American Tower Corporation (REIT) (AMT)

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American Tower (AMT)

Q4 2010 Earnings Call

February 23, 2011 8:30 am ET

Executives

Leah Stearns -

Thomas Bartlett - Chief Financial Officer and Executive Vice President

James Taiclet - Executive Chairman, Chief Executive Officer and President

Analysts

Gray Powell - Wells Fargo Securities, LLC

Philip Cusick - Macquarie

Simon Flannery - Morgan Stanley

David Barden

Brett Feldman - Deutsche Bank AG

Jason Armstrong - Goldman Sachs Group Inc.

Presentation

Operator

Good morning. My name is Don, and I'll be your conference operator today. At this time, I would like to welcome everyone to the American Tower Fourth Quarter Full Year 2010 Conference Call. [Operator Instructions] Ms. Leah Stearns, you may begin your conference.

Leah Stearns

Thank you and good morning, everyone. Thank you for joining American Tower's Conference Call regarding our Fourth Quarter and Full Year 2010 Financial Results. Please note that we have posted a presentation on our website, which we will refer to throughout our prepared remarks. Our agenda for this morning's call will be as follows: I will provide a brief overview of our fourth quarter and full year 2010 financial results; then Tom Bartlett, our Executive Vice President and Chief Financial Officer, will review our 2010 performance and provide an overview of our expectations for 2011; and finally, Jim Taiclet, our Chairman, President and Chief Executive Officer, will provide closing remarks. After these comments, of course, we will open up the call for your questions.

Before I begin, I would like to remind you that this call contains forward-looking statements that involve a number of risks and uncertainties. Examples of these risks include those regarding our 2011 outlook, our pending acquisitions, our consideration to elect REIT status and any other statements regarding matters that are not historical facts. You should be aware that certain factors may affect us in the future and could cause actual results to differ materially from those expressed in these forward-looking statements.

Such factors include the risk factors set forth in this morning's press release and those set forth in our Form 10-Q for the quarter ended September 30, 2010 and then our other filings with the SEC. We urge you to consider these factors and remind you that we undertake no obligation to update the information contained in this call to reflect subsequent events or circumstances.

And with that, please turn to Slide 4 of the presentation, which provides a summary of our fourth quarter and full year 2010 results. Highlights from the fourth quarter included over 23% growth in total Rental and Management revenues to $536 million. Adjusted EBITDA growth of over 18% to $365 million, operating income growth of over 15% to $203 million and an increase in our income from continuing operations to approximately $84 million or $0.21 per basic and diluted common share.

From a full year perspective, we generated over 16% growth in total Rental and Management revenues to approximately $1.94 billion, adjusted EBITDA growth of over 14% to approximately $1.3 billion, operating income growth of approximately 17% to over $784 million and an increase in our income from continuing operations to approximately $374 million or $0.93 per basic and $0.92 per diluted common share. Please note that our increased expansion activity in international market, as well as changes to our organizational structure, have led us to separately disclose our Rental and Management operations in two segments: Domestic Rental and Management and International Rental and Management. In addition to the segment information provided in this morning's press release, we have also posted historical quarterly segment detail for 2010 to our website. Further, we recently completed a new investor presentation, which provides background on the tower industry, as well as American Tower, which can also be found in our website. We hope that you find these supplemental sources of information helpful.

And with that, I would like to turn the call over to Tom, who will discuss our results in more detail.

Thomas Bartlett

Thanks, Leah, and good morning, everyone. I'm pleased to report that our business continued to produce strong results in the fourth quarter, positioning us well for 2011. If you'll please turn to Slide 5, you'll see that for the quarter, our total Rental and Management revenue increased over 23% to more than $536 million. Adjusting for the impact of FX, straight line and a one-time $8.9 million revenue item that occurred during the fourth quarter, the core growth in total Rental and Management revenues was nearly 14%.

Turning to Slide 6, continuing with some highlights from our Domestic Rental and Management segment for the fourth quarter, revenue increased 17% to over $420 million, and our sites ended the year with an average of 2.6 tenants per tower. Please note that our domestic revenue benefited from an increase in straight-line revenue, as well as the one-time $8.9 million item I mentioned earlier compared to the prior period. In addition, and as I've highlighted in our previous earning calls this year, three discrete items negatively impacted our results during 2010. These items included the impact of broadcast analog churn, the completion of a customer take-or-pay agreement and a customer settlement. Excluding the impact of straight-line revenue recognition, the one-time $8.9 million revenue item from the quarter and the three discrete items domestic revenue growth would have been about 10%.

For the quarter, our Domestic Rental and Management segment gross margin increased over $55 million or 20%, which reflects a year-over-year conversion rate of 91%. And finally, our Domestic Rental and Management segment operating profit increased 18% to just over $315 million. Please note that the impact of the one-time $8.9 million benefit to revenue this quarter was offset by one-time direct and overhead costs incurred during the fourth quarter of the year.

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