American Tower Corporation (REIT) (AMT)

AMT 
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American Tower (AMT)

Q3 2012 Earnings Call

October 31, 2012 8:30 am ET

Executives

Leah Stearns

Thomas A. Bartlett - Chief Financial Officer, Executive Vice President and Treasurer

James D. Taiclet - Executive Chairman, Chief Executive Officer and President

Analysts

Richard H. Prentiss - Raymond James & Associates, Inc., Research Division

Philip Cusick - JP Morgan Chase & Co, Research Division

Jonathan A. Schildkraut - Evercore Partners Inc., Research Division

Simon Flannery - Morgan Stanley, Research Division

James M. Ratcliffe - Barclays Capital, Research Division

Steve Sakwa - ISI Group Inc., Research Division

Batya Levi - UBS Investment Bank, Research Division

Jason Armstrong - Goldman Sachs Group Inc., Research Division

Kevin Smithen - Macquarie Research

Presentation

Operator

Good morning. My name is Tanisha, and I will be your conference operator today. At this time, I would like to welcome everyone to the American Tower Third Quarter 2012 Earnings Call. [Operator Instructions] Thank you, Ms. Leah Stearns, Vice President of Investor Relations and Capital Markets, you may begin.

Leah Stearns

Great. Thank you. Good morning, and thank you to everyone for joining American Tower's Third Quarter 2012 Earnings Conference Call. We have posted a presentation, which we will refer to throughout our prepared remarks under the Investors tab on our website, www.americantower.com.

Our agenda for this morning's call will be as follows. First, I will provide a brief overview of our third quarter and year-to-date results. Then Tom Bartlett, our Executive Vice President, CFO and Treasurer, will review our financial and operational performance for the quarter, as well as updated outlook for 2012. And finally, Jim Taiclet, our Chairman, President and CEO, will provide closing remarks. After these comments, we will open up the call for your questions.

Before I begin, I would like to remind you that this call will contain forward-looking statements that involve a number of risks and uncertainties. Examples of these statements include those regarding our 2012 outlook and future operating performance, including AFFO growth and dividend per share growth, our pending acquisitions, our stock repurchase program and REIT distribution 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, those set forth in our Form 10-Q for the quarter ended June 30, 2012, and in 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 third quarter and year-to-date 2012 results. During the quarter, our rental and management business accounted for approximately 98% of total revenues, which were generated from leasing income-producing real estate, primarily to investment-grade corporate tenants. This revenue grew 13.5% to approximately $698 million from the third quarter of 2011.

In addition, our adjusted EBITDA increased 15.7% to approximately $464 million. Operating income increased 29.5% to approximately $296 million, and net income attributable to American Tower Corporation was approximately $232 million or $0.59 per basic and $0.58 per diluted common share.

During the quarter, we recorded unrealized noncash gains of approximately $46 million, due primarily to the impact of foreign currency exchange rate fluctuations related to over $1.6 billion of intercompany loans denominated in currencies other than our local currency. The intercompany loans have been utilized to facilitate the funding of our international expansion initiatives and general operations.

For accounting purposes, at the end of each quarter, these loans are remeasured based on the actual FX rate on the last day of the quarter end. As a result of a weaker U.S. dollar as of September 30, 2012, compared to June 30, 2012, the remeasurement of these loans generated noncash gains for accounting purposes.

Turning to our year-to-date 2012 results. Our rental and management revenue grew 18.2% to over $2.06 billion for the 9 months ended September -- from the 9 months ended September 30, 2011. In addition, our adjusted EBITDA increased 19.3% to nearly $1.4 billion. Operating income increased 25% to approximately $840 million, and net income attributable to American Tower Corporation was approximately $502 million or $1.27 per basic and $1.26 per diluted common share.

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

Thomas A. Bartlett

Thanks, Leah, and good morning, everyone. I'm pleased to report that we had another solid quarter and are on pace to complete yet another very strong year.

Our signed new business exceeded our expectations, driven by continued global leasing momentum, and revenue growth was augmented by the construction or acquisition of nearly 1,500 communication sites. In addition, we signed a new MLA with T-Mobile, which extended our average remaining lease term with that customer to 9 years and locked in a significant amount of incremental contractually guaranteed revenue, which, on a consolidated basis, now stands at nearly $19 billion. As a result of these items, we've increased our full year 2012 outlook for total rental and management revenue and adjusted EBITDA.

This morning, I'll begin with more detail on our third quarter financial and operational results and conclude with a discussion of our updated expectations for the full year. If you'll please turn to Slide 5 of our presentation, you will see that for the third quarter, our total rental and management revenue increased by over 13% to $698 million. On a core basis, which we will reference through this presentation as reported results, excluding the impacts of foreign currency exchange rate fluctuations, noncash straight-line lease accounting and significant onetime items, our consolidated rental and management revenue growth was over 18%.

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