues. AT&T Mobility, Sprint Nextel and Verizon Wireless accounted for approximately 19%, 18% and 15%, respectively, of our 2009 total revenues. Approximately 61% of our total revenues for the year ended December 31, 2009 were derived from four customers. As a result, we are subject to certain risks, as set forth in Item 1A of this Annual Report under the caption “Risk Factors—Due to the long-term expectations of revenue from tenant leases, we are sensitive to the credit worthiness of our tenants” and “A substantial portion of our revenue is derived from a small number of customers.” In addition, we are subject to risks related to our international operations, as set forth under the caption “Risk Factors—Our foreign operations are subject to economic, political and other risks that could adversely affect our revenues or financial position.”

Our leases with wireless communications providers in the markets we serve generally have initial non-cancelable terms of five to ten years. In most cases, our tenant leases have multiple five-year renewal terms

 

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at the option of the tenant. Wireless carriers generally renew their leases with us because suitable alternative sites may not exist or be available and repositioning a site in an existing carrier’s network may be expensive and often requires reconfiguring several other sites within the carrier’s network, which may impact the carrier’s network quality and coverage and may also require the carrier to obtain other governmental permits. Most of our tenant leases have escalation provisions that periodically increase the rent due under the lease. These automatic increases are typically annual and are based on a fixed percentage (generally three to five percent), inflation or a fixed percentage plus inflation.

Annual rental payments vary considerably depending upon various factors including:

 

   

tower location;

 

   

amount and function of the customer’s equipment on the tower;

 

   

ground space necessary for the customer’s electronic and other equipment related to the antennas;

 

   

remaining tower capacity;

 

   

shared back-up power infrastructure;

 

   

type of tower structure (e.g., stealth or camouflage tower); and

 

   

location of the customer’s antennas on the tower.

The number of antenna arrays that our towers can accommodate varies depending on the tower’s location, height, and structural capacity at certain wind speeds. As of December 31, 2009, our towers had an average of approximately 2.4 tenants per tower. We believe that a significant majority of our towers have the capacity to add new tenants, and new equipment for existing tenants, without the need to make capital investments to augment the structure. We believe that nearly all of our towers that are currently at or near full structural capacity can be upgraded or augmented to meet future leasing demand with relatively minor capital investment by strengthening its foundation, increasing its height or reinforcing the steel crossbars. In the United States, a portion of these upgrade and augmentation costs are generally shared with the customer, resulting in a short payback period for our net capital investment.

Broadcast Communications Towers. We are one of the largest independent owners and operators of broadcast towers in the United States and Mexico. We own approximately 230 broadcast towers in the United States and have exclusive rights to approximately 200 broadcast towers in Mexico. Broadcast towers generally are taller and structurally more complex than wireless communications towers, require unique engineering skills and are more costly to build. We lease space on our broadcast towers to a variety of customers including wireless service providers, but the higher elevations on these towers are primarily leased to radio and television broadcast companies. In leasing tower space to radio and broadcast companies, we generally receive monthly fees, with initial non-cancelable lease terms ranging from ten to twenty years. For the years ended December 31, 2009, 2008 and 2007, approximately 6%, 6% and 7%, respectively, of our rental and management segment revenue was attributable to our broadcast communications towers.

DAS Networks. We provide in-building and outdoor DAS networks in the United States. We own and operate approximately 200 in-building DAS networks in malls, casinos and other in-building applications in the United States and Mexico. We obtain rights to install and operate in-building DAS networks by entering into contracts with property owners, and we grant rights to wireless service providers to attach their equipment to our in-building DAS networks for a fee under licenses that typically have an initial non-cancelable term of at least ten years.

We offer outdoor DAS networks as a complementary shared infrastructure solution for our customers. Typically, we design, build and operate our outdoor DAS networks in areas in which zoning restrictions or other barriers may prevent or delay deployment of more traditional wireless structures. Similar to our in-building DAS

 

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networks, our customer agreements for our outdoor DAS networks typically have an initial non-cancelable term of at least ten years.

For the years ended December 31, 2009, 2008 and 2007, approximately 1% of our rental and management segment revenue was attributable to our DAS networks.

Rooftop Management. We also provide management services to property owners in the United States, Mexico and Brazil who own rooftops that are capable of hosting wireless communications equipment. We obtain rights to manage a rooftop by entering into contracts with property owners pursuant to which we receive a percentage of occupancy or license fees paid by the wireless carriers and other tenants. For the years ended December 31, 2009, 2008 and 2007, approximately 1% of our rental and management segment revenue was attributable to rooftop management.

Network Development Services Segment

We offer tower-related services, including site acquisition, zoning and permitting services and structural analysis services, through our network development services segment. This segment accounted for approximately 3%, 3% and 2% of our total revenues for the years ended December 31, 2009, 2008 and 2007, respectively.

Site Acquisition, Zoning and Permitting Services. We engage in site acquisition services on our own behalf in connection with our tower development projects, as well as on the behalf of our customers. We typically work with our customers’ engineers to determine the geographic areas where a new tower site will best address the customers’ needs and meet their coverage objectives. Once a new site is identified, we acquire the rights to the land or structure on which the site will be constructed, and we manage the permitting process to ensure all necessary approvals are obtained to construct and operate the communications site under applicable law.

Structural Analysis. We offer structural analysis services to wireless carriers in connection with the installation of communications equipment on towers. Our team of engineers can evaluate whether a tower can support the additional burden of the new equipment or if augmentation is needed, which enables our customers to better assess potential sites before making an installation decision. Our structural analysis capabilities enable us to provide higher quality service to our existing customers by, among other things, reducing cycle times related to tower structural analysis, as well as provide opportunities to offer structural analysis services to third parties.

Recent Developments

Growth and Expansion

In 2009, we continued to focus on our strategy of growing our operations using selective criteria for acquisitions and new site development, including expansion into new international geographic areas. During the year ended December 31, 2009, we grew our communications site portfolio through acquisitions and construction activities, including the acquisition and construction of 3,529 towers and the installation of 20 in-building and one outdoor DAS networks. In addition, we continue to evaluate opportunities to acquire larger communications site portfolios that we believe we can effectively integrate into our portfolio.

United States. During 2009, in response to the needs of our customers, we pursued the acquisition and construction of communications sites in select locations throughout the United States. Our expansion in the United States during 2009 included the acquisition and construction of 507 towers and the installation of 21 in-building and outdoor DAS networks.

Latin America. During 2009, the majority of our expansion efforts in Latin America were focused in Brazil as our customers sought to increase the density of their networks following a recent wireless spectrum auction. Our expansion in Latin America during 2009 included the acquisition and construction of 578 towers.

 

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Asia. During 2009, we expanded our presence and increased our footprint in India through the acquisitions of XCEL Telecom Private Limited (“XCEL”) and Insight Infrastructure Pte. Ltd. (“Insight”), as well as the construction of new communications sites. In 2009, we acquired and constructed 2,444 towers.

Financing Transactions

During the year ended December 31, 2009, we improved our financial position by raising capital to refinance and repurchase a portion of our outstanding indebtedness, which increased our flexibility and our ability to return value to our stockholders. Significant transactions included those set forth below.

Senior Notes Offerings. In June and October of 2009, we completed institutional private placements of $300.0 million aggregate principal amount of our 7.25% senior unsecured notes due 2019 (“7.25% Notes”) and $600.0 million aggregate principal amount of our 4.625% senior unsecured notes due 2015 (“4.625% Notes”), respectively. We used the net proceeds from the offering of the 7.25% Notes to finance the repurchase and redemption of our outstanding 7.50% senior notes due 2012 (“7.50% Notes”) and to repay certain of our indebtedness incurred under our $1.25 billion senior unsecured revolving credit facility (“Revolving Credit Facility”). We used the net proceeds from the offering of the 4.625% Notes primarily to finance the redemption of our outstanding 7.125% senior notes due 2012 (“7.125% Notes”).

Repurchases and Redemption of Debt Securities. During the year ended December 31, 2009, we repurchased or redeemed approximately $725.1 million face amount of our outstanding debt securities, including the repurchase and redemption of $225.0 million principal amount of our 7.50% Notes, the redemption of $500.0 million principal amount of our 7.125% Notes and the redemption of $0.1 million principal amount of our 3.00% convertible notes due August 15, 2012 (“3.00% Notes”).

Stock Repurchase Program. In 2009, we continued to repurchase shares of our Class A common stock (“Common Stock”) pursuant to our publicly announced stock repurchase program. In February 2008, our Board of Directors approved a stock repurchase program, pursuant to which we are authorized to purchase up to $1.5 billion of our Common Stock (“2008 Buyback”). During the year ended December 31, 2009, we repurchased 6.6 million shares of our Common Stock for an aggregate of $214.7 million, including commissions and fees, pursuant to the 2008 Buyback.

For more information about our financing transactions, see Item 7 of this Annual Report under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” and notes 6 and 13 to our consolidated financial statements included in this Annual Report.

Regulatory Matters

Towers and Antennas. The Federal Communications Commission (“FCC”) and the Federal Aviation Administration (“FAA”) regulate the siting, lighting, marking and maintenance of towers. Depending on factors such as tower height and proximity to public airfields, the construction of new towers or modifications to existing towers may require pre-approval by the FAA. Prior to use, towers requiring FAA approval must be registered with the FCC and must be painted and lighted in accordance with the FAA’s standards. Tower owners are responsible for notifying the FAA of any tower lighting outages or malfunctions and for timely repairing lighting outages or malfunctions. Tower owners also must notify the FCC when ownership of a tower changes. We generally indemnify our customers against non-compliance with applicable standards. Non-compliance with applicable tower-related requirements may lead to monetary penalties.

In all countries in which we own or operate towers, we are subject to local zoning restrictions and restrictive covenants imposed by local authorities or community developers. These regulations vary greatly, but typically require tower owners and/or licensees to obtain approval from local officials, government agencies or

 

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community standards organizations prior to tower construction or the addition of a new antenna to an existing tower. In the United States however, the Telecommunications Act of 1996 limits state and local zoning authorities’ jurisdiction over the construction, modification and placement of wireless communications towers. The law preserves local zoning authority but prohibits any action that would discriminate between different providers of wireless services or ban altogether the construction, modification or placement of communications towers. It also prohibits state or local restrictions based on the environmental effects of radio frequency emissions to the extent the facilities comply with FCC regulations. The Telecommunications Act of 1996 also requires the federal government to help licensees of wireless communications services gain access to preferred sites for their facilities. This may require that federal agencies and departments work directly with licensees to make federal property available for towers.

Local zoning authorities and community residents often are opposed to construction in their communities, which can delay or prevent new tower construction, new antenna installation or site upgrade projects, thereby limiting our ability to respond to customer demand. In addition, zoning regulations can increase costs associated with new tower construction and the addition of new antennas to a site. Existing regulatory policies may adversely affect the associated timing or cost of such projects and additional regulations may be adopted which can increase delays or result in additional costs to us. These factors could materially and adversely affect our domestic and international construction activities and operations.

As we expand our operations into additional international geographic areas, we will be subject to regulations in these jurisdictions. In addition, our customers in each country may also be subject to new regulatory policies from time to time that may materially and adversely affect the demand for communications sites and in some cases require relocation of certain sites.

Environmental, Health and Safety Matters. Our domestic and international operations, like those of other companies engaged in similar businesses, are subject to various environmental and occupational health and safety laws and regulations, at all levels of government, including those relating to the management, use, storage, disposal, emission and remediation of, and exposure to, hazardous and non-hazardous substances, materials, and wastes, and the siting of our towers. For example, in India, we are subject to the pollution control laws for the use of diesel generators at sites, and these laws vary from state to state. In the United States, the FCC considers the construction of a new tower or the addition of a new antenna to an existing site (including building rooftops and water towers) to be a federal undertaking subject to prior environmental review and approval under the National Environmental Policy Act of 1969 (“NEPA”), which obligates federal agencies to evaluate the environmental impacts of undertakings to determine whether they may significantly affect the environment. The FCC has issued regulations implementing NEPA as well as the National Historic Preservation Act of 1966 and the Endangered Species Act of 1973. These regulations obligate each FCC applicant or licensee to investigate potential environmental and other effects of operations and to disclose any significant impacts in an environmental assessment prior to constructing a tower or adding a new antenna to a site. If a tower or new antenna would have a significant impact on the environment, FCC approval of the tower or antenna could be significantly delayed.

As an owner, lessee and/or operator of real property and facilities, we may have liability for the costs of investigation, removal or remediation of soil and groundwater contaminated by hazardous substances or wastes at our sites or at sites to which we transported hazardous substances or wastes. Certain of these laws impose cleanup responsibility and liability without regard to whether we, as the owner, lessee or operator, knew of or were responsible for the contamination, and whether or not we have discontinued operations or sold the property. We may also be subject to common law claims by third parties based on damages and costs resulting from off-site migration of contamination.

Our domestic and international operations are also subject to guidelines regarding employee protection from radio frequency exposure and other occupational health and safety matters. In the United States, we are subject to the Occupational Safety and Health Act of 1970 and our field personnel are subject to regulation by the

 

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Occupational Safety and Health Administration (“OSHA”) and equivalent state agencies concerning such matters.

We, and our customers, may be required to obtain permits, comply with regulatory requirements, and make certain informational filings related to hazardous substances used at our sites. Violations of these types of regulations could subject us to fines and/or criminal sanctions.

Competition and Customer Demand

Rental and Management Segment

Our rental and management segment competes with other international, national and regional tower companies, such as Crown Castle International Corp. and SBA Communications Corporation in the United States and Indus Towers in India, as well as wireless carriers and broadcasters that own and operate their own communications site networks and lease space to third parties, numerous independent tower owners and the owners of non-communications sites, including rooftops, utility towers, water towers and other alternative structures. We believe that site location and capacity, price and quality of service have been and will continue to be significant competitive factors affecting owners, operators and managers of communications sites.

Customer demand is also affected by the emergence and growth of new technologies. Technologies that make it possible for wireless carriers to increase the capacity and efficiency of their existing networks could reduce customer demand for our communications sites. The increased use of spectrally efficient air-link technologies, which potentially can relieve some network capacity problems, could reduce the demand for tower-based antenna space. Additionally, certain complementary network technologies, such as femtocells, could offload a portion of network traffic away from the traditional tower-based networks, which could reduce the need for carriers to add more equipment at certain communications sites.

In addition, any increase in the use of network sharing, roaming or resale arrangements by wireless service providers also could adversely affect customer demand for tower space. These arrangements, which are essentially extensions of traditional roaming agreements, enable a provider to adequately serve its customers outside its license area, to give licensed providers the right to enter into arrangements to serve overlapping license areas, and to permit non-licensed providers to enter the wireless marketplace. Consolidation among wireless carriers could have a similar impact on customer demand for our communications sites because the existing networks of wireless carriers often overlap. In addition, if wireless carriers share their sites or swap their sites with other carriers to a significant degree, it could reduce demand for our communications sites.

Network Development Services Segment

Our network development services segment competes with a variety of companies offering individual, or combinations of, competing services. The field of competitors includes site acquisition consultants, zoning consultants, real estate firms, right-of-way consulting firms, structural engineering firms, tower owners/managers, telecommunications equipment vendors who can provide turnkey site development services through multiple subcontractors, and our customers’ internal staffs. We believe that our customers base their decisions for network development services on various criteria, including a company’s experience, local reputation, price, and time for completion of a project.

We believe that we compete favorably as to the key competitive factors relating to our rental and management and network development services segments.

Employees

As of December 31, 2009, we employed 1,420 full-time individuals and consider our employee relations to be satisfactory.

 

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Available Information

Our Internet website address is www.americantower.com. Information contained on our website is not incorporated by reference into this Annual Report, and you should not consider information contained on our website as part of this Annual Report. You may access, free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, plus amendments to such reports as filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), through the Investors portion of our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (“SEC”).

We have adopted a written Code of Conduct that applies to all of our employees and directors, including, but not limited to, our principal executive officer, principal financial officer, and principal accounting officer or controller, or persons performing similar functions. The Code of Conduct, our corporate governance guidelines, and the charters of the audit, compensation, and nominating and corporate governance committees of our Board of Directors, are available at the “Investors” portion of our website. In the event we amend the provisions of our Code of Conduct, or provide any waivers of the Code of Conduct for our directors or executive officers, we intend to disclose these events on our website as required by the regulations of the New York Stock Exchange and applicable law.

In addition, paper copies of these documents may be obtained free of charge by writing us at the following address: 116 Huntington Avenue, Boston, Massachusetts 02116, Attention: Investor Relations; or by calling us at (617) 375-7500.

 

ITEM 1A. RISK FACTORS

Decrease in demand for our communications sites would materially and adversely affect our operating results and we cannot control that demand.

Many of the factors affecting the demand for our communications sites, and to a lesser extent our network development services, could materially and adversely affect our operating results. Those factors include:

 

   

a decrease in consumer demand for wireless services due to general economic conditions or other factors;

 

   

the financial condition of wireless service providers;

 

   

the ability and willingness of wireless service providers to maintain or increase capital expenditures;

 

   

the growth rate of wireless communications or of a particular wireless segment;

 

   

governmental licensing of spectrum;

 

   

mergers or consolidations among wireless service providers;

 

   

increased use of network sharing, roaming or resale arrangements by wireless service providers;

 

   

delays or changes in the deployment of next generation wireless technologies;

 

   

zoning, environmental, health or other government regulations; and

 

   

technological changes.

The demand for broadcast space is dependent on the needs of television and radio broadcasters. Among other things, technological advances, including the development of satellite-delivered radio and video services, may reduce the need for tower-based broadcast transmission. In addition, as we continue to work with our customers during the transition from analog-based transmissions to digital-based transmissions, any significant increase in attrition rate or decrease in overall demand for broadcast space could have a material adverse effect on our business, results of operations and financial condition.

 

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Furthermore, any downturn in the economy or disruption in the financial and credit markets could have an impact on consumer demand for wireless services. If wireless service subscribers significantly reduce their minutes of use, or fail to widely adopt and use wireless data applications, our wireless carrier customers could experience a decrease in demand for their services. As a result, they may scale back their business plans or otherwise reduce their spending, which could materially and adversely affect demand for our communications sites and our network development services business, which could have a material adverse effect on our business, results of operations and financial condition.

If our wireless service provider customers consolidate or merge with each other to a significant degree, our growth, revenue and ability to generate positive cash flows could be materially and adversely affected.

Significant consolidation among our wireless service provider customers may result in the decommissioning of certain existing communications sites, because certain portions of their networks may be redundant, and a reduction in future capital expenditures in the aggregate, because their expansion plans may be similar. For example, in connection with the combinations of Verizon Wireless and ALLTEL (to form Verizon Wireless), Cingular and AT&T Wireless (to form AT&T Mobility) and Sprint PCS and Nextel (to form Sprint Nextel) in the United States, and of Iusacell Celular and Unefon (now under the common ownership of Grupo Iusacell) in Mexico, the combined companies rationalized duplicative parts of their networks, which has led to the decommissioning of certain equipment on our communications sites. In addition, these and other customers could determine not to renew leases with us as a result. Our future results may be negatively impacted if a significant number of these contracts are terminated, and our ongoing contractual revenues would be reduced as a result. Similar consequences might occur if wireless service providers engage in extensive sharing, roaming or resale arrangements as an alternative to leasing on our communications sites.

Our leverage and debt service obligations may materially and adversely affect us.

As of December 31, 2009, we had approximately $4.2 billion of consolidated debt, and the ability to borrow additional amounts of approximately $695.8 million under the Revolving Credit Facility. Our substantial level of indebtedness increases the possibility that we may be unable to generate cash sufficient to pay when due the principal of, interest on, or other amounts due with respect to our indebtedness. We are also permitted, subject to certain restrictions under our existing indebtedness, to obtain additional long-term debt and working capital lines of credit to meet future financing needs. This would have the effect of increasing our total leverage.

Our leverage could have significant negative consequences on our financial condition and results of operations, including:

 

   

impairing our ability to meet one or more of the financial ratio covenants contained in our debt agreements or to generate cash sufficient to pay interest or principal due under those agreements, which could result in an acceleration of some or all of our outstanding debt and the loss of towers subject to our securitization transaction (the “Securitization”) if an uncured default occurs;

 

   

increasing our vulnerability to general adverse economic and industry conditions;

 

   

limiting our ability to obtain additional debt or equity financing;

 

   

increasing our borrowing costs if our current investment grade debt ratings decline;

 

   

requiring the dedication of a substantial portion of our cash flow from operations to service our debt, thereby reducing the amount of our cash flow available for other purposes, including capital expenditures;

 

   

requiring us to sell debt or equity securities or to sell some of our core assets, possibly on unfavorable terms, to meet payment obligations;

 

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limiting our flexibility in planning for, or reacting to, changes in our business and the markets in which we compete;

 

   

limiting our ability to repurchase our Common Stock; and

 

   

placing us at a possible competitive disadvantage to less leveraged competitors and competitors that may have better access to capital resources.

Restrictive covenants in the loan agreement for the Revolving Credit Facility and term loan, the indentures governing our debt securities, and the loan agreement related to our Securitization could materially and adversely affect our business by limiting flexibility.

The loan agreement for the Revolving Credit Facility and the additional $325.0 million of term loan commitments (“Term Loan”) contain restrictive covenants, as well as requirements to comply with certain leverage and other financial maintenance tests, and thus require that we limit our ability to take various actions, including incurring additional debt, guaranteeing indebtedness and engaging in various types of transactions, including mergers, acquisitions and sales of assets. Additionally, our indentures restrict our and our subsidiaries’ ability to incur liens securing our or their indebtedness. These covenants could place us at a disadvantage compared to some of our competitors, who may have fewer restrictive covenants and may not be required to operate under these restrictions. Further, these covenants could have an adverse effect on our business by limiting our ability to take advantage of financing, new tower development, mergers and acquisitions or other opportunities.

The loan agreement related to our Securitization includes operating covenants and other restrictions customary for loans subject to rated securitizations. Among other things, the borrowers under the loan agreement for the Securitization are prohibited from incurring other indebtedness for borrowed money or further encumbering their assets. A failure to comply with the covenants in the loan agreement could prevent the borrowers from taking certain actions with respect to the towers subject to the Securitization, and could prevent the borrowers from distributing any excess cash from the operation of such towers to us. If the borrowers were to default on the loan, the servicer on the loan could seek to foreclose upon or otherwise convert the ownership of the towers subject to the Securitization, in which case we could lose such towers and the revenue associated with such towers.

In addition, reporting and information covenants in our loan agreements and indentures require that we provide financial and operating information within certain time periods. If we are unable to timely provide the required information, we would be in breach of these covenants. For more information regarding the covenants and requirements discussed above, please see Item 7 of this Annual Report under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Factors Affecting Sources of Liquidity” and note 6 to our consolidated financial statements included in this Annual Report.

We could suffer adverse tax and other financial consequences if taxing authorities do not agree with our tax positions, or we are unable to utilize our net operating losses.

We are periodically subject to a number of tax examinations by taxing authorities in the states and countries where we do business, and we expect that we will continue to be subject to tax examinations in the future. In addition, U.S. federal, state and local, as well as international, tax laws and regulations are extremely complex and subject to varying interpretations. We recognize tax benefits of uncertain tax positions when we believe the positions are more likely than not of being sustained upon a challenge by the relevant tax authority. We believe our judgments in this area are reasonable and correct, but there is no guarantee that our tax positions will not be challenged by relevant tax authorities or that we would be successful in any such challenge. If there are tax benefits that are challenged successfully by a taxing authority, we may be required to pay additional taxes or we may seek to enter into settlements with the taxing authorities, which could require significant payments or otherwise have a material adverse effect on our business, results of operations and financial condition.

 

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In addition, we have significant deferred tax assets related to our net operating losses (“NOLs”) in U.S. federal and state taxing jurisdictions. Generally, for U.S. federal and state tax purposes, NOLs can be carried forward and used for up to twenty years, and all of our tax years will remain subject to examination until three years after our NOLs are used or expire. We may be limited in our ability to utilize our NOLs to offset future taxable income and thereby reduce our otherwise payable income taxes. We have substantial federal and state NOLs, including significant portions obtained through acquisitions and dispositions, as well as those generated through our historic business operations. In addition, we have disposed of some entities and restructured other entities in conjunction with financing transactions and other business activities.

To the extent we believe that a position with respect to an NOL is not more likely than not to be sustained, we do not record the related deferred tax asset. In addition, for NOLs that meet the recognition threshold, we assess the recoverability of the NOL and establish a valuation allowance against the deferred tax asset related to the NOL if recoverability is questionable. Given the uncertainty surrounding the recoverability of certain of our NOLs, we have established a valuation allowance to offset the related deferred tax asset so as to reflect what we believe to be the recoverable portion of our NOLs.

Our ability to utilize our NOLs is also dependent, in part, upon us having sufficient future earnings to utilize our NOLs before they expire. If market conditions change materially and we determine that we will be unable to generate sufficient taxable income in the future to utilize our NOLs, we could be required to record an additional valuation allowance. We review our uncertain tax position and the valuation allowance for our NOLs periodically and make adjustments from time to time, which can result in an increase or decrease to the net deferred tax asset related to our NOLs. Our NOLs are also subject to review and potential disallowance upon audit by the taxing authorities of the jurisdictions where the NOLs were incurred, and future changes in tax laws or interpretations of such tax laws could limit materially our ability to utilize our NOLs. If we are unable to use our NOLs or use of our NOLs is limited, we may have to make significant payments or otherwise record charges or reduce our deferred tax assets, which could have a material adverse effect on our business, results of operations and financial condition.

Due to the long-term expectations of revenue from tenant leases, we are sensitive to the creditworthiness and financial strength of our tenants.

Due to the long-term nature of our tenant leases, we, like others in the tower industry, are dependent on the continued financial strength of our tenants. Many wireless service providers operate with substantial leverage. In the past, we have had customers that have filed for bankruptcy, although to date these bankruptcies have not had a material adverse effect on our business or revenues. In addition, many of our customers and potential customers rely on capital raising activities to fund their operations and capital expenditures, and the downturn in the economy and the disruptions in the financial and credit markets have made it more difficult and more expensive to raise capital. If our customers or potential customers are unable to raise adequate capital to fund their business plans, they may reduce their spending, which could materially and adversely affect demand for our communications sites and our network development services business. If, as a result of a prolonged economic downturn or otherwise, one or more of our significant customers experienced financial difficulties or filed for bankruptcy, it could result in uncollectible accounts receivable and an impairment on our deferred rent asset, tower asset or customer relationship intangible asset. In addition, it could result in the loss of significant customers and all or a portion of our anticipated lease revenues from certain customers, all of which could have a material adverse effect on our business, results of operations and financial condition. For example, as discussed below in “—Risk Factors—A substantial portion of our revenue is derived from a small number of customers,” Grupo Iusacell suspended the debt service payment of its U.S. Dollar denominated debt to its bondholders and is currently in negotiations with those bondholders. While Grupo Iusacell’s operating subsidiaries have continued to make partial payments to us, our net accounts receivable related to Grupo Iusacell was approximately $28.2 million as of December 31, 2009.

 

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Our foreign operations are subject to economic, political and other risks that could materially and adversely affect our revenues or financial position, including risks associated with foreign currency exchange rates.

Our business operations in Mexico, Brazil and India, and our expansion into any other international geographic areas in the future, could result in adverse financial consequences and operational problems not typically experienced in the United States. For the year ended December 31, 2009, approximately 15% of our consolidated revenues were generated by our international operations. We anticipate that our revenues from our international operations may grow in the future. Accordingly, our business is subject to risks associated with doing business internationally, including:

 

   

changes in a specific country’s or region’s political or economic conditions;

 

   

laws and regulations that tax or otherwise restrict repatriation of earnings or other funds or otherwise limit distributions of capital;

 

   

laws and regulations that dictate how we operate our communications sites and conduct business, including zoning and environmental matters;

 

   

changes to existing or new tax laws directed specifically at the ownership and operation of communications sites;

 

   

expropriation and governmental regulation restricting foreign ownership;

 

   

possible failure to comply with anti-bribery laws such as the Foreign Corrupt Practices Act and similar local anti-bribery laws;

 

   

uncertainties regarding legal or judicial systems, including inconsistencies between and within laws, regulations and decrees, and judicial application thereof;

 

   

health or similar issues, such as a pandemic or epidemic; and

 

   

difficulty in recruiting and retaining trained personnel.

In addition, we face risks associated with changes in foreign currency exchange rates, including those arising from our operations, investments and financing transactions related to our international business. Volatility in foreign currency exchange rates can also affect our ability to plan, forecast and budget for our international operations and expansion efforts. While most of the contracts for our operations in Mexico are denominated in the U.S. Dollar, many are denominated in the Mexican Peso, and contracts for our operations in Brazil and India are denominated in the local currencies. We have not historically engaged in significant currency hedging activities relating to our non-U.S. Dollar operations, and a weakening of these foreign currencies against the U.S. Dollar would have a negative impact on our reported revenues and operating profits, which could have a material adverse effect on our business, results of operations and financial condition.

A substantial portion of our revenue is derived from a small number of customers.

A substantial portion of our total operating revenues is derived from a small number of customers. For the year ended December 31, 2009:

 

   

Four customers accounted for approximately 61% of our revenues;

 

   

AT&T Mobility accounted for approximately 19% of our revenues;

 

   

Sprint Nextel accounted for approximately 18% of our revenues;

 

   

Verizon Wireless accounted for approximately 15% of our revenues; and

 

   

T-Mobile accounted for approximately 9% of our revenues.

 

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Our largest international customer is Grupo Iusacell, which now controls both Iusacell Celular and Unefon in Mexico. Grupo Iusacell is under common control with TV Azteca. Grupo Iusacell accounted for approximately 5% of our total revenues for the year ended December 31, 2009. In addition, for the year ended December 31, 2009, we received $15.7 million in interest income from TV Azteca on our net note receivable balance of $108.2 million.

If any of these customers is unwilling or unable to perform its obligations under our agreements with them, our revenues, results of operations, financial condition and liquidity could be materially and adversely affected. In the ordinary course of our business, we do occasionally experience disputes with our customers, generally regarding the interpretation of terms in our agreements. Although we have historically resolved these disputes in a manner that did not have a material adverse effect on us or our customer relationships, it is possible that such disputes could lead to a termination of our agreements with customers or a material modification of the terms of those agreements, either of which could have a material adverse effect on our business, results of operations and financial condition. If we are forced to resolve any of these disputes through litigation, our relationship with the applicable customer could be terminated or damaged, which could lead to decreased revenues or increased costs, resulting in a corresponding adverse effect on our business, results of operations and financial condition.

On April 1, 2009, Grupo Iusacell announced that one of its subsidiaries had suspended the debt service payment of its U.S. Dollar denominated debt as part of an ongoing process to restructure its U.S. Dollar denominated debt, which has been affected by the significant devaluation of the Mexican Peso versus the U.S. Dollar. While Grupo Iusacell has continued to make partial payments to us, our net accounts receivable related to Grupo Iusacell was approximately $28.2 million as of December 31, 2009. We also have approximately $33.5 million of other Grupo Iusacell related assets as of December 31, 2009, which includes financing lease commitments and accrued straight-line revenue that are primarily long-term in nature. If Grupo Iusacell is unable to restructure its indebtedness or if a further devaluation of the Mexican Peso were to adversely impact Grupo Iusacell’s overall liquidity, Grupo Iusacell might not be able to meet its operating obligations, including making full payments under the lease agreements with us in the future, which could have a material adverse effect on our business and results of operations.

We anticipate that we may need additional financing to fund future growth and expansion initiatives, to refinance our existing indebtedness and to fund our stock repurchase program.

In order to fund future growth and expansion initiatives, refinance our existing indebtedness and fund our stock repurchase program, we may need to raise additional capital through financing activities. We believe our cash provided by operations for the year ending December 31, 2010 will be sufficient to fund our cash needs for operations, capital expenditures and cash debt service (interest and principal repayments) obligations for 2010. However, we anticipate that we may need to obtain additional sources of capital in the future to fund growth initiatives and to support additional return of capital to stockholders. If so, depending on market conditions, we may seek to raise capital through credit facilities or debt or equity offerings. A downgrade of our credit rating below investment grade could negatively impact our ability to access credit markets or preclude us from obtaining funds on investment grade terms and conditions. Further, certain of our current debt instruments limit the amount of indebtedness we and our subsidiaries may incur. Additional financing, therefore, may be unavailable, more expensive or restricted by the terms of our outstanding indebtedness. If we are unable to raise capital when our needs arise, we may not be able to fund our stock repurchase program, refinance our existing indebtedness or fund future growth and expansion initiatives.

New technologies could make our tower leasing business less desirable to potential tenants and result in decreasing revenues.

The development and implementation of new technologies designed to enhance the efficiency of wireless networks could reduce the use and need for tower-based wireless services transmission and reception and have

 

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the effect of decreasing demand for tower space. Examples of such technologies include spectrally efficient air-link technologies which potentially can relieve some network capacity problems, could reduce the demand for tower-based antenna space. Additionally, certain complementary network technologies, such as femtocells, could offload a portion of network traffic away from the traditional tower-based networks, which would reduce the need for carriers to add more equipment at certain communications sites. Moreover, the emergence of alternative technologies could reduce the need for tower-based broadcast services transmission and reception. For example, the growth in delivery of wireless communication, radio and video services by direct broadcast satellites could materially and adversely affect demand for our antenna space. The development and implementation of any of these and similar technologies to any significant degree could have a material adverse effect on our business, results of operations and financial condition.

We could have liability under environmental laws.

Our operations, like those of other companies engaged in similar businesses, are subject to the requirements of various federal, state, local and foreign environmental and occupational safety and health laws and regulations, including those relating to the management, use, storage, disposal, emission and remediation of, and exposure to, hazardous and non-hazardous substances, materials and wastes. As the owner, lessee or operator of real property and facilities, we may be liable for substantial costs of investigation, removal or remediation of soil and groundwater contaminated by hazardous materials, without regard to whether we, as the owner, lessee or operator, knew of or were responsible for the contamination. We may also be liable for certain costs of remediating contamination at third party sites to which we sent waste for disposal, even if the original disposal may have accorded with all legal requirements. Many of these laws and regulations contain information reporting and record keeping requirements. We cannot assure you that we are at all times in complete compliance with all environmental requirements. We may be subject to potentially significant fines or penalties if we fail to comply with any of these requirements. The requirements of these laws and regulations are complex, change frequently, and could become more stringent in the future. It is possible that these requirements will change or that liabilities will arise in the future in a manner that could have a material adverse effect on our business, results of operations and financial condition.

Our business is subject to government regulations and changes in current or future laws or regulations could restrict our ability to operate our business as we currently do.

Our business, and that of our customers, is subject to federal, state, local and foreign regulation, including by the FAA, the FCC, the U.S. Environmental Protection Agency and the OSHA. Both the FCC and the FAA regulate towers used for wireless communications and radio and television broadcasting and the FCC separately regulates transmitting devices operating on towers. Similar regulations exist in Mexico, Brazil, India and other foreign countries regarding wireless communications and the operation of towers. Local zoning authorities and community organizations are often opposed to construction in their communities and these regulations can delay, prevent or increase the cost of new tower construction, modifications, additions of new antennas to a site, or site upgrades, thereby limiting our ability to respond to customer demands and requirements. Existing regulatory policies may materially and adversely affect the associated timing or cost of such projects and additional regulations may be adopted which increase delays or result in additional costs to us, or that prevent such projects in certain locations. These factors could materially and adversely affect our business, results of operations and financial condition.

Increasing competition in the tower industry may create pricing pressures that may materially and adversely affect us.

Our industry is highly competitive, and our customers have numerous alternatives for leasing antenna space. Some of our competitors, such as national wireless carriers that allow collocation on their towers, are larger and may have greater financial resources than we do, while other competitors may have lower return on investment criteria than we do.

 

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Our competition includes:

 

   

international, national and regional tower companies;

 

   

wireless carriers that own towers and lease antenna space to other carriers;

 

   

site development companies that purchase antenna space on existing towers for wireless carriers and manage new tower construction; and

 

   

alternative site structures (e.g., building rooftops, outdoor and indoor DAS networks, billboards and electric transmission towers).

Competitive pricing pressures for tenants on towers from these competitors could materially and adversely affect our lease rates and services income. In addition, we may not be able to renew existing customer leases or enter into new customer leases, resulting in a material adverse impact on our results of operations and growth rate. Increasing competition could also make the acquisition of high quality tower assets more costly. Any of these factors could materially and adversely affect our business, results of operations or financial condition.

If we are unable to protect our rights to the land under our towers, it could adversely affect our business and operating results.

Our real property interests relating to our towers consist primarily of leasehold and sub-leasehold interests, fee interests, easements, licenses and rights-of-way. A loss of these interests at a particular tower site may interfere with our ability to operate a tower and generate revenues. For various reasons, we may not always have the ability to access, analyze and verify all information regarding titles and other issues prior to completing an acquisition of communications sites, which can affect our rights to access and operate a site. From time to time we also experience disputes with landowners regarding the terms of ground agreements for land under a tower, which can affect our ability to access and operate a tower site. Further, for various reasons, landowners may not want to renew their ground agreements with us, they may lose their rights to the land, or they may transfer their land interests to third parties, including ground lease aggregators, which could affect our ability to renew ground agreements on commercially viable terms. Approximately 83% of the communications sites in our portfolio as of December 31, 2009 are located on land we do not own. Approximately 89% of the ground agreements for these sites have a final expiration date of 2019 and beyond. Our inability to protect our rights to the land under our towers may have a material adverse effect on our business, results of operations or financial condition.

If we are unable or choose not to exercise our rights to purchase towers that are subject to lease and sublease agreements at the end of the applicable period, our cash flows derived from such towers would be eliminated.

Our communications site portfolio includes towers that we operate pursuant to lease and sublease agreements that include a purchase option at the end of each lease period. If we are unable or choose not to exercise our rights to purchase towers under these agreements at the end of the applicable period, our cash flows derived from such towers would be eliminated. For example, our SpectraSite subsidiary has entered into lease or sublease agreements with affiliates of SBC Communications, a predecessor entity to AT&T Mobility, with respect to approximately 2,500 towers pursuant to which SpectraSite has the option to purchase the sites upon the expiration of the lease or sublease beginning in 2013. The aggregate purchase option price for the AT&T Mobility towers was approximately $413.0 million as of December 31, 2009, and will accrete at a rate of 10% per year to the applicable expiration of the lease or sublease of a site. We have entered into a similar agreement with ALLTEL, which completed its merger with Verizon Wireless in January 2009, with respect to approximately 1,800 towers, for which we have an option to purchase the sites upon the expiration of the lease or sublease beginning in 2016. The aggregate purchase option price for the ALLTEL towers was approximately $63.3 million as of December 31, 2009, and will accrete at a rate of 3% per year through the expiration of the lease or sublease period. At ALLTEL’s option, at the expiration of the sublease period, the purchase price would

 

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be payable in cash or with 769 shares of our Common Stock per tower. We may not have the required available capital to exercise our right to purchase these or other leased or subleased towers at the end of the applicable period. Even if we do have available capital, we may choose not to exercise our right to purchase such towers for business or other reasons. In the event that we do not exercise these purchase rights, or are otherwise unable to acquire an interest that would allow us to continue to operate these towers after the applicable period, we will lose the cash flows derived from such towers, which may have a material adverse effect on our business. In the event that we decide to exercise these purchase rights, the benefits of the acquisitions of such towers may not exceed the associated acquisition, compliance and integration costs, and our business, results of operations or financial condition could be materially and adversely affected.

Our towers may be affected by natural disasters and other unforeseen damage for which our insurance may not provide adequate coverage.

Our towers are subject to risks associated with natural disasters, such as ice and wind storms, tornadoes, floods, hurricanes and earthquakes, as well as other unforeseen damage. Any damage or destruction to our towers as a result of these or other risks would impact our ability to provide services to our customers and could materially and adversely impact our results of operation or financial condition. While we maintain insurance coverage for natural disasters, we may not have adequate insurance to cover the associated costs of repair or reconstruction for a future major event. Further, we carry business interruption insurance, but such insurance may not adequately cover all of our lost revenues, including potential revenues from new tenants that could have been added to our towers but for the damage. If we are unable to provide services to our customers as a result of damage to our towers, it could lead to customer loss, resulting in a corresponding material adverse effect on our business, results of operations or financial condition.

Our costs could increase and our revenues could decrease due to perceived health risks from radio emissions, especially if these perceived risks are substantiated.

Public perception of possible health risks associated with cellular and other wireless communications technology could slow the growth of wireless companies, which could in turn slow our growth. In particular, negative public perception of, and regulations regarding, these perceived health risks could slow the market acceptance of wireless communications services and increase opposition to the development and expansion of tower sites. The potential connection between radio frequency emissions and certain negative health effects has been the subject of substantial study by the scientific community in recent years, and numerous health-related lawsuits have been filed against wireless carriers and wireless device manufacturers. If a scientific study or court decision resulted in a finding that radio frequency emissions posed health risks to consumers, it could negatively impact the market for wireless services, as well as our wireless carrier customers, which could materially and adversely affect our business, results of operations or financial condition. We do not maintain any significant insurance with respect to these matters.

Our historical stock option granting practices are subject to ongoing governmental proceedings, which could result in fines, penalties or other liability.

In May 2006, we announced that our Board of Directors had established a special committee of independent directors to conduct a review of our stock option granting practices and related accounting. Subsequent to the formation of the special committee, we received an informal letter of inquiry from the SEC, a subpoena from the office of the United States Attorney for the Eastern District of New York and an information document request from the Internal Revenue Service (“IRS”), each requesting documents and information related to our stock option grants and practices. We also received a request for information from the Department of Labor, which concluded its review in September 2008, with no action taken against us. We have cooperated with these governmental authorities to provide the requested documents and information. These governmental proceedings are ongoing, and the time period necessary to resolve these proceedings is uncertain and could require significant

 

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additional management and financial resources. Significant legal and accounting expenses related to these matters have been incurred to date, and we may incur expenses in the future. Depending on the final outcomes of these proceedings, we and members of our senior management could be subject to regulatory fines, penalties, enforcement actions or other liability, which could have a material adverse impact on our business, results of operations or financial condition. In addition, as a result of the special committee’s findings, we restated our historical financial statements for certain periods prior to March 31, 2006 to, among other things, record changes for stock-based compensation expense (and related tax effects) relating to certain past stock option grants.

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

 

ITEM 2. PROPERTIES

Our principal offices are located in Boston, Southborough and Woburn, Massachusetts; Atlanta, Georgia; Cary, North Carolina; Mexico City, Mexico; Sao Paulo, Brazil; and Delhi and Mumbai, India. Details of each of these offices are provided below:

 

Location

  

Function

   Size (square feet)    Property Interest  

Boston, MA

   Corporate Headquarters and American Tower International Headquarters    19,600    Leased   

Southborough, MA

   Information Technology Data Center    13,900    Leased   

Woburn, MA

   US Tower Division Headquarters, Lease Administration, Site Leasing Management and Broadcast Division Headquarters    58,100    Owned (1) 

Atlanta, GA

   US Tower Division, Accounting Services, New Site Development and Site Operations Headquarters    21,400    Leased   

Cary, NC

   US Tower Division, DAS Solutions and Structural Engineering Services Headquarters    17,500    Leased   

Mexico City, Mexico

   Mexico Headquarters    11,000    Leased   

Sao Paulo, Brazil

   Brazil Headquarters    6,300    Leased   

Delhi, India

   India Headquarters    7,200    Leased   

Mumbai, India

   India Operations Center    10,800    Leased (2) 

 

(1) Our Woburn facility is approximately 163,000 square feet. Our offices occupy approximately 58,100 square feet, and we lease the remaining space to unaffiliated tenants.

 

(2) We lease two office spaces in Mumbai that together occupy an aggregate of approximately 10,800 square feet.

In addition to the principal offices set forth above, we maintain offices in the geographic areas we serve through which we operate our tower leasing and services businesses. We also have an international business development group based in London, England. We believe that our owned and leased facilities are suitable and adequate to meet our anticipated needs.

Our interests in our communications sites are comprised of a variety of ownership interests, including leases created by long-term ground lease agreements, easements, licenses or rights-of-way granted by government entities. Pursuant to the loan agreement for our Securitization, the tower sites subject to the Securitization are subject to mortgages, deeds of trust and deeds to secure the loan. A typical tower site consists of a compound

 

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enclosing the tower site, a tower structure, and one or more equipment shelters that house a variety of transmitting, receiving and switching equipment. There are three principal types of towers: guyed, self-supporting lattice, and monopole.

 

   

A guyed tower includes a series of cables attaching separate levels of the tower to anchor foundations in the ground. A guyed tower can reach heights of up to 2,000 feet. A guyed tower site for a typical broadcast tower can consist of a tract of land of up to 20 acres.

 

   

A lattice tower typically tapers from the bottom up and usually has three or four legs. A lattice tower can reach heights of up to 1,000 feet. Depending on the height of the tower, a lattice tower site for a typical wireless communications tower can consist of a tract of land of 10,000 square feet for a rural site or less than 2,500 square feet for a metropolitan site.

 

   

A monopole is a tubular structure that is used primarily to address space constraints or aesthetic concerns. Monopoles typically have heights ranging from 50 to 200 feet. A monopole tower site used in metropolitan areas for a typical wireless communications tower can consist of a tract of land of less than 2,500 square feet.

Of the approximately 27,200 communications sites in our portfolio as of December 31, 2009, approximately 83% are located on land we do not own. Ground agreements for land underlying our towers generally have an initial term of five years with three or four additional automatic renewal periods of five years, for a total of twenty to twenty-five years. As a result, approximately 89% of the ground agreements for our sites have a final expiration date of 2019 and beyond.

 

ITEM 3. LEGAL PROCEEDINGS

On May 18, 2006, we received a letter of informal inquiry from the SEC Division of Enforcement requesting information related to our stock option grants and stock option practices. The inquiry is focused on stock options granted to senior management and members of our Board of Directors during the period 1997 to 2006. We continue to cooperate with the SEC to provide documents, testimony and other information, as requested. We are aware that in February 2008, a former officer of the Company received a “Wells” notice from the SEC which affords such individual the opportunity to make a submission to the SEC with respect to contemplated civil enforcement recommendations against such individual for certain violations of the federal securities laws.

On May 19, 2006, we received a subpoena from the United States Attorney’s Office for the Eastern District of New York for records and information relating to our stock option granting practices. The subpoena requests materials related to certain stock options granted between 1995 and 2006. We continue to cooperate with the U.S. Attorney’s Office to provide the requested information and documents.

On May 26, 2006, a purported securities class action was filed in United States District Court for the District of Massachusetts against us and certain of our current and former officers by John S. Greenebaum for monetary relief. In March 2007, an amended consolidated complaint was filed, naming certain of our current and former officers and directors of the Company as defendants and alleging that the defendants violated federal securities laws in connection with public statements made relating to our stock option practices and related accounting. The complaint asserted claims under Sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5. In February 2008, the court preliminarily approved a settlement we had reached with the plaintiffs. The settlement provided for a payment by us of $14.0 million and led to a dismissal of all claims against all defendants in the litigation. In March and April of 2008, we paid the settlement amount. In May 2008, the original plaintiff, Mr. Greenebaum, filed an objection to the settlement which was dismissed by the court. In June and July of 2008, the court approved the settlement and denied a request by Mr. Greenebaum to opt-out of the settlement class certified by the court. Mr. Greenebaum appealed the decision of the court relating to him and in December 2008, we entered

 

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into a settlement agreement with Mr. Greenebaum providing for payment by us of $5,000, which the court approved in January 2009. In January 2009, the plaintiff’s class entered into a settlement agreement with Mr. Greenebaum. As a result of these settlements, Mr. Greenebaum withdrew his appeals, effectively ending the litigation.

On May 24, 2006 and June 14, 2006, two shareholder derivative lawsuits were filed in Suffolk County Superior Court in Massachusetts by Eric Johnston and Robert L. Garber, respectively. The lawsuits were filed against certain of our current and former officers and directors for alleged breaches of fiduciary duties and unjust enrichment in connection with our historical stock option granting practices. The lawsuits also named us as a nominal defendant. The lawsuits sought to recover the damages sustained by us and disgorgement of all profits received with respect to the alleged backdated stock options. In October 2007, the court dismissed the complaint, without leave to amend, due to the plaintiffs’ failure to make a demand upon our Board of Directors before initiating their lawsuits. In December 2007, the plaintiffs filed an appeal of that decision to the Massachusetts Court of Appeals. In June 2008, the Massachusetts Supreme Judicial Court elected, on its own motion, to hear the appeal, and in April 2009, affirmed the judgment dismissing the complaint without leave to amend. The plaintiffs’ right to initiate a new claim based on the response to the demand made at the time of dismissal expired in July 2009.

On August 31, 2006, we received an Information Document Request from the IRS for documents and information relating to our stock option granting practices and related accounting. The IRS requested materials related to certain stock options granted between 1998 and 2005. We have received subsequent related requests and we continue to cooperate with the IRS to provide the requested information and documents.

One of our subsidiaries, SpectraSite Communications, Inc. (“SCI”), is involved in a lawsuit brought in Mexico against a former Mexican subsidiary of SCI (the subsidiary of SCI was sold in 2002, prior to our merger with SCI’s parent in 2005). The lawsuit concerns a terminated tower construction contract and related agreements with a wireless carrier in Mexico. The primary issue for us is whether SCI itself can be found liable to the Mexican carrier. The trial and lower appellate courts initially found that SCI had no such liability in part because Mexican courts do not have full jurisdiction over SCI. These decisions were appealed by the plaintiff, and in July 2008, they were reversed by an intermediate Mexican appellate court. In its decision, the intermediate appellate court identified potential damages of approximately $23.0 million. SCI appealed that ruling to a higher constitutional court in Mexico. In January 2009, the constitutional court ruled in SCI’s favor, remanding the case back to the intermediate appellate court for further proceedings. In March 2009, the intermediate appellate court issued its decision, which reasserts jurisdiction and reimposes liability on SCI. In April 2009, as permitted under Mexican law, SCI filed an appeal of this decision to the higher constitutional court on the grounds that the decision of the intermediate appellate court is inconsistent with the January 2009 ruling of the higher constitutional court and Mexican law. In August 2009, the plaintiff filed a petition with the Supreme Court of Mexico asking the court to rule on SCI’s appeal to the constitutional court. In September 2009, the Supreme Court refused to hear the appeal. As a result, the case remains pending in the constitutional court and we are unable to estimate our share, if any, of potential liability at this stage of the proceedings.

We periodically become involved in various claims and lawsuits that are incidental to our business. In the opinion of management, after consultation with counsel, other than the legal proceedings discussed above and in note 16 to our consolidated financial statements included in this Annual Report, there are no matters currently pending that would, in the event of an adverse outcome, have a material impact on our consolidated financial position, results of operations or liquidity.

 

ITEM 4. [RESERVED].

 

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PART II

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The following table presents reported quarterly high and low per share sale prices of our Common Stock on the New York Stock Exchange (“NYSE”) for the years 2009 and 2008.

 

2009

   High    Low

Quarter ended March 31

   $ 32.53    $ 25.45

Quarter ended June 30

     34.52      27.93

Quarter ended September 30

     37.71      29.89

Quarter ended December 31

     43.84      35.03

2008

   High    Low

Quarter ended March 31

   $ 42.72    $ 32.10

Quarter ended June 30

     46.10      38.53

Quarter ended September 30

     43.43      31.89

Quarter ended December 31

     37.28      19.35

On February 12, 2010, the closing price of our Common Stock was $42.62 per share as reported on the NYSE. As of February 12, 2010, we had 402,669,455 outstanding shares of Common Stock and 482 registered holders.

Dividends

We have never paid a dividend on our Common Stock. We anticipate that we may retain future earnings, if any, to fund the development and growth of our business. The loan agreement for our Revolving Credit Facility and Term Loan contain covenants that restrict our ability to pay dividends unless certain financial covenants are satisfied. In addition, certain of SpectraSite’s subsidiaries are subject to restrictions on the amount of cash that they can distribute to us under the loan agreement related to our Securitization.

For more information about the restrictions under the loan agreement for the Revolving Credit Facility and Term Loan, our notes indentures and the loan agreement related to our Securitization, see Item 7 of this Annual Report under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Factors Affecting Sources of Liquidity” and note 6 to our consolidated financial statements included in this Annual Report.

 

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Performance Graph

This performance graph is furnished and shall not be deemed “filed” with the SEC or subject to Section 18 of the Exchange Act, nor shall it be deemed incorporated by reference in any of our filings under the Securities Act of 1933, as amended.

The following graph compares the cumulative total stockholder return on our Common Stock with the cumulative total return of the S&P 500 Index and the Dow Jones US Telecommunications Equipment Index. The performance graph assumes that on December 31, 2004, $100 was invested in each of our Common Stock, the S&P 500 Index and the Dow Jones US Telecommunications Equipment Index. The cumulative return shown in the graph assumes reinvestment of all dividends. The performance of our Common Stock reflected below is not necessarily indicative of future performance.

LOGO

 

     Cumulative Total Returns
     12/04    12/05    12/06    12/07    12/08    12/09

American Tower Corporation

   $ 100.00    $ 147.28    $ 202.61    $ 231.52    $ 159.35    $ 234.84

S&P 500 Index

     100.00      104.91      121.48      128.16      80.74      102.11

Dow Jones US Telecommunications Equipment Index

     100.00      101.39      118.08      121.95      72.49      109.33

Recent Sales of Unregistered Securities

During the three months ended December 31, 2009, we issued an aggregate of 40,019 shares of our Common Stock upon the exercise of 5,675 warrants assumed in our merger with SpectraSite, Inc. In August 2005, in connection with the merger, we assumed approximately 1.0 million warrants to purchase shares of SpectraSite, Inc. common stock. Upon completion of the merger, each warrant to purchase shares of SpectraSite, Inc. common stock automatically converted into a warrant to purchase 7.15 shares of Common Stock at an exercise price of $32 per warrant. As some of these warrants were exercised pursuant to a cashless net exercise pursuant to the warrant agreement, net proceeds from these warrant exercises were $181,504. The shares were

 

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issued in reliance on the exemption from registration set forth in Sections 3(a)(9) and 3(a)(10) of the Securities Act of 1933, as amended, and Section 1145 of the United States Code. No underwriters were engaged in connection with such issuances.

Issuer Purchases of Equity Securities

During the three months ended December 31, 2009, we repurchased 661,640 shares of our Common Stock for an aggregate of $27.6 million, including commissions and fees, pursuant to our publicly announced stock repurchase program, as follows:

 

Period

   Total Number
of Shares
Purchased(1)
   Average
Price Paid
per Share
   Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs
   Approximate Dollar Value
of Shares that May Yet be
Purchased Under the
Plans or Programs
                    (in millions)

October 2009

   25,900    $ 36.43    25,900    $ 778.6

November 2009

   101,600    $ 40.53    101,600    $ 774.4

December 2009

   534,140    $ 42.11    534,140    $ 751.9
               

Total Fourth Quarter

   661,640    $ 41.64    661,640    $ 751.9
               

 

(1) Repurchases made pursuant to the 2008 Buyback. Under this program, our management is authorized to purchase shares from time to time through open market purchases or privately negotiated transactions at prevailing prices as permitted by securities laws and other legal requirements, and subject to market conditions and other factors. To facilitate repurchases, we make purchases pursuant to a trading plan under Rule 10b5-1 of the Exchange Act, which allows us to repurchase shares during periods when we otherwise might be prevented from doing so under insider trading laws or because of self-imposed trading blackout periods. This program may be discontinued at any time.

Subsequent to December 31, 2009, we repurchased 770,451 shares of our Common Stock for an aggregate of $33.5 million, including commissions and fees, pursuant to the 2008 Buyback. As of February 12, 2010, we had repurchased a total of 21.3 million shares of our Common Stock for an aggregate of $781.6 million, including commissions and fees pursuant to the 2008 Buyback. We expect to continue to manage the pacing of the remaining $718.4 million under the 2008 Buyback in response to general market conditions and other relevant factors.

 

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ITEM 6. SELECTED FINANCIAL DATA

You should read the selected financial data in conjunction with our “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our audited consolidated financial statements and the related notes to those consolidated financial statements included in this Annual Report.

Our continuing operations are reported in two segments: rental and management and network development services. In accordance with accounting principles generally accepted in the United States (“GAAP”), the consolidated statements of operations for all periods presented in this “Selected Financial Data” have been adjusted to reflect certain businesses as discontinued operations (see note 1 to our consolidated financial statements included in this Annual Report).

Year-over-year comparisons are significantly affected by our acquisitions, dispositions and, to a lesser extent, construction of towers. Our August 2005 merger with SpectraSite, Inc., as well as the change in the estimated useful lives of our tower assets in 2008, impacts the comparability of reported results between certain periods.

 

    Year Ended December 31,  
    2009     2008     2007     2006     2005  
    (In thousands, except per share data)  

Statements of Operations Data:

         

Revenues:

         

Rental and management

  $ 1,668,420      $ 1,547,035      $ 1,425,975      $ 1,294,068      $ 929,762   

Network development services

    55,694        46,469        30,619        23,317        15,024   
                                       

Total operating revenues

    1,724,114        1,593,504        1,456,594        1,317,385        944,786   
                                       

Operating expenses:

         

Costs of operations (exclusive of items shown separately below)

         

Rental and management

    383,990        363,024        343,450        332,246        247,781   

Network development services

    32,385        26,831        16,172        11,291        8,346   

Depreciation, amortization and accretion

    414,619        405,332        522,928        528,051        411,254   

Selling, general, administrative and development expense

    201,694        180,374        186,483        159,324        108,059   

Other operating expenses

    19,168        11,189        9,198        2,572        34,232   
                                       

Total operating expenses

    1,051,856        986,750        1,078,231        1,033,484        809,672   
                                       

Operating income

    672,258        606,754        378,363        283,901        135,114   

Interest income, TV Azteca, net

    14,210        14,253        14,207        14,208        14,232   

Interest income

    1,722        3,413        10,848        9,002        4,402   

Interest expense

    (249,803     (253,584     (235,824     (215,643     (222,419

Loss on retirement of long-term obligations

    (18,194     (4,904     (35,429     (27,223     (67,110

Other income

    1,294        5,988        20,675        6,619        227   
                                       

Income (loss) from continuing operations before income taxes and income (loss) on equity method investments

    421,487        371,920        152,840        70,864        (135,554

Income tax provision

    (182,565     (135,509     (59,809     (41,768     (5,714

Income (loss) on equity method investments

    26        22        19        26        (2,078
                                       

Income (loss) from continuing operations before cumulative effect of change in accounting principle

    238,948        236,433        93,050        29,122        (143,346

Income (loss) from discontinued operations

    8,179        110,982        (36,396     (854     (1,913
                                       

Net income (loss) before cumulative effect of change in accounting principle

    247,127        347,415        56,654        28,268        (145,259

Cumulative effect of change in accounting principle

    —          —          —          —          (35,525
                                       

Net income (loss)

    247,127        347,415        56,654        28,268        (180,784

Net income attributable to noncontrolling interest

    (532     (169     (338     (784     (575
                                       

Net income (loss) attributable to American Tower Corporation

  $ 246,595      $ 347,246      $ 56,316      $ 27,484      $ (181,359
                                       

Basic income (loss) per common share from continuing operations attributable to American Tower Corporation before cumulative effect of change in accounting principle(1)

  $ 0.60      $ 0.60      $ 0.22      $ 0.06      $ (0.47

Diluted income (loss) per common share from continuing operations attributable to American Tower Corporation before cumulative effect of change in accounting principle(1)

  $ 0.59      $ 0.58      $ 0.22      $ 0.06      $ (0.47
                                       

Weighted average common shares outstanding(1)

         

Basic

    398,375        395,947        413,167        424,525        302,510   
                                       

Diluted

    406,948        418,357        426,079        436,217        302,510   
                                       

Other Operating Data:

         

Ratio of earnings to fixed charges(2)

    2.27x        2.12x        1.50x        1.25x        —     

 

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     As of December 31,
     2009    2008    2007    2006    2005
     (In thousands)

Balance Sheet Data:

              

Cash and cash equivalents (including restricted cash and investments)(3)

   $ 295,129    $ 194,943    $ 86,807    $ 281,264    $ 112,701

Property and equipment, net

     3,175,511      3,022,636      3,045,186      3,218,124      3,460,526

Total assets

     8,512,668      8,211,665      8,130,457      8,613,219      8,786,854

Long-term obligations, including current portion

     4,211,581      4,333,146      4,285,284      3,543,016      3,613,429

Total American Tower Corporation stockholders’ equity

     3,315,082      2,991,322      3,022,092      4,384,916      4,541,821

 

(1) Basic income (loss) per common share from continuing operations represents income (loss) from continuing operations divided by the weighted average number of common shares outstanding during the period. Diluted income per common share from continuing operations for the years ended December 31, 2009, 2008, 2007 and 2006 represents income from continuing operations divided by the weighted average number of common shares outstanding during the period and any dilutive common share equivalents, including shares issuable upon exercise of stock options and warrants, as determined under the treasury stock method, and upon conversion of our convertible notes, as determined under the if-converted method. Diluted loss per common share from continuing operations for 2005 excludes shares issuable upon exercise of stock options and warrants and upon conversion of our convertible notes, as their effect is anti-dilutive.

 

(2) For the purpose of this calculation, “earnings” consists of income (loss) from continuing operations before income taxes, minority interest in net earnings of subsidiaries, income (loss) on equity method investments and fixed charges (excluding interest capitalized and amortization of interest capitalized). “Fixed charges” consist of interest expense, including amounts capitalized, amortization of debt discount and related issuance costs and the component of rental expense associated with operating leases believed by management to be representative of the interest factor thereon. We had an excess (deficiency) in earnings to fixed charges in each period as follows (in thousands):2009–$423,743; 2008–$373,842; 2007–$155,462; 2006–$72,813; and 2005–$(133,464).

 

(3) As of December 31, 2009, 2008 and 2007, includes approximately $44.3 million, $51.9 million and $53.7 million, respectively, in restricted cash on deposit in reserve accounts related to the certificates issued in our Securitization. As of December 31, 2006 and 2005, amounts include cash and cash equivalents only.

 

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The discussion and analysis of our financial condition and results of operations that follows are based upon our consolidated financial statements, which have been prepared in accordance with 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 disclosures in 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 consolidated financial statements and the accompanying notes thereto and the information set forth under the caption “Critical Accounting Policies and Estimates” beginning at page 45.

Our continuing operations are reported in two segments, rental and management and network development services. Management focuses on segment gross margin and segment operating profit as a means to measure operating performance in these business segments. We define segment gross margin as segment revenue less segment operating expenses excluding 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 rental and management segment also include interest income, TV Azteca, net (see note 18 to our 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), noncontrolling interest in net earnings of subsidiaries, income (loss) on equity method investments, income taxes and discontinued operations.

Executive Overview

Our principal operating segment is our rental and management segment, which accounted for approximately 97% of our total revenues, and approximately 99% of our segment operating profit for the years ended December 31, 2009 and 2008. The primary factors affecting the consistent incremental growth in our revenues and cash flows for this segment are our recurring revenues generated from sites which existed in our portfolio as of the beginning of the prior year period (“legacy sites”), new revenue generated from new sites acquired or constructed since the beginning of the prior year period (“new sites”), our existing tenant leases and related contractual escalations, leasing of additional space on our existing sites and the cancellation rate of our existing tenant leases. We continue to believe that our site leasing revenue is likely to increase due to the growing use of wireless communications services and our ability to increase the utilization of our existing site capacity. In addition, we believe the majority of our site leasing activity will continue to come from customers providing wireless broadband services. As we continue to primarily focus on growing our rental and management business, we anticipate that our network development services revenue will continue to represent a small percentage of our total revenues.

The majority of our tenant leases with wireless carriers are typically for an initial non-cancelable 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 segment as of the end of December 2009 is recurring revenue that we should continue to receive in future periods. In addition, most of our tenant leases have provisions that periodically increase the rent due under the lease. These contractual escalations are typically annual and are based on a fixed percentage (generally three to five percent), inflation, or a fixed percentage plus inflation. Revenue generated by rate increases based on fixed escalation clauses is recognized on a straight-line basis over the non-cancelable term of the applicable agreement. We also routinely seek to extend our tenant leases with our customers, which increases the non-cancelable term of the agreement and creates incremental growth in our revenues and cash flows.

The revenues generated by our rental and management segment may also be affected by cancellations of existing customer leases. As discussed above, most of our tenant leases with wireless carriers and broadcasters

 

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are multi-year contracts, which typically may not be cancelled or, in some instances, may be cancelled only upon payment of a termination fee. Accordingly, lease cancellations historically have not had a material adverse effect on the revenues generated by our rental and management segment. During the year ended December 31, 2009, tenant leases representing approximately 2% of our rental and management revenues were cancelled.

During the year ended December 31, 2009, revenues generated by our rental and management segment increased $121.4 million from the year ended December 31, 2008. The increase was primarily attributable to incremental revenue generated by our legacy sites which resulted from leasing additional space to new tenants, leasing additional space for the equipment of our existing tenants, as well as contractual tenant lease escalations. To a lesser extent, a portion of our revenue growth was attributable to the 4,511 new sites that we acquired or constructed since January 1, 2008. The increase in revenue was partially offset by tenant lease cancellations as well as the negative impact of foreign currency exchange rate fluctuations and a reduction in straight-line revenue recognition.

Our ability to lease additional space on our sites is a function of the rate at which wireless carriers deploy capital to improve and expand their wireless networks and, to a lesser extent, the location of and available capacity on our existing sites. This rate, in turn, is influenced by the growth of wireless communications services and related infrastructure needs, the financial performance of our customers and their access to capital, and general economic conditions. We believe leasing additional space on our existing sites and expanding our site portfolio will contribute to the majority of our year-over-year revenue growth in 2010.

Our rental and management segment operating expenses include our direct site level expenses and consist primarily of ground rent, property taxes, repairs and maintenance and utilities. These segment level 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. Our segment level selling, general, administrative and development expenses consist of expenses to support our rental and management and network development services segments, such as sales and property management functions. In general, our segment level selling, general and administrative expenses do not significantly increase as a result of adding incremental customers to our legacy sites and increase only modestly year-over-year. As a result, leasing additional space to new customers on our legacy sites provides significant incremental cash flow. In geographic areas where we have recently launched operations or are focused on materially expanding our site footprint, we may incur additional segment level selling, general and administrative expenses as we increase our presence in these areas. 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.

 

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Results of Operations

Years Ended December 31, 2009 and 2008

 

     Year Ended
December 31,
    Amount of
Increase
(Decrease)
    Percent
Increase
(Decrease)
 
     2009     2008      
     (In thousands)  

REVENUES:

        

Rental and management

   $ 1,668,420      $ 1,547,035      $ 121,385      8

Network development services

     55,694        46,469        9,225      20   
                          

Total revenues

     1,724,114        1,593,504        130,610      8   
                          

OPERATING EXPENSES:

        

Costs of operations (exclusive of items shown separately below)

        

Rental and management

     383,990        363,024        20,966      6   

Network development services

     32,385        26,831        5,554      21   

Depreciation, amortization and accretion

     414,619        405,332        9,287      2   

Selling, general, administrative and development expense (including stock-based compensation expense of $60,670 and $54,807, respectively)

     201,694        180,374        21,320      12   

Other operating expenses

     19,168        11,189        7,979      71   
                          

Total operating expenses

     1,051,856        986,750        65,106      7   
                          

OTHER INCOME (EXPENSE) AND OTHER ITEMS:

        

Interest income, TV Azteca, net

     14,210        14,253        (43   —     

Interest income

     1,722        3,413        (1,691   (50

Interest expense

     (249,803     (253,584     (3,781   (1

Loss on retirement of long-term obligations

     (18,194     (4,904     13,290      271   

Other income

     1,294        5,988        (4,694   (78

Income tax provision

     (182,565     (135,509     47,056      35   

Income on equity method investments

     26        22        4      18   
                          

Income from continuing operations

     238,948        236,433        2,515      1   

Income from discontinued operations, net

     8,179        110,982        (102,803   (93
                          

Net income

     247,127        347,415        (100,288   (29

Net income attributable to noncontrolling interest

     (532     (169     363      215   
                          

Net income attributable to American Tower Corporation

   $ 246,595      $ 347,246      $ (100,651   (29 )% 
                          

Total Revenues

Total revenues for the year ended December 31, 2009 were $1,724.1 million, an increase of $130.6 million from the year ended December 31, 2008. Approximately $121.4 million of the increase was attributable to an increase in rental and management revenue, with the remaining portion of the increase attributable to network development services revenue.

Rental and Management Revenue

Rental and management revenue for the year ended December 31, 2009 was $1,668.4 million, an increase of $121.4 million from the year ended December 31, 2008. Legacy sites contributed $73.4 million of the increase, which was primarily attributable to incremental revenue generated from adding new tenants to those sites, existing tenants adding more equipment to those sites and contractual tenant lease escalations, partially offset by

 

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tenant lease cancellations as well as the negative impact of foreign currency exchange rate fluctuations and a reduction in straight-line revenue recognition. Approximately $48.0 million of the increase resulted from the 4,511 new sites that we acquired or constructed since January 1, 2008.

Network Development Services Revenue

Network development services revenue for the year ended December 31, 2009 was $55.7 million, an increase of $9.2 million from the year ended December 31, 2008. The increase was primarily attributable to revenues generated from our expanding site acquisition, zoning, permitting and installation services.

Total Operating Expenses

Total operating expenses for the year ended December 31, 2009 were $1,051.9 million, an increase of $65.1 million from the year ended December 31, 2008. The increase was primarily attributable to an increase in selling, general, administrative and development expense of $21.3 million, increases in expenses within our rental and management segment of $21.0 million and network development services segment of $5.6 million, an increase in depreciation, amortization and accretion expenses of $9.3 million, and an increase in other operating expenses of $8.0 million.

Rental and Management Expense/Segment Gross Margin/Segment Operating Profit

Rental and management expense for the year ended December 31, 2009 was $384.0 million, an increase of $21.0 million from the year ended December 31, 2008. Increases in rental and management expenses of our legacy sites, consisting primarily of contractual ground lease escalations and inflationary increases, were offset by the favorable impact of foreign currency exchange rate fluctuations. Accordingly, the $21.0 million was attributable to the new sites added since January 1, 2008.

Rental and management segment gross margin for the year ended December 31, 2009 was $1,298.6 million, an increase of $100.4 million from the year ended December 31, 2008. The increase primarily resulted from additional rental and management revenue described above, partially offset by an increase in rental and management expense.

Rental and management segment operating profit for the year ended December 31, 2009 was $1,212.5 million, an increase of $82.3 million from the year ended December 31, 2008. This increase was comprised of the $100.4 million increase in rental and management segment gross margin described above, partially offset by an increase of approximately $18.1 million in selling, general, administrative and development expenses related to our rental and management segment, due in large part to our international expansion.

Network Development Services Expense

Network development services expense for the year ended December 31, 2009 was $32.4 million, an increase of $5.6 million from the year ended December 31, 2008. The increase correlates to the growth in services performed as noted above.

Depreciation, Amortization and Accretion

Depreciation, amortization and accretion for the year ended December 31, 2009 was $414.6 million, an increase of $9.3 million from the year ended December 31, 2008. This increase was primarily attributable to depreciation, amortization and accretion associated with the acquisition or construction of 3,550 sites during 2009, which resulted in an increase in property, plant and equipment.

 

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Selling, General, Administrative and Development Expense

Selling, general, administrative and development expense for the year ended December 31, 2009 was $201.7 million, an increase of $21.3 million from the year ended December 31, 2008. The increase was primarily attributable to an increase of approximately $5.9 million in stock based compensation expense, which was principally driven by the additional expense recognized upon the modification of certain equity awards during the year ended December 31, 2009, an increase of $5.9 million of bad debt expense, an increase of $5.4 million for the write-off of capitalized costs related to discontinued projects and an increase in the cost to support our growth in international geographic areas. For the year ended December 31, 2008, selling, general, administrative and development expense included a one-time reduction related to payroll tax expense of approximately $3.1 million.

Other Operating Expenses

Other operating expenses for the year ended December 31, 2009 were $19.2 million, an increase of $8.0 million from the year ended December 31, 2008. The increase was primarily attributable to approximately $6.3 million in acquisition related costs which have been expensed as a result of new accounting guidance issued by the Financial Accounting Standards Board (“FASB”). Approximately $1.2 million of these costs are related to the expensing of amounts which had been recorded as other long-term assets at December 31, 2008 for pending acquisitions and the remaining $5.1 million relates to additional acquisition related costs incurred during the year ended December 31, 2009. Approximately $1.4 million of the increase was attributable to an increase in impairments and losses on the sale of assets.

Interest Expense

Interest expense for the year ended December 31, 2009 was $249.8 million, a decrease of $3.8 million from the year ended December 31, 2008. The decrease was primarily attributable to a decrease in average outstanding debt of approximately $107.8 million.

Loss on Retirement of Long-Term Obligations

Loss on retirement of long-term obligations for the year ended December 31, 2009 was $18.2 million, an increase of $13.3 million from the year ended December 31, 2008.

During the year ended December 31, 2009, pursuant to a tender offer and subsequent redemption, we repurchased and redeemed an aggregate of $225.0 million principal amount of 7.50% Notes for an aggregate purchase price of $231.7 million, including accrued and unpaid interest, and we repurchased an aggregate of $500.0 million principal amount of 7.125% Notes for an aggregate purchase price of $511.7 million, including accrued and unpaid interest. As a result of these transactions, we recorded a charge of $18.2 million related to the amounts paid in excess of carrying value and the write-off of the related deferred financing fees, discounts and premiums.

During the year ended December 31, 2008, holders of approximately $18.3 million principal amount of our 3.25% convertible notes due August 15, 2012 (“3.25% Notes”) and $182.8 million principal amount of our 3.00% Notes converted their notes into shares of our Common Stock. In connection with conversions of a portion of these notes, we paid holders an aggregate of approximately $4.9 million, calculated based on the discounted value of the future interest payments on their notes.

For more information regarding our financing activities, see “—Liquidity and Capital Resources—Cash Flows from Financing Activities” below.

 

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Other Income

Other income for the year ended December 31, 2009 was approximately $1.3 million, as compared to other income of approximately $6.0 million for the year ended December 31, 2008. During the year ended December 31, 2009, other income of $1.3 million consisted primarily of a gain of approximately $1.7 million on the settlement of a foreign currency exchange contract executed to hedge the foreign currency exposure associated with our acquisition of XCEL, partially offset by foreign currency remeasurement losses of approximately $0.2 million. During the year ended December 31, 2008, we recorded foreign currency remeasurement gains of approximately $5.7 million.

Income Tax Provision

The income tax provision for the year ended December 31, 2009 was $182.6 million, an increase of $47.1 million from the year ended December 31, 2008. The effective tax rate was 43.3% for the year ended December 31, 2009, as compared to an effective tax rate of 36.4% for the year ended December 31, 2008. The increase in the effective tax rate for the year ended December 31, 2009, as compared to the year ended December 31, 2008, is primarily due to the discrete impact of foreign currency exchange rate fluctuations on certain tax items, IRS audit adjustments and certain valuation allowances, partially offset by the decrease in tax reserves. The increase in the income tax provision correlates to the increase in income during the year ended December 31, 2009 as noted above.

The effective tax rates on income from continuing operations for the years ended December 31, 2009 and December 31, 2008 differ from the federal statutory rate due primarily to adjustments for foreign items, non-deductible stock-based compensation expense, IRS audit adjustments of approximately $10.0 million, tax reserves and state taxes. As we continue to evaluate our organizational structure in light of our expansion within Latin America, we anticipate that the implementation of certain restructuring activities could have a favorable impact on our effective tax rate in 2010.

Income from Discontinued Operations, Net

Income from discontinued operations, net for the year ended December 31, 2009 was $8.2 million, a decrease of $102.8 million from the year ended December 31, 2008. This decrease is primarily attributable to the recording of an income tax benefit of $110.1 million during the year ended December 31, 2008, related to losses associated with our investment in our wholly owned subsidiary, Verestar, Inc. (“Verestar”). Verestar filed for protection under Chapter 11 of the federal bankruptcy laws in December 2003. During 2007, we settled the litigation related to the Verestar bankruptcy. In April 2008, the bankruptcy court approved Verestar’s plan of liquidation and in December 2008, Verestar was liquidated. The $102.8 million decrease was partially offset by an insurance reimbursement received during the year ended December 31, 2009 for approximately $5.0 million related to the Verestar bankruptcy settlement.

 

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Years Ended December 31, 2008 and 2007

 

     Year Ended
December 31,
    Amount of
Increase
(Decrease)
    Percent
Increase
(Decrease)
 
     2008     2007      
     (In thousands)  

REVENUES:

        

Rental and management

   $ 1,547,035      $ 1,425,975      $ 121,060      8

Network development services

     46,469        30,619        15,850      52   
                          

Total revenues

     1,593,504        1,456,594        136,910      9   
                          

OPERATING EXPENSES:

        

Costs of operations (exclusive of items shown separately below)

        

Rental and management

     363,024        343,450        19,574      6   

Network development services

     26,831        16,172        10,659      66   

Depreciation, amortization and accretion

     405,332        522,928        (117,596   (22

Selling, general, administrative and development expense (including stock-based compensation expense of $54,807 and $54,603, respectively)

     180,374        186,483        (6,109   (3

Other operating expenses

     11,189        9,198        1,991      22   
                          

Total operating expenses

     986,750        1,078,231        (91,481   (8
                          

OTHER INCOME (EXPENSE) AND OTHER ITEMS:

        

Interest income, TV Azteca, net

     14,253        14,207        46     

Interest income

     3,413        10,848        (7,435   (69

Interest expense

     (253,584     (235,824     17,760      8   

Loss on retirement of long-term obligations

     (4,904     (35,429     (30,525   (86

Other income

     5,988        20,675        (14,687   (71

Income tax provision

     (135,509     (59,809     75,700      127   

Income on equity method investments

     22        19        3      16   
                          

Income from continuing operations

     236,433        93,050        143,383      154   

Income (loss) from discontinued operations, net

     110,982        (36,396     147,378      405   
                          

Net income

     347,415        56,654        290,761      513   

Net income attributable to noncontrolling interest

     (169     (338     (169   (50
                          

Net income attributable to American Tower Corporation

   $ 347,246      $ 56,316      $ 290,930      517
                          

Total Revenues

Total revenues for the year ended December 31, 2008 were $1,593.5 million, an increase of $136.9 million from the year ended December 31, 2007. Approximately $121.1 million of the increase was attributable to an increase in rental and management revenue. The balance of the increase resulted from an increase in network development services revenue of $15.9 million.

Rental and Management Revenue

Rental and management revenue for the year ended December 31, 2008 was $1,547.0 million, an increase of $121.1 million from the year ended December 31, 2007. Legacy sites contributed approximately $95.4 million of the increase, which was primarily attributable to incremental revenue generated from adding new tenants to those sites, existing tenants adding more equipment to those sites and contractual tenant lease escalations, partially offset by tenant lease cancellations as well as a reduction in straight-line revenue recognition. Approximately $25.7 million of the increase resulted from the 1,420 new sites that we acquired or constructed since January 1, 2007.

 

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Network Development Services Revenue

Network development services revenue for the year ended December 31, 2008 was $46.5 million, an increase of $15.9 million from the year ended December 31, 2007. The increase was primarily attributable to revenues generated from our site acquisition, zoning, permitting and installation services.

Total Operating Expenses

Total operating expenses for the year ended December 31, 2008 were $986.8 million, a decrease of approximately $91.5 million from the year ended December 31, 2007. The decrease was attributable to decreases in depreciation, amortization and accretion expense and selling, general, administrative and development expense of $117.6 million and $6.1 million, respectively. These decreases were partially offset by an increase in expenses within our rental and management segment of $19.6 million, an increase in expenses within our network development services segment of $10.7 million and an increase in other operating expense of $2.0 million.

Rental and Management Expense/Segment Gross Margin/Segment Operating Profit

Rental and management expense for the year ended December 31, 2008 was $363.0 million, an increase of $19.6 million from the year ended December 31, 2007. Approximately $10.4 million of the increase was attributable to legacy sites and was primarily related to increases due to contractual ground lease escalations. The remaining $9.2 million of the increase was attributable to the new sites added since January 1, 2007.

Rental and management segment gross margin for the year ended December 31, 2008 was $1,198.3 million, an increase of $101.5 million from the year ended December 31, 2007. The increase resulted from the additional rental and management revenue described above, partially offset by the increase in rental and management expense.

Rental and management segment operating profit for the year ended December 31, 2008 was $1,130.2 million, an increase of $99.3 million from the year ended December 31, 2007. This was comprised of the $101.5 million increase in rental and management segment gross margin described above, net of an increase of $2.2 million in selling, general, administrative and development expenses related to the rental and management segment.

Network Development Services Expense

Network development services expense for the year ended December 31, 2008 was $26.8 million, an increase of $10.7 million from the year ended December 31, 2007. The majority of the increase correlates to the growth in services performed as noted above.

Depreciation, Amortization and Accretion

Depreciation, amortization and accretion expense for the year ended December 31, 2008 was $405.3 million, a decrease of $117.6 million from the year ended December 31, 2007. The decrease was primarily due to our revision of the estimated useful lives of our towers and certain related intangible assets from our historical estimate of 15 years to a revised estimate of 20 years, partially offset by the depreciation, amortization and accretion expense associated with the acquisition or construction of 961 sites during 2008. The change in the estimated useful lives of our towers was based on a review that we completed in the first quarter of 2008, the effect of which was accounted for prospectively effective January 1, 2008, which resulted in a reduction in depreciation and amortization expense of approximately $121.2 million for the year ended December 31, 2008.

Selling, General, Administrative and Development Expense

Selling, general, administrative and development expense for the year ended December 31, 2008 was $180.4 million, a decrease of $6.1 million from the year ended December 31, 2007. The decrease was primarily

 

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attributable to a decrease of approximately $12.8 million in costs associated with the legal and governmental proceedings related to the review of our historical stock option granting practices and related accounting, and other related costs, partially offset by increases of approximately $6.7 million in expenses associated with international business development and information technology spending.

Other Operating Expenses

Other operating expenses for the year ended December 31, 2008 was $11.2 million, an increase of $2.0 million from the year ended December 31, 2007. The increase was primarily due to a $1.4 million increase in losses recognized upon the disposal of certain non-core tower assets.

Interest Income

Interest income for the year ended December 31, 2008 was $3.4 million, a decrease of $7.4 million from the year ended December 31, 2007. The decrease was primarily attributable to a decrease in average interest rates from December 31, 2007 to December 31, 2008.

Interest Expense

Interest expense for the year ended December 31, 2008 was $253.6 million, an increase of $17.8 million from the year ended December 31, 2007. The increase was primarily attributable to an approximately 13% increase in our average outstanding debt, as a result of the debt financing activities described in “Liquidity and Capital Resources” below, partially offset by a decrease in the average borrowing rate.

Loss on Retirement of Long-Term Obligations

Loss on retirement of long-term obligations for the year ended December 31, 2008 was $4.9 million, a decrease of $30.5 million from the year ended December 31, 2007.

During the year ended December 31, 2008, holders of approximately $18.3 million principal amount of our 3.25% Notes and $182.8 million principal amount of our 3.00% Notes converted their notes into shares of our Common Stock. In connection with conversions of a portion of these notes, we paid holders an aggregate of approximately $4.9 million, calculated based on the discounted value of the future interest payments on their notes.

During the year ended December 31, 2007, holders of approximately $89.5 million principal amount of our 3.25% Notes converted their notes into shares of our Common Stock, and we repurchased pursuant to tender offers approximately $192.5 million principal amount of our 5.0% convertible notes due 2010 (“5.0% Notes”) and $324.8 million principal amount of our ATI 7.25% senior subordinated notes due 2011 (“ATI 7.25% Notes”). We also repaid all amounts outstanding under the credit facilities of SpectraSite and at the American Tower operating company level, and we terminated all commitments thereunder. In addition, we repaid all amounts outstanding under our $500.0 million senior unsecured term loan credit facility and terminated the loan. As a result of these transactions, we recorded a charge of $35.4 million related to amounts paid in excess of the carrying value of our 5.0% Notes and ATI 7.25% Notes, amounts paid to holders of our 3.25% Notes in connection with their note conversions, and the write-off of related deferred financing fees.

For more information regarding our financing activities, see “—Liquidity and Capital Resources—Cash Flows from Financing Activities” below.

Other Income

Other income for the year ended December 31, 2008 was $6.0 million, a decrease of $14.7 million from the year ended December 31, 2007. Other income for the year ended December 31, 2008, consisted primarily of

 

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foreign currency gains of $5.7 million. Other income for the year ended December 31, 2007 consisted primarily of approximately $18.0 million of gains from the sale of available-for-sale securities and the mark-to-market and subsequent settlement of interest rate swap agreements.

Income Tax Provision

The income tax provision for the year ended December 31, 2008 was $135.5 million, as compared to $59.8 million for the year ended December 31, 2007, representing an increase of $75.7 million from the prior year period. The effective tax rate was 36.4% for the year ended December 31, 2008, as compared to 39.1% for the year ended December 31, 2007. The increase in the income tax provision correlates to the increase in income during the year ended December 31, 2008 as noted above.

The effective tax rate on income from continuing operations for the year ended December 31, 2008 differs from the federal statutory rate primarily due to foreign currency gains, the reversal of $6.4 million of valuation allowances related to our Mexican subsidiary and state taxes. Other differences from the federal statutory rate include other foreign items, settlement of tax reserves, non-deductible stock-based compensation expense and additional tax reserves.

In the year ended December 31, 2007, we recovered a portion of our deferred tax asset through our federal income tax refund claims related to the carry back of certain federal net operating losses. In June 2003 and October 2003, we filed federal income tax refund claims with the IRS relating to the carry back of $380.0 million of net operating losses generated prior to 2003. In April 2007, we received a refund of approximately $65.0 million, plus $15.0 million in interest, substantially all of which was accrued at March 31, 2007.

Income (Loss) From Discontinued Operations, Net

Income from discontinued operations, net for the year ended December 31, 2008 was $111.0 million, as compared to a loss from discontinued operations of $36.4 million for the year ended December 31, 2007. During the year ended December 31, 2008, we recorded an income tax benefit related to losses associated with our investment in Verestar. We recorded an income tax benefit of $110.1 million related to losses associated with our investment in Verestar as income from discontinued operations during the year ended December 31, 2008. During the year ended December 31, 2007, we recorded a $32.0 million liability associated with the Verestar bankruptcy proceedings equal to the settlement amount, which we paid in November 2007.

Liquidity and Capital Resources

Overview

As a holding company, our cash flows are derived primarily from the operations of and distributions from our operating subsidiaries or funds raised through borrowings under our credit facilities and debt and equity offerings. As of December 31, 2009, we had approximately $943.1 million of total liquidity, comprised of approximately $247.3 million in cash and cash equivalents and the ability to borrow approximately $695.8 million under our Revolving Credit Facility. As of December 31, 2009, our cash and cash equivalents increased by $104.2 million as compared to December 31, 2008. Summary cash flow information for the years ended December 31, 2009, 2008 and 2007 is set forth below.

 

     Year Ended December 31,  
   2009     2008     2007  
     (In thousands)  

Net cash provided by (used for):

      

Operating activities

   $ 842,126      $ 773,258      $ 692,679   

Investing activities

     (543,066     (274,940     (186,180

Financing activities

     (194,942     (388,172     (754,640

Net effect of changes in exchange rates on cash and cash equivalents

     98        (192     —     
                        

Increase (decrease) in cash and cash equivalents

   $ 104,216      $ 109,954      $ (248,141
                        

 

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We use our cash flows to fund our operations and investments in our business, including tower maintenance and improvements, tower construction and DAS network installations, and tower and land acquisitions. During the years ended December 31, 2009 and 2008, we also used a significant amount of our cash flows to fund refinancing and repurchases of our outstanding indebtedness, as well as our stock repurchase program. By refinancing and repurchasing a portion of our outstanding indebtedness, we improved our financial position, which increased our financial flexibility and our ability to return value to our stockholders. Our significant financing transactions in 2009 included the following:

 

   

We extended the maturity dates and lowered the cost of our debt by completing two institutional private placements of $300.0 million aggregate principal amount of our 7.25% Notes and $600.0 million aggregate principal amount of our 4.625% Notes.

 

   

We reduced the amount of indebtedness outstanding under our senior and convertible notes through repurchases or redemptions of $725.1 million face amount of our outstanding debt securities.

 

   

We repurchased approximately 6.6 million shares of our Common Stock for an aggregate purchase price of $214.7 million, including commissions and fees, pursuant to our stock repurchase program.

As of December 31, 2009, we had total outstanding indebtedness of approximately $4.2 billion. We generated sufficient cash flow from operations to fund our capital expenditures and cash interest obligations in 2009. We believe our cash generated by operations for the year ending December 31, 2010 also will be sufficient to fund our capital expenditures and our cash debt service (interest and principal repayments) obligations for 2010.

For more information regarding our financing transactions in 2009, see “—Cash Flows from Financing Activities” below.

Cash Flows from Operating Activities

For the year ended December 31, 2009, cash provided by operating activities was $842.1 million, an increase of $68.9 million as compared to the year ended December 31, 2008. This increase was primarily comprised of an increase of $84.5 million in the operating profit of our operating segments, partially offset by an increase in the amount spent to meet working capital needs.

For the year ended December 31, 2008, cash provided by operating activities was $773.3 million, an increase of approximately $80.6 million as compared to the year ended December 31, 2007. This increase was primarily attributable to an increase of approximately $103.9 million in the operating profit of our operating segments, partially offset by an increase in the amount spent to meet working capital needs.

Each of our rental and management and network development services segments are expected to generate cash flows from operations during 2010 in excess of their cash needs for operations and expenditures for tower construction, improvements and acquisitions.

Cash Flows from Investing Activities

For the year ended December 31, 2009, cash used for investing activities was $543.1 million, an increase of approximately $268.1 million, as compared to the year ended December 31, 2008. This increase was primarily comprised of increased spending for acquisitions, property and equipment and construction activities during the year ended December 31, 2009.

During the year ended December 31, 2009, payments for purchases of property and equipment and construction activities totaled $250.3 million, including $63.8 million of capital expenditures related to the maintenance, improvement and redevelopment of our existing communications sites, $129.9 million spent in

 

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connection with the construction of 1,024 towers, the installation of 21 in-building DAS networks and the installation of shared back-up power generators, $49.1 million spent to acquire land under our towers that was subject to ground agreements (including leases), and $7.5 million spent on information technology improvements. In addition, during the year-ended December 31, 2009, we spent $98.0 million, net of $6.0 million cash acquired, to acquire XCEL, $19.9 million, net of $0.2 million cash acquired, to acquire Insight, and $183.9 million to acquire 522 additional towers.

We plan to continue to allocate our available capital among investment alternatives that meet our return on investment criteria. Accordingly, we may continue to acquire communications sites, acquire land under our towers, build or install new communications sites and redevelop or improve existing communications sites when the expected returns on such investments meet our return on investment criteria. We expect that our total capital expenditures will be between approximately $300 million and $350 million in 2010, with spending for capital improvements, corporate expenditures and the redevelopment of existing communications sites at levels comparable to 2009. Additionally, we expect to spend approximately $50 million for ground lease purchases and $165 million to $205 million for other discretionary capital projects including the construction of approximately 1,200 to 1,600 new communications sites.

For the year ended December 31, 2008, cash used for investing activities was $274.9 million, an increase of approximately $88.8 million as compared to the year ended December 31, 2007. This increase was primarily attributable to increased spending for the purchase of property and equipment and construction activities and acquisitions of approximately $89.1 million. During the year ended December 31, 2008, payments for purchases of property and equipment and construction activities totaled $243.5 million, including $105.5 million of capital expenditures related to the maintenance, improvement and redevelopment of our existing communications sites, $90.7 million spent in connection with the construction of 676 towers and the installation of 16 in-building DAS networks, $41.7 million spent to acquire land under our towers that was subject to ground agreements (including leases), and $5.6 million spent on information technology improvements. In addition, during the year ended December 31, 2008, we spent $42.8 million to acquire 269 towers.

Cash Flows from Financing Activities

For the year ended December 31, 2009, cash used for financing activities was $194.9 million, as compared to cash used for financing activities of approximately $388.2 million for the year ended December 31, 2008. The cash used for financing activities during the year ended December 31, 2009 primarily related to the tender offer and subsequent redemption of the 7.50% Notes, the redemption of the 7.125% Notes, the repayment of credit facilities and capital leases of approximately $931.2 million and payments for the repurchase of our Common Stock of $213.3 million, which consisted primarily of stock repurchases under our 2008 Buyback; partially offset by $900.0 million ($884.1 million, net of commissions and expenses) of proceeds from the issuance of the 7.25% Notes and the 4.625% Notes and approximately $66.0 million of proceeds from stock options, warrants and the employee stock purchase plan.

For the year ended December 31, 2008, cash used for financing activities was $388.2 million, a decrease of approximately $366.5 million, as compared to the year ended December 31, 2007. This decrease was primarily attributable to a decrease of approximately $928.2 million in purchases of our Common Stock and a decrease of $44.7 million in deferred financing costs and other financing activities. These decreases were partially offset by the absence of any new debt issuances during the year ended December 31, 2008, as compared to the issuance of approximately $2,250.0 million in debt during the year ended December 31, 2007. Borrowings under our credit facilities during the year ended December 31, 2008 were approximately $575.0 million, as compared to $2,175.0 million during the year ended December 31, 2007. The borrowings and debt issuances were offset by debt repayments of approximately $327.5 million and $3,612.2 million during the years ended December 31, 2008 and 2007, respectively.

Revolving Credit Facility. As of December 31, 2009, we had $550.0 million outstanding and the ability to borrow approximately $695.8 million under the Revolving Credit Facility. We continue to maintain the ability to draw down and repay amounts under the Revolving Credit Facility in the ordinary course.

 

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The borrower under the Revolving Credit Facility is American Tower Corporation. The Revolving Credit Facility has a term of five years and matures on June 8, 2012. Any outstanding principal and accrued but unpaid interest will be due and payable in full at maturity. The Revolving Credit Facility does not require amortization of principal and may be paid prior to maturity in whole or in part at our option without penalty or premium. The Revolving Credit Facility allows us to use borrowings for our and our subsidiaries’ working capital needs and other general corporate purposes (including, without limitation, to refinance or repurchase other indebtedness and, provided certain conditions are met, to repurchase our equity securities, in each case without additional lender approval).

Term Loan. On March 24, 2008, we entered into the $325.0 million Term Loan pursuant to the Revolving Credit Facility. At closing, we received net proceeds of approximately $321.7 million from the Term Loan, which, together with available cash, we used to repay $325.0 million of existing indebtedness under the Revolving Credit Facility. The Term Loan is governed by the terms of the loan agreement for the Revolving Credit Facility. Consistent with the terms of the Revolving Credit Facility, the borrower under the Term Loan is American Tower Corporation, and the maturity date for the Term Loan is June 8, 2012. Any outstanding principal and accrued but unpaid interest will be due and payable in full at maturity. The Term Loan does not require amortization of principal and may be paid prior to maturity in whole or in part at our option without penalty or premium.

XCEL Credit Facility. At the time of our acquisition of XCEL, a 4.8 billion Indian Rupee-denominated credit facility (“XCEL Credit Facility”) was in place, of which 3.4 billion Indian Rupees was outstanding. The borrower under the XCEL Credit Facility is XCEL. The XCEL Credit Facility has a term of four years and matures on March 31, 2016. Interest is payable monthly and accrues at an initial rate of 13.25% per year. In March 2010, the initial interest rate will be adjusted based upon the benchmark rate of interest of each lender. The XCEL Credit Facility allows us to use borrowings for construction and acquisition of communications sites and is secured by a first mortgage on all movable and immovable fixed assets of XCEL and a pledge of certain equity interests of XCEL.

Senior Notes Offerings. During the year ended December 31, 2009, we completed institutional private placements of $300.0 million aggregate principal amount of our 7.25% Notes and $600.0 million aggregate principal amount of our 4.625% Notes.

The net proceeds from the 7.25% Notes offering were approximately $290.2 million, after deducting commissions and expenses. We used $210.2 million of the net proceeds to finance the repurchase through a cash tender offer and subsequent redemption of our outstanding 7.50% Notes. In addition, we used $50.0 million of the net proceeds to repay certain of our outstanding indebtedness incurred under our Revolving Credit Facility.

The net proceeds from the 4.625% Notes offering were approximately $593.9 million, after deducting commissions and expenses. We used $511.7 million of the net proceeds to finance the redemption of our outstanding 7.125% Notes. The remainder of the net proceeds were used for general corporate purposes.

The 7.25% Notes mature on May 15, 2019, and interest is payable semi-annually in arrears on May 15 and November 15 of each year, commencing November 15, 2009, to the persons in whose names the notes are registered at the close of business on the preceding May 1 and November 1, respectively. We may redeem the 7.25% 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 will accrue from June 10, 2009 and will be computed on the basis of a 360-day year comprised of twelve 30-day months.

The 4.625% Notes will mature on April 1, 2015, and interest is payable semi-annually in arrears on April 1 and October 1 of each year, beginning on April 1, 2010, to the persons in whose names the notes are registered at the close of business on the preceding March 15 and September 15, respectively. We may redeem the 4.625% 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 will accrue from October 20, 2009 and will be computed on the basis of a 360-day year comprised of twelve 30-day months.

 

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If we undergo a change of control and ratings decline (in the event that on, or within 90 days after, an announcement of a change of control, both of our current investment grade credit ratings cease to be investment grade), each as defined in the indenture for the 7.25% Notes and 4.625% Notes, we may be required to repurchase all of the 7.25% Notes or 4.625% Notes at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest, if any, and additional interest, if any, up to but not including the date of repurchase. The 7.25% Notes and 4.625% Notes rank equally with all of our other senior unsecured debt and are structurally subordinated to all existing and future indebtedness and other obligations of our subsidiaries. Each indenture contains certain covenants that restrict our ability to merge, consolidate or sell assets and our ability and the ability of our subsidiaries to incur liens. These covenants are subject to a number of exceptions, including that we may incur 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 each indenture.

Stock Repurchase Program. In 2009, we continued to repurchase shares of our Common Stock pursuant to our 2008 Buyback. During the year ended December 31, 2009, we repurchased 6.6 million shares of our Common Stock for an aggregate of $214.7 million, including commissions and fees, pursuant to the 2008 Buyback. As of December 31, 2009, we had repurchased 20.5 million shares of our Common Stock for an aggregate of $748.1 million, including commissions and fees, pursuant to the 2008 Buyback.

In the near term, we expect to fund any further repurchases of our Common Stock through a combination of cash on hand, cash generated by operations and borrowings under our Revolving Credit Facility. Purchases under the 2008 Buyback are subject to us having available cash to fund repurchases. Under the 2008 Buyback, we are authorized to purchase shares from time to time through open market purchases or privately negotiated transactions at prevailing prices as permitted by securities laws and other legal requirements, and subject to market conditions and other factors. To facilitate repurchases, we purchase our Common Stock pursuant to trading plans under Rule 10b5-1 of the Exchange Act, which allow us to repurchase shares during periods when we otherwise might be prevented from doing so under insider trading laws or because of self-imposed trading blackout periods.

Subsequent to December 31, 2009, we repurchased approximately 0.8 million shares of our Common Stock for an aggregate of $33.5 million, including commissions and fees, pursuant to the 2008 Buyback. As of February 12, 2010, we had repurchased a total of 21.3 million shares of our Common Stock for an aggregate of $781.6 million, including commissions and fees pursuant to the 2008 Buyback. We expect to continue to manage the pacing of the remaining $718.4 million under the 2008 Buyback in response to general market conditions and other relevant factors.

Sales of Equity Securities. We receive proceeds from sales of our equity securities pursuant to our employee stock purchase plan, upon exercise of stock options granted under our equity incentive plans and upon exercise of warrants to purchase our equity securities. For the year ended December 31, 2009, we received an aggregate of $66.0 million in proceeds from sales of shares pursuant to our employee stock purchase plan, upon exercises of stock options and upon exercises of warrants.

 

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Contractual Obligations. Our contractual obligations relate primarily to the Commercial Mortgage Pass-Through Certificates, Series 2007-1 issued in our Securitization, borrowings under our Revolving Credit Facility and Term Loan, our outstanding notes and our operating leases related to the ground under our towers. The following table sets forth information relating to our contractual obligations payable in cash as of December 31, 2009 (in thousands):

 

    Payments Due by Period

Contractual Obligations

  2010   2011   2012   2013   2014   Thereafter   Total

Commercial Mortgage Pass-Through Certificates, Series 2007-1

          $ 1,750,000     $ 1,750,000

Revolving Credit Facility(1)

      $ 550,000           550,000

Term Loan(1)

        325,000           325,000

XCEL credit facility

  $ 9,171   $ 13,953     11,822   $ 11,822   $ 11,822     14,777     73,367

7.25% senior subordinated notes

      288             288

7.25% senior notes

              300,000     300,000

7.00% senior notes

              500,000     500,000

4.625% senior notes

              600,000     600,000

5.0% convertible notes(2)

    59,683               59,683
                                         

Long-term obligations, excluding capital leases and other notes payable

  $ 68,854   $ 14,241   $ 886,822   $ 11,822   $ 1,761,822   $ 1,414,777   $ 4,158,338

Cash interest expense(1)

    223,000     202,000     192,000     188,000     112,000     204,000     1,121,000

Capital lease payments (including interest) and other notes payable

    5,744     5,482     4,898     4,755     4,800     198,182     223,861
                                         

Total debt service obligations

  $ 297,598   $ 221,723   $ 1,083,720   $ 204,577   $ 1,878,622   $ 1,816,959   $ 5,503,199
                                         

Operating lease payments(3)

    258,427     251,553     243,457     237,828     233,483     2,814,908     4,039,656

Purchase obligations(4)

    18,000               18,000

Other long-term liabilities(5)(6)

    583     611     626     642     651     872,393     875,506
                                         

Total

  $ 574,608   $ 473,887   $ 1,327,803   $ 443,047   $ 2,112,756   $ 5,504,260   $ 10,436,361
                                         

 

(1) The Company has the option of choosing either a defined base rate or the London Interbank Offering Rate (“LIBOR”) as the applicable base interest rate for borrowings under the Revolving Credit Facility and Term Loan. For the Revolving Credit Facility, the interest rate ranges between 0.40% and 1.25% above the applicable LIBOR for LIBOR based borrowings or between 0.00% and 0.25% above the defined base rate for base rate borrowings, in each case based on our debt ratings. For the Term Loan, the interest rate ranges between 0.50% and 1.50% above LIBOR for LIBOR based borrowings or between 0.00% and 0.50% above the defined base rate for base rate borrowings, in each case based on our debt ratings. A quarterly commitment fee on the undrawn portion of the Revolving Credit Facility is required, ranging from 0.08% to 0.25% per annum, based on our debt ratings. As discussed in Item 7A. “Quantitative and Qualitative Disclosures About Market Risk,” we have entered into swap agreements to manage exposure to variable rate interest obligations under the Revolving Credit Facility and Term Loan. As a result of these swap agreements, the effective weighted average interest rate in effect at December 31, 2009 for the Revolving Credit Facility and Term Loan was 2.84%. For projections of our cash interest expense related to the Revolving Credit Facility and Term Loan, we have assumed the LIBOR rate before the margin, as defined in the loan agreement, is 0.25% through its maturity on June 7, 2012.

 

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(2) Our 5.0% convertible notes matured on February 15, 2010. We used cash on hand to repay the full amount outstanding.

 

(3) Operating lease payments include payments to be made under non-cancelable initial terms, as well as payments for certain renewal periods at our option because failure to renew could result in a loss of the applicable communications sites and related revenues from tenant leases, thereby making it reasonably assured that we will renew the lease.

 

(4) Pursuant to a definitive purchase agreement, we are obligated to acquire 114 towers in Brazil, pending regulatory approvals, for an aggregate purchase price of approximately $18.0 million. If regulatory approvals are not obtained by June 30, 2010, the definitive purchase agreement expires, unless extended by mutual consent of the parties.

 

(5) Primarily represents our asset retirement obligations and excludes certain other long-term liabilities included in our consolidated balance sheet, primarily our straight-line rent liability for which cash payments are included in operating lease payments and unearned revenue that is not payable in cash.

 

(6) Other long-term liabilities exclude $16.5 million of liabilities for unrecognized tax positions and $15.2 million of accrued income tax related interest and penalties included in our consolidated balance sheet as we are uncertain as to when and if the amounts may be settled. Settlement of such amounts could require the use of cash flows generated from operations. We expect 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. However, based on the status of these items and the amount of uncertainty associated with the outcome and timing of audit settlements, we are currently unable to estimate the impact of the amount of such changes, if any, to previously recorded uncertain tax positions.

Off-Balance Sheet Arrangements. We have no material off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Refinancing Activities

In order to extend the maturity dates of our indebtedness, lower our cost of debt and improve our financial flexibility, we use our available liquidity and seek new sources of liquidity to refinance our outstanding indebtedness.

Tender Offer for and Redemption of 7.50% Senior Notes. During the year ended December 31, 2009, we repurchased $204.2 million aggregate principal amount of our 7.50% Notes pursuant to a cash tender offer. We paid $210.2 million, including approximately $1.7 million in accrued and unpaid interest, to holders of the 7.50% Notes using net proceeds from the institutional private placement of the 7.25% Notes discussed above. Subsequent to the expiration of the tender offer, we completed the redemption of the remaining $20.8 million aggregate principal amount of the 7.50% Notes. In accordance with the redemption provisions and the indenture for the 7.50% Notes, the remaining 7.50% Notes were redeemed at a price equal to 101.875% of the principal amount, plus accrued and unpaid interest up to, but excluding, July 20, 2009, for an aggregate purchase price of $21.5 million, including accrued and unpaid interest of approximately $0.3 million. Upon completion of this redemption, none of the 7.50% Notes remained outstanding.

Redemption of 3.00% Convertible Notes. During the year ended December 31, 2009, we issued a notice for the redemption of the remaining $162.2 million aggregate principal amount of our 3.00% Notes. In accordance with the conversion provisions and the indenture for the 3.00% Notes, holders of the 3.00% Notes had the right at any time up to and including, but not after the close of business on August 26, 2009, to convert their 3.00% Notes into shares of our Common Stock at a conversion rate of 48.7805 shares per $1,000 principal amount of notes. Holders of approximately $162.1 million of the 3.00% Notes converted their notes into an aggregate of 7,908,316 shares of Common Stock prior to redemption. In accordance with the redemption provisions and the indenture for the 3.00% Notes, the remaining 3.00% Notes were redeemed at a price equal to 101.125% of the principal amount, plus accrued and unpaid interest up to, but excluding, August 27, 2009, for an aggregate purchase price of $0.1 million. Upon completion of this redemption, none of the 3.00% Notes remained outstanding.

 

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Redemption of 7.125% Senior Notes. During the year ended December 31, 2009, we issued a notice for the redemption of the principal amount of our outstanding 7.125% Notes. In accordance with the redemption provisions and the indenture for the 7.125% Notes, the 7.125% Notes were redeemed at a price equal to 101.781% of the principal amount, plus accrued and unpaid interest up to, but excluding, November 13, 2009, for an aggregate purchase price of $511.7 million, including approximately $2.8 million of accrued and unpaid interest. Upon completion of this redemption, none of the 7.125% Notes remained outstanding.

Interest Rate Swap Agreements. As of December 31, 2009, we held 13 interest rate swap agreements, all of which have been designated as cash flow hedges, and which have an aggregate notional amount of $625.0 million, interest rates ranging from 2.86% to 4.08% and expiration dates through March 2011.

Factors Affecting Sources of Liquidity

Internally Generated Funds. Because the majority of our tenant leases are multi-year contracts, a significant majority of the revenues generated by our rental and management segment as of the end of 2009 is recurring revenue that we should continue to receive in future periods. Accordingly, a key factor affecting our ability to generate cash flow from operating activities is to maintain this recurring revenue and to convert it into operating profit by minimizing operating costs and fully achieving our operating efficiencies. In addition, our ability to increase cash flow from operating activities is dependent upon the demand for our communications sites and our related services and our ability to increase the utilization of our existing communications sites.

Restrictions Under Loan Agreement Relating to Revolving Credit Facility and Term Loan. The loan agreement for the Revolving Credit Facility and Term Loan contains certain financial ratios and operating covenants and other restrictions applicable to us and all of our subsidiaries designated as restricted subsidiaries on a consolidated basis. These include limitations on additional debt, distributions and dividends, guaranties, sales of assets and liens. The loan agreement also contains covenants that establish three financial tests with which we and our restricted subsidiaries must comply related to total leverage, senior secured leverage and interest coverage, as set forth below. As of December 31, 2009, we were in compliance with each of these covenants.

 

   

Consolidated Total Leverage Ratio: This ratio requires that we not exceed a ratio of Total Debt to Adjusted EBITDA (as defined in the loan agreement) of 6.00 to 1.00. Based on our financial performance for the twelve months ended December 31, 2009, we could incur approximately $2.74 billion of additional indebtedness and still remain in compliance with this ratio. In addition, if we maintain our existing debt levels and our expenses do not change materially from current levels, our revenues could decrease by approximately $456 million and we would still remain in compliance with this ratio.

 

   

Consolidated Senior Secured Leverage Ratio: This ratio requires that we not exceed a ratio of Senior Secured Debt to Adjusted EBITDA of 3.00 to 1.00. Based on our financial performance for the twelve months ended December 31, 2009, we could incur approximately $1.69 billion of additional Senior Secured Debt and still remain in compliance with this ratio. In addition, if we maintain our existing Senior Secured Debt levels and our expenses do not change materially from current levels, our revenues could decrease by approximately $562 million and we would still remain in compliance with this ratio.

 

   

Interest Coverage Ratio: This ratio requires that we maintain a ratio of Adjusted EBITDA to Interest Expense of not less than 2.50 to 1.00. Based on our financial performance for the twelve months ended December 31, 2009, our interest expense, which was $238 million for that period, could increase by approximately $225 million and we would still remain in compliance with this ratio. In addition, if our interest expense does not change materially from current levels, our revenues could decrease by approximately $563 million and we would still remain in compliance with this ratio.

 

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The loan agreement also contains reporting and information covenants that require us to provide financial and operating information within certain time periods. If we are unable to provide the required information on a timely basis, we would be in breach of these covenants.

Any failure to comply with the financial maintenance tests and operating covenants of the loan agreement for the Revolving Credit Facility and Term Loan would not only prevent us from being able to borrow additional funds under the facility, 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. If this were to occur, we would not have sufficient cash on hand to repay such indebtedness. The key factors affecting our ability to comply with the debt covenants described above are our financial performance relative to the financial maintenance tests defined in the loan agreement for the Revolving Credit Facility and Term Loan and our ability to fund our debt service obligations. Based upon our current expectations, we believe our operating results during the next twelve months will be sufficient to comply with these covenants.

Restrictions Under Loan Agreement Relating to Securitization. The loan agreement related to the Securitization involved assets related to 5,295 broadcast and wireless communications towers owned by two special purpose subsidiaries of the Company (the “Borrowers”), through a private offering of $1.75 billion of Commercial Mortgage Pass-Through Certificates, Series 2007-1 (the “Certificates”). The Securitization loan agreement includes certain financial ratios and 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. The Borrowers’ organizational documents 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 Securitization loan agreement 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 Securitization loan agreement and other agreements related to the towers subject to the Securitization, and allow the trustee reasonable access to the towers, including the right to conduct site investigations.

Under the terms of the Securitization loan agreement, the loan will be paid solely from the cash flows generated by the towers subject to the Securitization, which must be deposited, and thereafter distributed, solely pursuant to the terms of the Securitization loan. The Borrowers are required to make monthly payments of interest on the Securitization loan. On a monthly basis, 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 Securitization loan, referred to as excess cash flow, is to be released to the Borrowers for distribution to us. During the year ended December 31, 2009, the Borrowers distributed excess cash to us of approximately $447.4 million.

In order to distribute this excess cash flow to us, the Borrowers must maintain several specified ratios with respect to their debt service coverage (“DSCR”). For this purpose, DSCR is tested as of the last day of each calendar quarter and is generally defined as four times the Borrowers’ net cash flow for that quarter divided by the amount of interest, servicing fees and trustee fees that the Borrowers must pay over the succeeding twelve months on the Securitization loan. Pursuant to one such test, if the DSCR as of the end of any calendar quarter were:

 

   

1.30x or less, during the five-year period commencing on the closing date of the Securitization in May 2007, or

 

   

1.75x or less, thereafter, (1.30x or 1.75x as applicable, the “Cash Trap DSCR”),

then all excess cash flow would be placed in a reserve account and would not be released to the Borrowers for distribution to us until the DSCR exceeded the Cash Trap DSCR for two consecutive calendar quarters.

 

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Additionally, while principal payments generally are not due with respect to any component of the Securitization loan until April 2014, excess cash flow would be applied to principal during an “Amortization Period” under the Securitization loan until April 2014. An “Amortization Period” would commence under the Securitization loan if the DSCR as of the end of any calendar quarter fell below:

 

   

1.15x, during the five-year period commencing on the closing date of the Securitization in May 2007, or

 

   

1.45x thereafter (1.15x or 1.45x as applicable, the “Minimum DSCR”).

In such a case, all excess cash flow and any amounts then in the reserve account because the Cash Trap DSCR was not met would be applied to pay principal of the Securitization loan on each monthly payment date until the DSCR exceeded the Minimum DSCR for two consecutive calendar quarters, and so would not be available for distribution to us.

Consequently, a failure to comply with the covenants in the Securitization loan agreement could prevent the Borrowers from taking certain actions with respect to the towers. Additionally, a failure to meet the noted DSCR tests could prevent the Borrowers from distributing excess cash flow to us, which could affect our ability to fund our discretionary expenditures, including tower construction and acquisitions, and our stock repurchase program. In addition, if the Borrowers were to default on the loan related to the Securitization, the trustee could seek to foreclose upon or otherwise convert the ownership of the towers subject to the Securitization, in which case we could lose the towers and the revenue associated with the towers.

As of December 31, 2009, the Borrowers’ DSCR was 3.10x. Based on the Borrowers’ net cash flow for the calendar quarter ended December 31, 2009 and the amount of interest, servicing fees and trustee fees payable over the succeeding twelve months on the Securitization loan, the Borrowers could endure a reduction of approximately $177.5 million in net cash flow before triggering a Cash Trap DSCR, and approximately $192.3 million in net cash flow before triggering an Amortization Period.

As discussed above, we use our available liquidity and seek new sources of liquidity to refinance and repurchase our outstanding indebtedness. In addition, in order to fund future growth and expansion initiatives and fund our stock repurchase program, we may need to raise additional capital through financing activities. If we determined that it is desirable or necessary to raise additional capital, we may be unable to do so, or such additional financing may be prohibitively expensive or restricted by the terms of our outstanding indebtedness. If we are unable to raise capital when our needs arise, we may not be able to fund future growth expansion initiatives, refinance our existing indebtedness or fund our stock repurchase program.

In addition, our liquidity depends on our ability to generate cash flow from operating activities. As set forth under the caption “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K, we derive a substantial portion of our revenues from a small number of customers and, consequently, a failure by a significant customer to perform its contractual obligations to us could adversely affect our cash flow and liquidity. As also set forth in that Item, as of December 31, 2009, foreign currency exchange rate fluctuations have primarily caused a subsidiary of Grupo Iusacell, which represented approximately 5% of our total revenues for the year ended December 31, 2009, to suspend debt service payments on its U.S. Dollar denominated debt. While Grupo Iusacell has continued to make partial payments to us, our net accounts receivable related to Grupo Iusacell was approximately $28.2 million as of December 31, 2009.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, as well as related

 

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disclosures of contingent assets and liabilities. We evaluate our policies and estimates on an ongoing basis, including those related to impairment of assets, asset retirement obligations, revenue recognition, stock-based compensation, income taxes, and estimated useful lives of assets. Management bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We have reviewed our policies and estimates to determine our critical accounting policies for the year ended December 31, 2009. We have identified the following policies as critical to an understanding of our results of operations and financial condition. This is not a comprehensive list of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by generally accepted accounting principles, with no need for management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. For a discussion of our other accounting policies, see note 1 to our consolidated financial statements included in this Annual Report, beginning on page F-7.

 

   

Impairment of Assets—Assets Subject to Depreciation and Amortization and Non-Core Long-Lived Assets Held for Sale: We review long-lived assets, including intangibles, for impairment whenever events, changes in circumstances or other indicators or evidence indicate that the carrying amount of our assets may not be recoverable. We review our tower portfolio and network location intangible assets for indications of impairment, which primarily result from a tower not having current tenant leases or from having expenses in excess of revenues. We monitor our customer related intangible assets on a customer by customer basis for indications of impairment, such as high levels of turnover or attrition, non-renewal of a significant number of contracts, or the cancellation or termination of a relationship. We assess recoverability by determining whether the net book value of the related assets will be recovered through projected undiscounted cash flows or anticipated proceeds from sales of the assets. If we determine that the carrying value of an asset may not be recoverable, we will measure any impairment based on the projected future discounted cash flows to be provided from the asset or available market information relative to the asset’s fair market value, as compared to the asset’s carrying value. We record any related impairment charge in the period in which we identify such impairment.

 

   

Impairment of Assets—Goodwill—Assets Not Subject to Amortization: We review goodwill and intangible assets with indefinite lives for impairment at least annually or whenever events or circumstances indicate the carrying value of an asset may not be recoverable.

All of our goodwill is recorded in our rental and management segment and tested for impairment annually as of December 31 or more frequently if an event occurs or circumstances indicate that the asset might be impaired. We utilize the two step traditional impairment test when testing goodwill for impairment. When conducting this test, we employ a discounted cash flow analysis, corroborated by a peer group and market valuation analysis. The key assumptions utilized in the discounted cash flow analysis include current operating performance, terminal sales growth rate, management’s expectations of future operating results, the current weighted average cost of capital, and a current tax rate. Under the first step of this test, we compare the fair value, as calculated using future discounted cash flows, to the carrying value of the rental and management reporting unit. If the carrying value exceeds the fair value, we conduct the second step of this test, in which the implied fair value of the rental and management reporting unit’s goodwill is compared to the carrying amount of that goodwill. If the carrying amount of goodwill exceeds its implied fair value, an impairment loss would be recognized.

During the year ended December 31, 2009, no impairment was determined under the first step of the test. We performed a sensitivity analysis on our significant assumptions and determined that none

 

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of the following negative changes in our assumptions individually, which we determined to be reasonable, would impact our conclusions: a 15% reduction in projected net income, a 200 basis point increase in the weighted average cost of capital, and a 15% reduction in terminal sales growth rate.

 

   

Asset Retirement Obligations: We recognize asset retirement obligations associated with our legal obligation to retire tangible long-lived assets and the related asset retirement costs, principally obligations to remediate leased land on which certain of our tower assets are located, in the period in which they are incurred, if a reasonable estimate of a fair value can be made, and we accrete such liability through the obligation’s estimated settlement date. The associated retirement costs are capitalized as part of the carrying amount of the related tower fixed assets and depreciated over their estimated useful life.

During the years ended December 31, 2009 and 2008, we updated our assumptions used in estimating our aggregate asset retirement obligation, which resulted in a net increase in the estimated obligation of $18.9 million and $13.0 million, respectively. The increase in 2009 primarily resulted from changes in timing of certain settlement date and cost assumptions. Fair value estimates of liabilities for asset retirement obligations generally involve discounted future cash flows, and periodic accretion of such liabilities due to the passage of time is recorded as an operating expense. The significant assumptions used in estimating our aggregate asset retirement obligation are: timing of tower removals; cost of tower removals; timing and number of land lease renewals; expected inflation rates; and credit-adjusted risk-free interest rates that approximate our incremental borrowing rate. While we feel the assumptions are appropriate, there can be no assurances that actual costs and the probability of incurring obligations will not differ from these estimates. We will continue to review these assumptions periodically and we may need to adjust them as necessary.

 

   

Revenue Recognition: Rental and management revenues are recognized on a monthly basis under lease or management agreements when earned, regardless of whether the payments from the customer are received in equal monthly amounts. Fixed escalation clauses present in non-cancelable lease agreements, excluding those tied to the Consumer Price Index or other inflation-based indices, and other incentives present in lease agreements with our customers are recognized on a straight-line basis over the terms of the applicable leases. Straight-line revenues for the years ended December 31, 2009, 2008 and 2007 approximated $36.3 million, $50.4 million and $69.7 million, respectively. Amounts billed up-front for certain services provided in connection with the execution of lease agreements are initially deferred and recognized as revenue over the terms of the applicable leases. Amounts billed or received prior to being earned are deferred and reflected in unearned revenue in the consolidated balance sheets until the earnings process is complete.

 

   

Stock-Based Compensation: We measure stock-based compensation cost at the accounting measurement date based on the fair value of the award and the fair value is recognized as an expense over the service period, which generally represents the vesting period. The expense recognized over the service period is required to include an estimate of the awards that will be forfeited. The fair value of a stock option is determined using a Black-Scholes option-pricing model that takes into account the stock price at the accounting measurement date, the exercise price, the expected life of the option, the volatility of the underlying stock and its expected dividends, and the risk-free interest rate over the expected life of the option. These assumptions are highly subjective and changes in them could significantly impact the value of the option and hence the compensation expense. The fair value of restricted stock units is based on the fair value of our Common Stock on the grant date.

 

   

Income Taxes: We adjust our tax liabilities when our judgment changes as a result of the evaluation of new information not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the tax liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which they are determined.

We expect 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, or if the applicable

 

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statute of limitations lapses. We believe that the amount of the change could range from zero to $1.0 million. As of December 31, 2009, we have classified approximately $16.5 million as other long-term liabilities in the consolidated balance sheet. We also classified approximately $15.2 million of accrued income tax-related interest and penalties as other long-term liabilities in the consolidated balance sheet as of December 31, 2009.

We periodically review our deferred tax assets, and we record a valuation allowance to reduce our net deferred tax asset to the amount that management believes is more likely than not to be realized. As of December 31, 2009, we have provided a valuation allowance of approximately $47.8 million which primarily relates to state net operating loss carryforwards, equity investments and foreign items. We have not provided a valuation allowance for the remaining deferred tax assets, primarily our federal net operating loss carryforwards, as we believe that we will have sufficient taxable income to realize these federal net operating loss carryforwards during the twenty-year tax carryforward period. Valuation allowances may be reversed if related deferred tax assets are deemed realizable based on changes in facts and circumstances relevant to the assets’ recoverability.

The recoverability of our remaining net deferred tax asset has been assessed utilizing projections based on our current operations. The projections show a significant decrease in depreciation in the later years of the carryforward period as a result of a significant portion of our assets being fully depreciated during the first fifteen years of the carryforward period. Accordingly, the recoverability of our net deferred tax asset is not dependent on material improvements to operations, material asset sales or other non-routine transactions. Based on our current outlook of future taxable income during the carryforward period, management believes that our net deferred tax asset will be realized. The realization of our deferred tax assets will be dependent upon our ability to generate approximately $0.9 billion and $0.9 billion in federal and state taxable income, respectively, from January 1, 2010 to December 31, 2029. If we are unable to generate sufficient taxable income in the future or carry back losses as described above, we will be required to reduce our net deferred tax asset through a charge to income tax expense.

Changes in tax laws and rates could also affect recorded deferred tax assets and liabilities in the future. Management is not aware of any such changes that would have a material effect on our consolidated results of operations, cash flows or financial position.

The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions across our international operations.

From time to time, we are subject to examination by various tax authorities in jurisdictions in which we have significant business operations, and we regularly assess the likelihood of additional assessments in each of the tax jurisdictions resulting from these examinations. We believe that adequate provisions have been made for income taxes for all periods through December 31, 2009.

 

   

Estimated Useful Lives of Assets: As described in note 2 to our consolidated financial statements included herein, we completed the review of the estimated useful lives of our tower assets in the first quarter of 2008. Based on this review, we revised the estimated useful lives of our towers and certain related intangible assets, primarily its network location intangible assets, from our historical estimate of 15 years to a revised estimate of 20 years, effective January 1, 2008. We accounted for the change in estimated useful lives as a change in estimate which was accounted for prospectively effective January 1, 2008. For the year ended December 31, 2008, the change resulted in a reduction in depreciation and amortization expense of approximately $121.2 million and an increase in net income of approximately $74.4 million.

Recently Adopted Accounting Standards

In September 2009, the FASB issued new accounting guidance which designated the FASB Accounting Standards Codification (“ASC”) as the source of all authoritative GAAP to be applied by nongovernmental

 

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entities. All guidance contained in the ASC carries an equal level of authority. The ASC supersedes all existing non-SEC accounting and reporting standards. All other nongrandfathered non-SEC accounting literature not included in the ASC is considered nonauthoritative. The implementation and adoption of the guidance provided by the ASC had no impact on our consolidated results of operations or financial position.

In December 2007, the FASB issued new accounting guidance which, among other things, eliminates the step acquisition model, requires that contingent consideration be recognized at the time of acquisition (instead of being recognized when it is probable), disallows the capitalization of transaction costs, and changes when restructurings related to acquisitions can be recognized. This guidance also establishes additional disclosure requirements that enable the evaluation of the nature and financial effects of business combinations. This guidance was effective for us as of January 1, 2009 and, upon adoption, approximately $1.2 million of transaction costs previously capitalized in notes receivable and other long-term assets was expensed.

In December 2007, the FASB issued new accounting guidance which requires the classification of noncontrolling interest as a separate component of equity and disclosure clearly identifying, and distinguishing between, parent and noncontrolling owner interests. This guidance was effective for us as of January 1, 2009 and did not materially impact our consolidated results of operations and financial position. However, we have adjusted our presentation of noncontrolling interest in our consolidated financial statements included in this Annual Report.

In February 2008, the FASB issued new accounting guidance which delayed the effective date of applying fair value measures to all nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis (that is, at least annually) to January 1, 2009. The adoption of this guidance had no impact on our consolidated results of operations or financial position.

In March 2008, the FASB issued new accounting guidance which, among other things, changes disclosure requirements and requires entities to provide enhanced disclosures about how and why entities use derivative financial instruments, how derivative instruments and related hedged items are accounted for and how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. This guidance was effective for us as of January 1, 2009. We have included additional disclosures regarding our derivative instruments (see note 8 to our consolidated financial statements included herein.) The adoption of this guidance had no impact on our consolidated results of operations or financial position.

In April 2009, the FASB issued new accounting guidance which requires additional disclosures about the fair value of financial instruments for interim reporting periods as well as in annual financial statements. This guidance was effective for us as of April 1, 2009. Beginning with our Quarterly Report for the quarter ended June 30, 2009, we have included additional disclosures regarding the fair value of our financial instruments. The adoption of this guidance had no impact on our consolidated results of operations or financial position.

In May 2009, the FASB issued new accounting guidance, which, among other things, sets forth the period after the balance sheet date during which management should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should disclose events or transactions occurring after the balance sheet date, and the disclosures entities should make about events or transactions that occurred after the balance sheet date. This guidance was effective for us as of June 30, 2009. Beginning with our Quarterly Report for the quarter ended June 30, 2009, we have included additional disclosures regarding our review of subsequent events (see note 21 to our consolidated financial statements included herein.) The adoption of this guidance had no impact on our consolidated results of operations or financial position.

Accounting Standards Updates

In October 2009, the FASB issued new guidance which establishes accounting and reporting guidance for arrangements including multiple revenue-generating activities. This guidance requires companies to allocate the

 

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overall consideration to each deliverable under the arrangement using the estimated selling prices in the absence of vendor specific objective evidence or third-party evidence of selling prices for deliverables. This guidance is effective for any contracts entered into or materially modified after January 1, 2011, with early adoption available. We are evaluating the impact that this guidance will have on our consolidated results of operations or financial position.

In January 2010, the FASB issued new guidance which clarifies some of the existing disclosure requirements and adds additional disclosure requirements with respect to fair value measurements. This guidance is effective for interim and annual reporting periods beginning after December 15, 2009. We are evaluating the impact that this guidance will have on our disclosures; however, the adoption of these updates will have no impact on our consolidated results of operations or financial position.

 

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ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk from changes in interest rates on long-term debt obligations. We attempt to reduce these risks by utilizing derivative financial instruments, namely interest rate swaps. As of December 31, 2009, we held 13 interest rate swap agreements, all of which have been designated as cash flow hedges, and which have an aggregate notional amount of $625.0 million, interest rates ranging from 2.86% to 4.08% and expiration dates through March 2011. In addition, in May 2009, we entered into a foreign currency exchange contract to hedge the foreign currency exposure associated with our acquisition of XCEL. This foreign currency exchange contract was not designated as a hedging instrument and was settled upon the completion of the acquisition of XCEL on May 27, 2009.

During the year ended December 31, 2009, we repurchased or redeemed approximately $725.1 million face amount of our outstanding debt securities, including the repurchase and redemption of $225.0 million principal amount of our 7.50% Notes, the redemption of $500.0 million principal amount of our 7.125% Notes and the redemption of $0.1 million aggregate principal amount of our 3.00% Notes. As of December 31, 2009, $550.0 million was outstanding under the Revolving Credit Facility and the Term Loan was fully drawn.

The following tables provide information as of December 31, 2009 and 2008 about our market risk exposure associated with changing interest rates. For long-term debt obligations, the tables present principal cash flows by maturity date and average interest rates related to outstanding obligations. For interest rate caps and swaps, the tables present notional principal amounts and weighted-average interest rates by contractual maturity dates.

As of December 31, 2009

Principal Payments and Interest Rate Detail by Contractual Maturity Dates

(In thousands, except percentages)

 

Long-Term Debt

   2010     2011     2012     2013     2014     Thereafter     Total    Fair Value  

Fixed Rate Debt(a)

   $ 70,521      $ 16,232      $ 13,004      $ 12,891      $ 1,762,943      $ 1,466,743      $ 3,342,334    $ 3,483,364   

Average Interest Rate(a)

     6.08     12.32 %(f)      12.64 %(f)      12.70 %(f)      5.66     6.18     

Variable Rate Debt(a)

       $ 875,000            $ 875,000    $ 861,875   

Aggregate Notional Amounts Associated with Interest Rate Swaps in Place

As of December 31, 2009 and Interest Rate Detail by Contractual Maturity Dates

(In thousands, except percentages)

  

  

  

Interest Rate SWAPS

   2010     2011     2012     2013     2014     Thereafter     Total    Fair Value  

Notional Amount

   $ 100,000 (c)              $ 100,000    $ (3,535

Fixed Rate(e)

     4.08               

Notional Amount

     $ 525,000 (d)            $ 525,000    $ (15,317

Fixed Rate(e)

       3.11             

As of December 31, 2008

Principal Payments and Interest Rate Detail by Contractual Maturity Dates

(In thousands, except percentages)

  

  

  

Long-Term Debt

   2009     2010     2011     2012     2013     Thereafter     Total    Fair Value  

Fixed Rate Debt(a)

   $ 1,837      $ 60,989      $ 1,018      $ 887,822      $ 646      $ 2,305,054      $ 3,257,366    $ 2,849,261   

Average Interest Rate(a)

     5.93     5.02     6.43     6.47     6.31     5.97     

Variable Rate Debt(a)

         $ 1,075,000          $ 1,075,000    $ 1,023,986   

 

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Aggregate Notional Amounts Associated with Interest Rate Swaps in Place

As of December 31, 2008 and Interest Rate Detail by Contractual Maturity Dates

(In thousands, except percentages)

 

Interest Rate SWAPS

   2009     2010     2011     2012    2013    Thereafter    Total    Fair Value  

Notional Amount

   $ 150,000 (b)                 $ 150,000    $ (3,681

Fixed Rate (e)

     3.95                  

Notional Amount

     $ 100,000 (c)               $ 100,000    $ (5,125

Fixed Rate (e)

       4.08                

Notional Amount

       $ 525,000 (d)             $ 525,000    $ (17,815

Fixed Rate (e)

         3.11              

 

(a) As of December 31, 2009, variable rate debt consists of our Revolving Credit Facility ($550.0 million drawn) and Term Loan ($325.0 million) included above based on the June 8, 2012 maturity date. As of December 31, 2009, fixed rate debt consists of: the Certificates ($1.75 billion); the 5.0% Notes ($59.7 million) (the 5.0% notes matured on February 15, 2010, and were repaid using cash on hand); the 7.25% Notes ($300.0 million principal amount due at maturity, the balance as of December 31, 2009 is $295.0 million); ATI 7.25% Notes ($0.3 million); the 7.00% senior notes due 2017 (the “7.00% Notes”) ($500.0 million); the XCEL credit facility ($73.4 million); the 4.625% Notes ($600.0 million principal amount due at maturity, the balance as of December 31, 2009 is $599.2 million); and other debt of $59.0 million. Interest on the Revolving Credit Facility and Term Loan is payable in accordance with the applicable London Interbank Offering Rate (“LIBOR”) agreement or quarterly and accrues at our option either at LIBOR plus margin (as defined) or the base rate plus margin (as defined). The weighted average interest rate in effect at December 31, 2009 for the Revolving Credit Facility and Term Loan was 2.84%. For the year ended December 31, 2009, the weighted average interest rate under the Revolving Credit Facility and Term Loan was 3.63%.

 

     As of December 31, 2008, variable rate debt consists of our Revolving Credit Facility ($750.0 million drawn) and Term Loan ($325.0 million) included above based on the June 8, 2012 maturity date. As of December 31, 2008, fixed rate debt consists of: the Certificates ($1.75 billion); 2.25% convertible notes due 2009 (“2.25% Notes”) ($0.04 million); the 7.125% Notes ($500.0 million principal amount due at maturity; the balance as of December 31, 2008 is $501.1 million); the 5.0% Notes ($59.7 million); the 7.50% Notes ($225.0 million); the ATI 7.25% Notes ($0.3 million); the 3.00% Notes ($162.2 million principal amount due at maturity; the balance as of December 31, 2008 is $161.9 million accreted value); the 7.00% Notes ($500.0 million) and other debt of $60.1 million. Interest on the Revolving Credit Facility and Term Loan is payable in accordance with the applicable LIBOR agreement or quarterly and accrues at our option either at LIBOR plus margin (as defined) or the base rate plus margin (as defined). The weighted average interest rate in effect at December 31, 2008 for the Revolving Credit Facility and Term Loan was 3.20%. For the year ended December 31, 2008, the weighted average interest rate under the Revolving Credit Facility and Term Loan was 4.16%.

 

(b) Includes notional amounts of $150.0 million that expired in December 2009.

 

(c) Includes notional amount of $100.0 million that expires in December 2010.

 

(d) Includes notional amounts of $525.0 million that expire between January and March 2011.

 

(e) Represents the weighted-average fixed rate or range of interest based on contractual notional amount as a percentage of total notional amounts in a given year.

 

(f) The increase in the interest rate is primarily due to the scheduled payments under the XCEL credit facility.

Changes in interest rates can cause interest charges to fluctuate on our variable rate debt. Variable rate debt as of December 31, 2009, after giving effect to our interest rate swap agreements, was comprised of $200.0 million under the Revolving Credit Facility and $50.0 million under the Term Loan. A 10% increase, or approximately 28 basis points, in current interest rates would have caused an additional pre-tax charge to our net income and an increase in our cash outflows of $0.7 million for the year ended December 31, 2009.

We are exposed to market risk from changes in foreign currency exchange rates in connection with our foreign operations, including our rental and management segment divisions in Mexico, Brazil and India. For the year ended December 31, 2009, the remeasurement loss from these operations approximated $0.2 million. For the year ended December 31, 2008, the remeasurement gain from these operations approximated $5.7 million.

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Item 15 (a).

 

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

 

ITEM 9A.    CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We have established disclosure controls and procedures designed to ensure that material information relating to us, including our consolidated subsidiaries, is made known to the officers who certify our financial reports and to other members of senior management and the Board of Directors.

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Annual Report on Form 10-K. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2009.

Management’s Annual Report on Internal Control over Financial Reporting

Our management, with the participation of our principal executive officer and principal financial officer, is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control system is designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of published financial statements.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2009. In making its assessment of internal control over financial reporting, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework. Based on this assessment, management concluded that, as of December 31, 2009, our internal control over financial reporting is effective.

Deloitte & Touche LLP, an independent registered public accounting firm that audited our financial statements included in this Annual Report, has issued an attestation report on management’s internal control over financial reporting, which is included in this Item 9A under the caption “Report of Independent Registered Public Accounting Firm.”

 

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

American Tower Corporation Boston,

Massachusetts

We have audited the internal control over financial reporting of American Tower Corporation and subsidiaries (the “Company”) as of December 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements of the Company as of and for the year ended December 31, 2009, and our report dated March 1, 2010, expressed an unqualified opinion on those financial statements.

/s/ DELOITTE & TOUCHE LLP

Boston, Massachusetts

March 1, 2010

 

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Changes in Internal Control over Financial Reporting

Except as otherwise discussed above, there have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) during the fiscal quarter ended December 31, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Our executive officers and their respective ages and positions as of February 12, 2010 are set forth below:

 

James D. Taiclet, Jr.

   49    Chairman, President and Chief Executive Officer

Thomas A. Bartlett

   51    Executive Vice President and Chief Financial Officer

Jean A. Bua

   51    Executive Vice President, Finance and Treasurer

Edmund DiSanto

   57    Executive Vice President, Chief Administrative Officer and General Counsel

William H. Hess

   46    Executive Vice President, International Operations and President, Latin America and EMEA

Steven C. Marshall

   48    Executive Vice President, and President, U.S. Tower Division

Robert J. Meyer, Jr

   46    Senior Vice President, Finance and Corporate Controller

Amit Sharma

   59    Executive Vice President and President, Asia

James D. Taiclet, Jr. is our Chairman, President and Chief Executive Officer. Mr. Taiclet joined us in September 2001 as President and Chief Operating Officer and was named our Chief Executive Officer in October 2003. Mr. Taiclet was elected to our Board of Directors in November 2003 and was named our Chairman in February 2004. Prior to joining us, Mr. Taiclet had been President of Honeywell Aerospace Services, a part of Honeywell International, since March 1999. From March 1996 until March 1999, Mr. Taiclet served as Vice President, Engine Services at Pratt & Whitney, a unit of United Technologies Corporation. Mr. Taiclet was also previously a consultant at McKinsey & Company, specializing in telecommunications and aerospace, and prior to that, a United States Air Force officer and pilot. Mr. Taiclet received a Masters in Public Affairs from Princeton University, where he was a Wilson Fellow, and is a distinguished graduate of the United States Air Force Academy.

Thomas A. Bartlett is our Executive Vice President and Chief Financial Officer. Mr. Bartlett joined us in April 2009. Prior to joining us, Mr. Bartlett served as Senior Vice President and Corporate Controller with Verizon Communications, Inc. since November 2005. In this role, he was responsible for corporate-wide accounting, tax planning and compliance, SEC financial reporting, budget reporting and analysis, and capital expenditures planning functions. Mr. Bartlett previously held the roles of Senior Vice President and Treasurer, as well as Senior Vice President in Investor Relations. During his 25 year career with Verizon Communications and its predecessor companies and affiliates, he served in numerous operations and business development roles, including as the President and Chief Executive Officer of Bell Atlantic International Wireless from 1995 through 2000, where he was responsible for wireless activities in North America, Latin America, Europe and Asia, and was also an area President in Verizon’s U.S. wireless business responsible for all operational aspects in both the Northeast and Mid-Atlantic states. Mr. Bartlett earned his M.B.A. degree from Rutgers University and a Bachelor of Science in Engineering from Lehigh University, and is also a Certified Public Accountant.

Jean A. Bua is our Executive Vice President, Finance and Treasurer. Ms. Bua joined us in August 2005 as Senior Vice President, Finance and Corporate Controller and in February 2007, was named Executive Vice President, Finance and Corporate Controller. Ms. Bua served as our Chief Financial Officer from June 2008 through April 2009, at which time she was appointed our Senior Vice President, Finance and Treasurer. Prior to joining us, since 1996, Ms. Bua was with Iron Mountain, Inc., a global records management and data protection services company, where she most recently served as Senior Vice President, Chief Accounting Officer and Worldwide Controller. From 1993 to 1996, Ms. Bua was Corporate Controller for Duracraft Corporation, an international consumer products manufacturer. Prior to joining Duracraft, Ms. Bua was Assistant Controller for Keithley Instruments, a high-tech hardware and software company, from 1991 to 1993. Ms. Bua was also previously a management consultant for Ernst & Young and an auditor for KPMG. Ms. Bua is a Certified Public Accountant and holds an M.B.A. degree from the University of Rhode Island.

 

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Edmund DiSanto is our Executive Vice President, Chief Administrative Officer and General Counsel. Mr. DiSanto joined us in April 2007. Prior to joining us, Mr. DiSanto was with Pratt & Whitney, a unit of United Technologies Corporation. Mr. DiSanto started with United Technologies in 1989, where he first served as Assistant General Counsel of its Carrier subsidiary, then corporate Executive Assistant to the Chairman and Chief Executive Officer of United Technologies, and from 1997, he held various legal and business roles at its Pratt & Whitney unit, including Deputy General Counsel and most recently, Vice President, Global Service Partners, Business Development. Prior to joining United Technologies, Mr. DiSanto served in a number of legal and related positions at United Dominion Industries and New England Electric Systems. Mr. DiSanto earned his J.D. degree from Boston College Law School and a Bachelor of Science from Northeastern University.

William H. Hess is our Executive Vice President, International Operations and President, Latin America and EMEA. Mr. Hess joined us in March 2001 as Chief Financial Officer of American Tower International and was appointed Executive Vice President in June 2001. Mr. Hess was appointed Executive Vice President, General Counsel in September 2002, and in February 2007, Mr. Hess was also appointed Executive Vice President, International Operations. Mr. Hess relinquished the position of General Counsel in April 2007 when he was named President of our Latin American operations. In March 2009, Mr. Hess also became responsible for the Europe, Middle East and Africa (EMEA) territory. Prior to joining us, Mr. Hess had been a partner in the corporate and finance practice group of the law firm of King & Spalding LLP, which he joined in 1990. Prior to attending law school, Mr. Hess practiced as a Certified Public Accountant with Arthur Young & Co. Mr. Hess received his J.D. degree from Vanderbilt University School of Law and is a graduate of Harding University.

Steven C. Marshall is our Executive Vice President and President, U.S. Tower Division. Mr. Marshall served as our Executive Vice President, International Business Development from November 2007 through March 2009, at which time he was appointed our Executive Vice President and President, U.S. Tower Division. Prior to joining us, Mr. Marshall was with National Grid Plc, where he served in a number of leadership and business development positions since 1997. Between 2003 and 2007, Mr. Marshall was Chief Executive Officer, National Grid Wireless, where he led National Grid’s wireless tower infrastructure business in the United States and United Kingdom. In addition, during his tenure at National Grid, as well as at Costain Group Plc and Tootal Group Plc, he led operational and business development efforts in Latin America, India, Southeast Asia, Africa and the Middle East. Mr. Marshall earned his M.B.A. degree from Manchester Business School in Manchester, England and a Bachelor of Science with honors in Building and Civil Engineering from the Victoria University of Manchester, England.

Robert J. Meyer, Jr. is our Senior Vice President, Finance and Corporate Controller. Mr. Meyer joined us in August 2008. Prior to joining us, since 1998, Mr. Meyer was with Bright Horizons Family Solutions, a provider of child care, early education and work/life consulting services, where he most recently served as Chief Accounting Officer. Mr. Meyer also served as Corporate Controller and Vice President of Finance while at Bright Horizons. Prior to joining Bright Horizons, from 1997 to 1998, Mr. Meyer served as Director of Financial Planning and Analysis at First Security Services Corp. Mr. Meyer earned his Masters in Finance from Bentley University and a Bachelor of Science in Accounting from Marquette University, and is also a Certified Public Accountant.

Amit Sharma is our Executive Vice President and President, Asia. Mr. Sharma joined us in September 2007. Prior to joining us, Mr. Sharma was with Motorola since 1992, where he led country teams in India and Southeast Asia, including as Country President, India and as Head of Strategy, Asia-Pacific. Mr. Sharma also served on Motorola’s Asia Pacific Board and was a member of its senior leadership team. Prior to joining Motorola, Mr. Sharma was with GE Capital, serving as Vice President, Strategy and Business Development, and prior to that, with McKinsey, New York, serving as a core member of the firm’s Electronics and Marketing Practices. Mr. Sharma earned his M.B.A. degree in International Business from the Wharton School, University of Pennsylvania, where he was on the Dean’s List and the Director’s Honors List. Mr. Sharma also holds an MS in Computer Science from the Moore School, University of Pennsylvania, and a Bachelor of Technology in Mechanical Engineering from the Indian Institute of Technology.

 

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The information under “Election of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance” from the Definitive Proxy Statement is incorporated herein by reference. Information required by this item pursuant to Item 407(c)(3) of SEC Regulation S-K relating to our procedures by which security holders may recommend nominees to our Board of Directors, and pursuant to Item 407(d)(4) and 407(d)(5) of SEC Regulation S-K relating to our audit committee financial experts and identification of the audit committee of our Board of Directors, is contained in the Definitive Proxy Statement under “Corporate Governance” and is incorporated herein by reference.

Information regarding our Code of Conduct applicable to our principal executive officer, our principal financial officer, our controller and other senior financial officers appears in Item 1 of this report under the caption “Business—Available Information.”

 

ITEM 11. EXECUTIVE COMPENSATION

The information under “Compensation and Other Information Concerning Directors and Officers” from the Definitive Proxy Statement is hereby incorporated by reference.

 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information under “Security Ownership of Certain Beneficial Owners and Management” and “Securities Authorized for Issuance Under Equity Compensation Plans” from the Definitive Proxy Statement is incorporated herein by reference.

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information under “Certain Relationships and Related Transactions” from the Definitive Proxy Statement is incorporated herein by reference.

Information required by this item pursuant to Item 407(a) of SEC Regulation S-K relating to director independence is contained in the Definitive Proxy Statement under “Corporate Governance” and is incorporated herein by reference.

 

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information under “Independent Auditor Fees and Other Matters” from the Definitive Proxy Statement is incorporated herein by reference.

PART IV

 

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

  (a) The following documents are filed as a part of this report:

1. Financial Statements. See Index to Consolidated Financial Statements, which appears on page F-1 hereof. The financial statements listed in the accompanying Index to Consolidated Financial Statements are filed herewith in response to this Item.

2. Financial Statement Schedules. All schedules are omitted because they are not applicable or because the required information is contained in the consolidated financial statements or notes included in this Annual Report on Form 10-K.

3. Exhibits. See Index to Exhibits. The exhibits listed in the Index to Exhibits immediately preceding the exhibits are filed herewith in response to this Item.

 

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 1st day of March, 2010.

 

AMERICAN TOWER CORPORATION
By:   /s/    JAMES D. TAICLET, JR.        
 

James D. Taiclet, Jr.

Chairman, President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been duly signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

/s/    JAMES D. TAICLET, JR.        

James D. Taiclet, Jr.

  

Chairman, President and Chief Executive Officer
(Principal Executive Officer)

  March 1, 2010

/s/    THOMAS A. BARTLETT        

Thomas A. Bartlett

  

Executive Vice President and Chief Financial Officer
(Principal Financial Officer)

  March 1, 2010

/s/    ROBERT J. MEYER, JR.        

Robert J. Meyer, Jr.

  

Senior Vice President, Finance and Corporate Controller
(Principal Accounting Officer)

  March 1, 2010

/s/    RAYMOND P. DOLAN        

Raymond P. Dolan

  

Director

  March 1, 2010

/s/    RONALD M. DYKES        

Ronald M. Dykes

  

Director

  March 1, 2010

/s/    CAROLYN F. KATZ        

Carolyn F. Katz

  

Director

  March 1, 2010

/s/    GUSTAVO LARA CANTU        

Gustavo Lara Cantu

  

Director

  March 1, 2010

/s/    JOANN A. REED        

JoAnn A. Reed

  

Director

  March 1, 2010

/s/    PAMELA D. A. REEVE        

Pamela D. A. Reeve

  

Director

  March 1, 2010

/s/    DAVID E. SHARBUTT        

David E. Sharbutt

  

Director

  March 1, 2010

/s/    SAMME L. THOMPSON        

Samme L. Thompson

  

Director

  March 1, 2010

 

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AMERICAN TOWER CORPORATION AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

     Page

Report of Independent Registered Public Accounting Firm

   F-2

Consolidated Balance Sheets as of December 31, 2009 and 2008

   F-3

Consolidated Statements of Operations for the Years Ended December 31, 2009, 2008 and 2007

   F-4

Consolidated Statements of Stockholders’ Equity for the Years Ended December  31, 2009, 2008 and 2007

  

F-5

Consolidated Statements of Cash Flows for the Years Ended December 31, 2009, 2008 and 2007

   F-6

Notes to Consolidated Financial Statements

   F-7

 

F-1


Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

American Tower Corporation

Boston, Massachusetts

We have audited the accompanying consolidated balance sheets of American Tower Corporation and subsidiaries (the “Company”) as of December 31, 2009 and 2008, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2009 and 2008, and the results of its operations and cash flows for each of the three years in the period ended December 31, 2009, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2009, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 1, 2010 expressed an unqualified opinion on the Company’s internal control over financial reporting.

/s/ DELOITTE & TOUCHE LLP

Boston, Massachusetts

March 1, 2010

 

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AMERICAN TOWER CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

 

     December 31,
2009
    December 31,
2008
 

ASSETS

    

CURRENT ASSETS:

    

Cash and cash equivalents

   $ 247,293      $ 143,077   

Restricted cash

     47,836        51,866   

Short-term investments and available-for-sale securities

     9,776        2,028   

Accounts receivable, net of allowances

     67,949        51,313   

Prepaid and other current assets

     89,051        61,415   

Deferred income taxes

     189,451        163,981   
                

Total current assets

     651,356        473,680   
                

PROPERTY AND EQUIPMENT, net

     3,175,511        3,022,636   

GOODWILL

     2,237,850        2,186,233   

OTHER INTANGIBLE ASSETS, net

     1,598,633        1,566,155   

DEFERRED INCOME TAXES

     198,185        381,428   

NOTES RECEIVABLE AND OTHER LONG-TERM ASSETS

     651,133        581,533   
                

TOTAL

   $ 8,512,668      $ 8,211,665   
                

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

CURRENT LIABILITIES:

    

Accounts payable and accrued expenses

   $ 185,138      $ 151,985   

Accrued interest

     23,538        28,635   

Current portion of long-term obligations

     70,521        1,837   

Unearned revenue

     112,047        120,188   
                

Total current liabilities

     391,244        302,645   
                

LONG-TERM OBLIGATIONS

     4,141,060        4,331,309   

OTHER LONG-TERM LIABILITIES

     662,239        583,232   
                

Total liabilities

     5,194,543        5,217,186   
                

COMMITMENTS AND CONTINGENCIES

    

STOCKHOLDERS’ EQUITY:

    

Preferred Stock: $.01 par value; 20,000,000 shares authorized; no shares issued or outstanding

    

Class A Common Stock: $.01 par value; 1,000,000,000 shares authorized, 479,703,633 and 468,513,843 shares issued, and 401,596,984 and 396,976,896 shares outstanding, respectively

     4,797        4,685   

Additional paid-in capital

     8,393,643        8,109,224   

Accumulated deficit

     (2,109,532     (2,356,127

Accumulated other comprehensive loss

     (12,649     (20,031

Treasury stock (78,106,649 and 71,536,947 shares at cost, respectively)

     (2,961,177     (2,746,429
                

Total American Tower Corporation stockholders’ equity

     3,315,082        2,991,322   

Noncontrolling interest

     3,043        3,157   
                

Total stockholders’ equity

     3,318,125        2,994,479   
                

TOTAL

   $ 8,512,668      $ 8,211,665   
                

See accompanying notes to consolidated financial statements.

 

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AMERICAN TOWER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

 

     Year Ended December 31,  
     2009     2008     2007  

REVENUES:

      

Rental and management

   $ 1,668,420      $ 1,547,035      $ 1,425,975   

Network development services

     55,694        46,469        30,619   
                        

Total operating revenues

     1,724,114        1,593,504        1,456,594   
                        

OPERATING EXPENSES:

      

Costs of operations (exclusive of items shown separately below)

      

Rental and management

     383,990        363,024        343,450   

Network development services

     32,385        26,831        16,172   

Depreciation, amortization and accretion

     414,619        405,332        522,928   

Selling, general, administrative and development expense (including stock-based compensation expense of $60,670, $54,807 and $54,603, respectively)

     201,694        180,374        186,483   

Other operating expense

     19,168        11,189        9,198   
                        

Total operating expenses

     1,051,856        986,750        1,078,231   
                        

OPERATING INCOME

     672,258        606,754        378,363   
                        

OTHER INCOME (EXPENSE):

      

Interest income, TV Azteca, net of interest expense of $1,488, $1,489, and $1,490, respectively

     14,210        14,253        14,207   

Interest income

     1,722        3,413        10,848   

Interest expense

     (249,803     (253,584     (235,824

Loss on retirement of long-term obligations

     (18,194     (4,904     (35,429

Other income

     1,294        5,988        20,675   
                        

Total other expense

     (250,771     (234,834     (225,523
                        

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND INCOME ON EQUITY METHOD INVESTMENTS

     421,487        371,920        152,840   

Income tax provision

     (182,565     (135,509     (59,809

Income on equity method investments

     26        22        19   
                        

INCOME FROM CONTINUING OPERATIONS

     238,948        236,433        93,050   

INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF INCOME TAX BENEFIT (PROVISION) OF $3,140, $107,914, and $(6,191), RESPECTIVELY

     8,179        110,982        (36,396
                        

NET INCOME

   $ 247,127      $ 347,415      $ 56,654   

Net income attributable to noncontrolling interest

     (532     (169     (338
                        

NET INCOME ATTRIBUTABLE TO AMERICAN TOWER CORPORATION

   $ 246,595      $ 347,246      $ 56,316   
                        

NET INCOME PER COMMON SHARE AMOUNTS:

      

BASIC:

      

Income from continuing operations attributable to American Tower Corporation

   $ 0.60      $ 0.60      $ 0.22   

Income (loss) from discontinued operations attributable to American Tower Corporation

     0.02        0.28        (0.09
                        

Net income attributable to American Tower Corporation

   $ 0.62      $ 0.88      $ 0.14   
                        

DILUTED:

      

Income from continuing operations attributable to American Tower Corporation

   $ 0.59      $ 0.58      $ 0.22   

Income (loss) from discontinued operations attributable to American Tower Corporation

     0.02        0.27        (0.09
                        

Net income attributable to American Tower Corporation

   $ 0.61      $ 0.84      $ 0.13   
                        

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

      

BASIC

     398,375        395,947        413,167   
                        

DILUTED

     406,948        418,357        426,079   
                        

See accompanying notes to consolidated financial statements.

 

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AMERICAN TOWER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share data)

 

    Class A
Common Stock
  Treasury Stock     Additional
Paid-in
Capital
    Accumulated
Other
Comprehensive
Income (Loss)
    Accumulated
Deficit
    Non-controlling
Interest
    Total
Stockholders’
Equity
    Total
Comprehensive
Income
 
    Issued Shares   Amount   Shares     Amount              

BALANCE, DECEMBER 31, 2006

  437,792,629   $ 4,378   (13,120,362   $ (404,093   $ 7,502,472      $ 16,079      $ (2,733,920   $ 3,591      $ 4,388,507     
                                                                 

Stock option activity

  7,400,667     74         182,658              182,732     

Issuance of common stock upon exercise of warrants

  192,054     2         290              292     

Issuance of common stock – Stock Purchase Plan

  48,886           1,658              1,658     

Treasury stock activity

      (40,121,065     (1,643,725             (1,643,725  

Net change in fair value of cash flow hedges, net of tax

              (3,244         (3,244     (3,244

Net realized loss on cash flow hedges, net of tax

              (6,162